Shares of BYD Co. plunged as much as 47% last December 2014 however an executive defended the company’s business prospects saying their operations are still normal.
BYD Co. is a Chinese electric car maker enjoying heavy financially backing from the business mogul Warren Buffet. Company secretary Qian Li, in a conference after their shares plummeted insisted that BYD’s operations were normal despite the shares significant plunge.
She also allayed fears of company investors and tried to dispel the rumors about the company.
On a positive note, BYD’s Hong Kong traded shares regained some ground later and finished at 25.20 Hong Kong dollars, down only by 28%.
Electric car company BYD assures investors that all is as normal
The shares fell during the falling of oil prices and the worsening financial outlook for the Chinese electric car maker.
BYD is a relatively young company being established only in 2003. Its parent company was acquired by Tsihchuan Automobile Company in 2002. BYD’s principal business is the design, development, manufacture and sale of passenger cars and buses bearing the BYD brand.
The company has also a 50-50 joint venture with Daimler AG, Shenzhen BYD Daimler New Technology Co. Ltd. Through this venture, the company plans to develop and manufacture luxury electric cars sold under the Denze brand.
BYD produces a range of automobiles including small and medium sized cars, small compacts, people carriers, small sedans, hybrid electric cars, and all-electric cars.
The total number of vehicles sold in China by BYD in 2013 is 506,189. This makes BYD the tenth largest selling brand and the largest selling Chinese brand.
Catalyst for BYD drop in share value still unclear
There is no clear reason for the sharp plunge of BYD’s shares and the company secretary Qian Li saw no reason to explain the situation. “Everything’s well,” said Li. “I think it’s market behavior. We’ll pay attention to it,” she added.
It appears that the 50% drop in oil prices in the past six months has put enormous pressure in green stocks in several areas.
The Warren Buffet-backed company also has been suffering lately from increasing competition for its gasoline-powered cars. Last October, BYD reported a drop in their third quarter profit of 26%.
Company expects profit to continue to fall due to China’s economic slump
The electric car company said that it expects this year’s profit to fall by as much as 22%. In addition, car sales growth in China has slowed down in the past few months in the midst of a more extensive slowing down of the country’s economic progress.
Approximately 25% stake in BYD is owned by the investment vehicle Berkshire Hathaway, Inc. of Warren Buffet. This is based on data collected by FactSheet. Qian Li, the company secretary said the company didn’t think the drop was connected to Berkshire Hathaway.
Nevertheless, it cannot be denied that the significant plunge in BYD’s shares will definitely affect the market posturing of the Chinese electric car maker. No matter what the company spokeswoman does in alleviating the fears of its investors, the figures are not lying.
The outlook appears to be bleak at the moment for BYD. There is more that the executives of the electric car company should do to allay the fears of its investors.
