BYD stocks drop as car loan deal fails

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From China.org

Shares of BYD Co fell 3.16 percent on Hong Kong Stock Exchange yesterday after its car loan joint venture collapsed.

BYD, backed by billionaire Warren Buffett, said its French partner Compagine Generale de Location d’Equipements decided to dissolve the joint venture due to concerns about increasing risks in China’s automobile market, according to a statement yesterday.

In June last year, BYD and CGL agreed to jointly set up a 500 million yuan (US$77 million) auto finance company in China to provide car loans for vehicle purchases.

The establishment of the venture, in which BYD invested 400 million yuan for a 80 percent stake, won regulatory approval on March 4.

BYD said both parties have conflicting assessments on the potential risks associated with the business and cannot reach consensus.

An end to car purchase incentives, rising fuel prices and traffic restrictions in Beijing have all crippled demand in the world’s largest auto market this year.

China’s passenger car sales fell 0.1 percent from a year earlier to 1.04 million units in May, the first pullback in more than two years.

BYD was among car makers hit by slower vehicle sales growth. The Shenzhen-based car maker has reported a 84 percent plunge in profits for the first quarter of this year after sales fell 27 percent to 119,000 units.

BYD’s share closed at HK$26 yesterday in Hong Kong. Its shares on the Chinese mainland’s smaller bourse, Shenzhen Stock Exchange, edged up 1 percent, compared to the 4.75 percent gain for the main index.