BYD, the Chinese electric carmaker backed by Warren Buffett, has announced a 99 per cent drop in third-quarter earnings after its growth strategy plunged the company into fierce competition with Chinese rivals, according to analysts, writes Patti Waldmeir.

Shares in the carmaker fell more than 10 per cent after its earnings statement. News of the profits drop came on top of other setbacks. BYD was recently forced to scale back plans to double sales this year, delay plans to export vehicles to the US, and surrender seven factories after Beijing said they had been built illegally.

After starting life as a maker of rechargeable batteries, BYD built its first branded car in 2005. By last year, the company was China’s fastest-growing carmaker and had taken first place in the Chinese market for compact cars. BYD forecast sales of 800,000 cars this year, up from 400,000 last year, but recently cut that forecast to 600,000 after sales began to slide when government tax incentives for small cars were partially withdrawn.