BYD Plans Massive Layoffs As Auto Sales Plunge

Fading Dream: A company once touted as China's electric-car pioneer makes big cuts to its workforce.

BYD, the Chinese battery-maker picked by Warren Buffet to become a giant of the global electric-car market, is shrinking its workforce as sales fail to live up to expectations.

The news has grown progressively more grim for BYD, with the resignation in August of general manager Xia Zhibing followed by recent layoffs of up to 70% of the company’s sales staff.

The day before the company made its official announcement a BYD employee had posted on Baidu that “the company is axing 30% of sales staff without giving any reason.” It began by shifting 1,000 sales staff to the company’s bus manufacturing plant to work on the production line, said the poster.

The firm is restructuring six major sales areas down to four and the number of marketing offices attached to each sales area will be cut to two or three, according to several BYD dealers.

“The move is big but it is necessary to reorganize after previous messes and overlapped sales channels,” they told China’s TNET.com.

This is the third time BYD has reshaped itself since late last year. The company fell 80,000 short of its 600,000 unit sales goal for 2010. Results have worsened during the first half of this year with sales of 225,800, a 22% drop from the same period last year.

Despite shrinking sales BYD is keeping all 1,200 dealerships — up from 300 in 2007. The dealers have been waging price wars with competitors as China’s auto sales growth has cooled markedly since jumping 32% to 18 million units in 2010.

“Hasty expansion of sales dealers and falling car sales are reasons for the embarrassment of the company,” said Yang Jian, chief editor at autonewschina.com. “Laying off staff could be the way to handle the company’s problem in the short term. However, slashing more than 70% of staff would mean it is not a short term problem.”

Warren Buffett has invested $232 million for a 10% stake in BYD. The company’s name is an acronym for “Build Your Dreams”. It had been touted as a potential leader in the emerging electric-car market based on its experience as a battery maker and claims that it had perfected an exceptionally efficient battery chemistry. Its other claim to fame is its reputation for copying the designs of popular models like the Toyota Camry while modifying them just enough to evade infringement suits.