When companies are facing trouble in their core markets, they tend to hive off unrelated assets to focus their energy on regaining their mojo in their core products. However BYD which has been facing one trouble after another in their automobile division is not following the playbook. The company which announced massive new investments into solar energy a couple of years ago, is going ahead with those plans. The solar industry is facing a massive glut of supply with all companies facing losses. However BYD which is a relative newcomer seems unfazed as it constructed a new R&D facility claiming it to be the first of its type in China.
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BYD has fallen almost 35% this year heavily underperforming the market as sales growth has slowed substantially. After a 140% growth in Auto Sales last year, this year the sales growth will go down to 30% as the company has reduced sales target to 600,000 from 800,000 earlier. Chinese auto sales have fallen and BYD has been specially affected with its workhorse F3 Model declining in popularity. The company delivered a good first half with $100 million in 2Q profits. However the company is still quite expensive at $15 Billion Market Cap which would give it a P/E of around 38x. Also the company’s strategy to enter solar energy does not make sense.
Build Your Dreams (BYD) the Chinese battery and electric vehicle producer made famous after Warren Buffet made an investment, has been facing rough times recently. Its falling auto growth, problems with land acquisitions in China and an incoherent strategy has hurt its profits and stock price in 2010. The Company has put on too many hats with investment in various green technologies besides its bread and butter car business. The most ambitious plans of BYD undoubtedly lies in the Solar Energy Business though little details have been revealed. The company is planning to spend 22.5 Billion Yuan on Solar Energy over the next 5 years for which it has already secured financing. The company has started a 100 MW cell plant in the Shaanxi province and plans to expand to 5000 MW by 2015. However its recent travails had made one think that they would have to put their Solar ambitions aside.