BYD aims to begin selling its electric vehicles, including the all-electric e6, to consumers in the US starting next year. It’s hard to know if that’s fantasy or not.

I was in Kathmandu, Nepal, a couple of weeks ago. After finishing a trek, I mentioned to another American there that I write about China and electric vehicles. “Oh,” he said, “I only know BYD. It is doing really well.” Not exactly, I had to tell him. Its cars—electric and gas—aren’t selling and another of its core businesses, mobile phone handset components and assembly, is in the dumps. I read a few days later that BYD’s 2012 third quarter net profit was down 94 percent compared to the same period in 2011. The falling profits were due to a slowdown in car sales, said BYD, and also from losses in its solar panel business.

So the picture for BYD looks pretty bad, right? I’m not sure. BYD is still earning money, though a lot less than in the past. And it does seem to be getting some traction with its electric vehicles, though I don’t think EVs are actually bringing in much income. Meanwhile, it is still selling regular gas-powered cars in China, some 303,858 units in the first nine months of 2012, according to LMC Automotive. That is down 7 percent on-year, but September sales were up 5 percent.

Start With Fleets

I get a steady stream of press releases from BYD touting achievements ranging from the University of Utah’s purchase of a BYD electric bus, to a memorandum of understanding with a London cab company named greentomato cars to create a fleet of 50 cabs using BYD’s electric vehicles. Micheal Austin, BYD’s PR guy here in the U.S., assures me that BYD’s U.S. strategy is not impacted by the fall in earnings. It still plans to pursue fleets here in the U.S. for the time being. “Fleets make better sense while our parts and service strategy gets firmed up,” he said in an email.

In China, BYD is also pursuing fleet business first for its electric vehicles. Thus, a recent announcement that the company is offering a zero initial payment with payoff in installments deal for its e6 electric car is not as desperate as it sounds. The scheme, which is supported by the state-owned China Development Bank, targets taxi fleets not private owners. China has some 1.2 million taxis. Beijing is leaning heavily on municipalities to electrify their taxi and bus fleets, but the high cost of electric vehicles has caused local governments to drag their feet. So the zero-down scheme is a pretty smart move.

Of course, none of those deals equal a bunch more income for BYD in the near term. And founder and Chairman Wang Chuanfu’s pursuit of diverse “green” businesses such as solar seems to be hurting BYD’s overall financial health. Wang is the key to BYD’s future. The company is dual-listed on the Hong Kong and Shenzhen stock exchanges, but Wang owns 24 percent of the shares. So BYD is for all intents and purposes owned by Wang Chuanfu. If he decides to change direction, the ship will turn. That may be why Warren Buffett is still holding his 9.9 percent stake in BYD.

BYD’s future may not be as bleak as it seems from the recent news. Having said that, I’m not recommending anyone rush out and buy BYD stock.