Warren Buffett-Backed BYD Unveils Stock Buyback And Luxury Car Production Expansion Amid Market Challenges

BYD Co Ltd BYDDF BYDDY, a Chinese electric vehicle (EV) manufacturer, has announced a new stock buyback plan and the expansion of its luxury car production, in a bid to counteract a recent stock price slump.

What Happened: BYD, backed by billionaire investor Warren Buffett, has decided to repurchase more shares in an attempt to revive its stock price, which hit a 15-month low earlier this month. The company, based in Shenzhen, also plans to increase the production of luxury models to bolster its image beyond affordable vehicles, reported Bloomberg on Monday.

The company’s stock performance has been affected by concerns over a potential industry price war and China’s economic performance. Despite a recent market rebound due to state support, BYD’s Hong Kong-listed shares were down 1% in early Monday trading. The company’s shares have dropped 11.4% since the beginning of the year.

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The ongoing price war has impacted BYD’s financials, with the company’s 2023 net income projected to be between 29 billion yuan ($4 billion) and 31 billion yuan, falling short of analysts’ estimates. This is despite BYD’s record deliveries in the fourth quarter when it surpassed Tesla as the world’s top seller of electric cars.

Why It Matters: BYD’s recent struggles come as a surprise, given its strong performance in 2023. The company saw a 74.5% increase in net profit for the financial year 2023, following its takeover of Tesla as the biggest EV seller. In January, BYD reported a 33.1% year-over-year jump in sales volume, further solidifying its position in the market.

BYD’s decision to expand its luxury car production could be a strategic move to diversify its product line and appeal to a wider customer base. Additionally, the company’s plans to repurchase shares indicate its confidence in its long-term growth potential, despite the current market challenges.\

Meanwhile, Buffett's Berkshire Hathaway has been trimming its stake in BYD. In late November, it was reported that the company sold about 3.23 million Hong Kong-listed shares of BYD for HK $630.33 million ($80.7 million).

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