Chinese electric carmaker BYD plunges after 89% profit drop
Posted October 29, 2019 10:39 p.m. EDT
Updated October 30, 2019 3:36 a.m. EDT
CNN — Shares in one of China's top electric carmakers plummeted Wednesday after the company reported a staggering 89% drop in net profit for the most recent quarter.
BYD stock fell 5.8% in Hong Kong by mid-afternoon. The company's Shenzhen-listed shares were down 6.8%.
The Warren Buffett-backed carmaker reported late Tuesday that it brought in 119.7 million yuan ($17 million) for the third quarter, far less than the nearly $1.1 billion yuan ($156 million) it brought in during the same time period last year. BYD blamed the decline on fluctuating fuel prices — the company also makes gas-powered vehicles — and a reduction in subsidies for new energy vehicles.
And the pain may not be over yet. BYD warned that its full-year profit could drop as much as 43% compared to last year.
That could be bad news for the Oracle of Omaha. Buffett's Berkshire Hathaway is one of BYD's biggest shareholders, with a 8.25% stake in the company.
Electric vehicle sales have grown rapidly in China on the back of government subsidies and tax incentives, and the government has said it wants sales of new energy vehicles to hit 7 million annually by 2025. But subsidies and tax breaks are also being phased out.
Sales of new energy vehicles fell 34% in China in September compared to a year ago, according to China's Association of Automobile Manufacturers.
In the broader market, Asian stocks moved lower Wednesday, dragged down by US-China trade doubts.
Markets in Asia were trending downward after Reuters reported that the "phase one" US-China trade agreement may not be ready for signing at an economic summit in Chile next month as expected.
China's Shanghai Composite, South Korea's Kospi and Japan's Nikkei 225 each fell 0.6%. Hong Kong's Hang Seng Index was down 0.5%.
If the preliminary deal isn't signed in Chile, it doesn't mean it's falling apart, a US administration official told Reuters, but investors may now betting that US and Chinese negotiators are further away from striking a deal.
Investors may also be looking to the Federal Reserve's next monetary policy decision Wednesday.
Fed chair Jerome Powell will be digesting third-quarter GDP, a detente in the trade war, a shrinking manufacturing sector and the General Motors strike.