Warren Buffett-backed electrical automaker hit by rising battery prices

The Chinese battery and electric vehicle manufacturer BYD is showing a model of its Han EV series at the 2020 Beijing Auto Show.

Evelyn Cheng | CNBC

BEIJING – Chinese electric car company BYD is feeling the rise in material costs for batteries.

With the support of US billionaire Warren Buffett, the automaker announced late Monday that net income attributable to shareholders in the first quarter will be between 200 million yuan ($ 30.4 million) and 300 million yuan.

“Given the volatility in the price of upstream raw materials, the profit of the automotive business still needs to be improved,” BYD said in a press release. It was found that seasonal factors also have “a certain influence” on sales of cars with new energy.

In a growing market for electric cars, the demand for batteries to power them is increasing. As a result, Goldman Sachs analysts said in a March 18 release that the prices of major materials will rise, driving battery prices up about 18%.

“(BYD) mgmt. Also mentioned that they are facing pressures on rising commodity prices such as lithium carbonate, electrolyte and copper,” Citi analysts said in a note, quoting a call to BYD chairman Wang Chuanfu , on Tuesday.

The below-expected forecasts for the first quarter make up only 3% to 5% of the analysts’ expectations for the full year, said Credit Suisse analysts in a statement on Tuesday. They cut their price target on BYD’s Hong Kong-listed stocks from previously $ 310 Hong Kong to $ 280 Hong Kong.

However, this new target still implies a gain of more than 60% for BYD from Hong Kong dollars 170.40 last Tuesday.

Credit Suisse analysts attributed the decline in the profit forecast to the seasonal weakness in auto sales, lower government subsidies and rising prices for battery raw materials.

BYD reported net income attributable to shareholders of 4.23 billion yuan for the full year 2020. The share of sales from automobiles and related products rose last year from 49% in the previous year to 53%, while that of batteries remained unchanged at around 8%. . The proportion of revenue outside of Greater China increased from 16% in the previous year to 39%.

While new electric vehicle models in a growing market helped drive those profits, Nomura analysts indicated that results are on the lower end of the estimated range as “higher raw material costs impacted short-term profit growth”. Nomura stuck to its price target for BYD of 300 Hong Kong dollars.

– CNBC’s Michael Bloom contributed to this report.

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