BYD to Spend $1 Billion to Boost Sales Amid Stagnant Revenue

Chinese car, battery, and components manufacturer BYD, listed on the Hong Kong stock exchange, is set to invest at least $1 billion to boost sales this year, following a 49% drop in its net profit last year. The firm's president, Wang Chuanfu, attributes the decline to the success of international mobile phone makers in the mainland market, which led to a sharp drop in battery sales. BYD hopes to capitalize on its recent tie-up with Nokia, securing a global supply deal for components such as casings and keypads.

Key Takeaways:

• BYD will spend at least $1 billion to boost sales this year, following a 49% drop in net profit in 2005.
• The firm's battery business saw a 40% drop in sales, with 2.1 billion yuan in revenue last year, down from 54% of total revenue in 2004.
• International mobile phone makers such as Nokia and Motorola have grabbed substantial market share from mainland handset makers, causing a decline in BYD's battery sales.
• BYD's sales of handset components, which include casings and keypads, jumped 103% to 1.9 billion yuan last year.
• The firm's president, Wang Chuanfu, predicts that its fledgling car business will turn from a loss to profit this year, with sales expected to reach at least 70,000 cars.
• BYD's high gearing ratio, which rose to 78.39% last year, means that the firm will not give dividends for 2005.

Statistics:

• BYD's net profit declined by 49% to 529 million yuan in 2005.
• The firm's battery sales accounted for 32.3% of its revenue in 2005, down from 54% in 2004.
• BYD's sales of handset components increased by 103% to 1.9 billion yuan in 2005.
• The firm's car sales grew from 16,000 units in 2005 to an expected 70,000 units this year.
• BYD's revenue stagnated at 6.5 billion yuan in 2005, up only 1.1% from the previous year.

Sources:

• BYD President Wang Chuanfu quoted by the South China Morning Post.
• Analyst Joseph Ho Wai-kei quoted by the South China Morning Post.