Chinese automaker BYD’s profit tumbled in 2019, in line with a nationwide market contraction that came as the market for gas-powered cars shrank and the government scaled back subsidies for new energy vehicles midway through the year.
Warren Buffet-backed BYD reported 1.6 billion yuan ($227 million) of net profit for the year ended Dec. 31, down 42% year-on-year, the company said Tuesday. Total revenue for the year was 121.8 billion yuan, flat from a year earlier.
The company, which counts electric vehicle sales as one of its major revenue sources, attributed the plummeting profits to Beijing’s cut in electric vehicle subsidies, which has led to falling sales, as well as contraction in the country’s market for traditional gas-powered cars.
In March, China’s Ministry of Finance started slashing subsidies for new energy vehicles and asked automakers to put more emphasis on innovation instead of using the subsidies to simply attract buyers. In 2019, the total sales of new energy vehicles in the country fell 4% year-on-year to about 1.2 million units, according to statistics from the Chinese Association of Automobile Manufacturers.
“In short term, the decline in new energy automobile subsidy will certainly contribute to the profit pressure on related companies,” BYD said in the financial report, while admitting that the policy change will help streamline the industry and make it more competitive and healthier in the long run. It added that advanced technology could also play a key role in helping automakers win market share in the future.
The earnings report comes just two days after BYD announced the launch of a newly designed battery named “Blade Battery,” which it claims has both safety and energy density advantages.
BYD shares were down 5.6% in afternoon trade on Wednesday after the results came out.
Contact reporter Ding Yi (firstname.lastname@example.org)