Awwal 15, 1432 H/Feb 18, 2011, SPA -- Warren Buffett-backed Chinese carmaker BYD Co Ltd slashed prices of five models by up to one-fifth, fuelling concerns it would spark a price war in the lower segment of the world's largest auto market, according to Reuters. BYD said the price cut was to gain market share, but analysts said it was in response to its weak sales in the past few months. The company reported a 15 percent decline in January sales, compared with a 16.2 percent increase in China's overall car sales last month. BYD, which sells some of the country's cheapest cars, cut prices on its five best-selling models -- the F0, F3, F3R, G3 and F6 -- by between 3,000 yuan ($455.8) and 15,000 yuan each. The biggest cuts, of 10.3 percent to 19.3 percent, were for its G3 model, BYD said, adding that it hoped the first cuts in several years would lift G3 and F6 sales to more than 10,000 each per month. BYD shares ended down 1.9 percent on Friday. Shares of Geely Automobile Holdings Ltd , one of BYD's main domestic rivals whose parent bought premium brand Volvo Car Corp last year, lost 2.2 percent in a market that gained 1.3 percent. Analysts say other automakers in China may follow suit by cutting prices of low-end cars. "For the mid- to high-end products, I haven't seen any price wars but for the smaller segment, it most likely will face price competition," said Jack Yeung, an analyst at BNP Paribas. But a Geely spokesman said the firm, which makes subcompacts and small hatchbacks as well as other models, had no plan to cut prices. "We won't do it. We absolutely won't take part in a price war," said Victor Yang. "We won't rely on pricing; we'll rely on our technology, quality, brands and service." INVESTOR CONCERNS BYD shares have lost almost a fifth of their value this year after plunging 40 percent in 2010 on lower-than-expected sales and as investors cast doubts on its high valuation fanned by Buffett's support and hopes on its development of electric cars. BYD's price cut "may at least help volume, which may help market share and may help brand recognition, and probably may help build the network, but it is going to be very bad for investors," said Scott Laprise, an analyst at CLSA. Buffett visited BYD's headquarters and plants in China's Shenzhen, Beijing and Chengdu last September to show his support to BYD chairman Wang Chuan-Fu and his company, which makes cars, batteries, solar panel and power-storage systems. But weak sales and the delay in commercial sales of BYD's SUV model S6 and electric cars on immature ecosystem continued to overcast its stock price. Analysts say China's auto sales growth is likely slow to between 10 and 20 percent this year as demand would be hurt by the resumption of a 10 percent purchase tax, potentially new restrictive policy on car sales and the government's moves to curb inflation. China's auto sales surged by about a third to a record high in 2010 on government stimulus measures, including tax incentives for smaller cars, at the height of the global financial crisis in 2009. The market has attracted top global auto makers, including Toyota Motor Corp , General Motors Co , BMW AG and Volkswagen , and has been a bright spot for these global industry giants. ($1=6.582 YUAN)
