Bubbles always last longer than you expect, but it seems the market has finally turned against BYD, the Shenzhen carmaker which got everyone hugely over-excited last year when Warren Buffett took a stake in it.
Yesterday, BYD shares closed at 50.1 HK dollars ($6.44). Three months ago, they were trading 40.4% higher, at 84 HK dollars.
At long last, the market has woken up to the fact that BYD’s electric cars, which they promoted with some brilliance, are not going to take over the world after all.
Despite hugely generous subsidies to electric car buyers from the Chinese government, worth as much as 50,000 yuan ($7,320) to anyone considering BYD’s F3DM model, the cars aren’t selling.
Until March, the only buyer was the Shenzhen local government. When the cars went on public sale, BYD allegedly shifted just 14 in April, 2 in May and 12 in June.
What’s the problem? Well, there’s no infrastructure to charge them and the batteries cost a lot and have been reported to be unreliable.
While BYD was coasting on a wave of public adulation, it seemed as if it could do nothing wrong. Now that BYD has cooled off, it has also been hit with problems over its new factory which it was supposed to build in Xi’an. As ChinaBizGov reports, BYD has now been ordered by the Ministry of Land and Resources to halt construction because of a "land use violation".