China Confiscates Factories from Automaker BYD

Government said that the Shaanxi provincial government had illegally re-zoned land reserved for agricultural use to make it industrial property

Beijing has fined Chinese automaker BYD, backed by Warren Buffett, more than $400,000 and ordered it to surrender seven factories in an illegal land-use dispute.

The ministry said on Oct. 13 that it would confiscate assembly plants, dormitories, roads and other facilities that BYD has been building on 112 acres of land near the northern city of Xian.

BYD has also been fined 2.95 million yuan (US$442,720), the ministry said. The statement said the Shaanxi provincial government had illegally re-zoned land reserved for agricultural use to make it industrial property.

A number of officials have received administrative punishments such as warnings or demerits recorded on their files, the ministry said.

The decision by China's land and resources ministry this week marks the latest setback for the Hong Kong-listed battery and electric vehicle maker, which has been hit by declining domestic sales.

Buffett thrust BYD into the international spotlight when he bought a nearly 10% stake in the company in 2008.

"We have no comment. I think there will be no impact on our operations," Shenzhen-based BYD spokesman Paul Lin said on Oct. 15. Lin would not comment on how much BYD had invested in the project, which would have had an annual production capacity of 200,000 units if completed.

BYD already has two auto manufacturing plants in Xian, with a total output of 400,000 units a year.

The ministry's decision is another blow to BYD, which in August cut its 2010 sales target by 25% amid falling domestic demand for its vehicles.

In July, the automaker said it would delay its planned $420 million mainland listing due to concerns about the weak stock market.

BYD, which sold 289,014 vehicles in the first half of 2010, or 36% of its original full-year target of 800,000 units, now aims to sell 600,000 vehicles in 2010.

The company sold nearly 450,000 vehicles in 2009, or 1.7 times the previous year's volume, due to strong demand for its popular F3 sedan.

Wang Chuanfu, the founder of BYD, last year topped the Shanghai-based Hurun Rich List thanks to Buffett's help. This year, Wang fell to 12th on the list after his fortune shrank 10 % to $4.6 billion.

Copyright Agence France-Presse, 2010

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