Chinese battery and automaker BYD Co Ltd is planning large-scale layoffs of its workforce to weather a sharp dive in sales and earnings in the first half, said a Chinese website on Tuesday.
The Shenzhen-based company, backed by US billionaire Warren Buffett, will downsize its automotive sales division by up to 70 percent, according to eeo.com.cn, a website owned by the Chinese business newspaper the Economic Observer News.
The news comes after the company last week reported an 88.6 percent year-on-year decrease in net profit in the first half.
Revenue during the period also fell by 10.77 percent to 22.5 billion yuan ($3.53 billion) from last year.
The automaker’s financial report also showed that sales in the first six months dropped 23 percent to 220,000 units, sending its market share diving from 6.34 percent in 2010 to 4.69 percent. The figure is far below its previous sales target of 800,000 units for the whole year.
BYD will close its marketing and sales divisions by Sept 30, the website said.
The move is expected to eventually cut its employment force from 2,600 to 800, starting with the termination of 1,000 jobs in the first round of layoffs, the website said, citing anonymous BYD employees.
The website also said that BYD’s other departments are considering cuts.
BYD executives and public relations representatives could not be reached by China Daily on Tuesday.
However, Li Yunfei, assistant of general manager of BYD’s sales unit, denied the reports on his micro blog and said that the company is just restructuring its sales force and will not close its sales divisions.
BYD’s shares dipped 0.77 percent to HK$15.48 ($1.99) apiece in Hong Kong, while the stock closed at 25.72 yuan a share with a 0.47 percent uptick on the Shenzhen Stock Exchange on Tuesday. That’s compared with the peak price of HK$85.5 a share last year.
Wang Liusheng, an auto analyst with China Merchants Securities Co Ltd, said that BYD’s waning auto business in the first half can be attributed to sluggish sales of its flagship F3 model as well as a lack of new models to drive sales.
He also said that the resignation of Xia Zhibing, the former head of BYD’s sales unit who stepped down earlier this month citing “personal reasons”, will further affect slumping sales as many in the industry took the resignation as an indication of a dispute between BYD and its dealers.
Jia Xinguang, an independent auto analyst based in Beijing, said that dealers should decide the size of their sales departments, not BYD.
“BYD’s dealers recruited an excessive number of sales representatives last year as a result of the company’s ambitious sales target of 800,000 units for this year,” said Jia.