A MORE than 10 percent slide in Hong Kong-traded shares of BYD Co. this year has not shaken analyst confidence in the Warren Buffett-backed electric carmaker.

Long-term growth prospects for China’s new energy vehicle market are overshadowing concerns about tighter government subsidies and increasing foreign competition that have wiped out more than US$3 billion from BYD’s market value this year.

A majority of the 27 analysts who cover the company remain bullish, with 18 recommending buy, rising from 15 at the end of last year. BYD’s recommendation consensus — a gauge of analyst confidence in a stock on a scale of 1 to 5 — stands at 3.96, above the 3.13 for U.S. electric car producer Tesla Inc.

BYD’s “near-term earnings are under pressure from the adjustments of subsidies,” said Kelvin Lau, a Hong Kong-based analyst with Daiwa Securities. But its new models in the pipeline will qualify for higher amounts under the government’s revised subsidies, and thus BYD will see a recovery in the second half, he said.

The government has been cutting subsidies for new energy vehicles to encourage competition, with a goal of phasing out the incentives by 2020. BYD last month predicted a drop of as much as 92 percent in first-quarter earnings, citing decreased government handouts for new energy vehicles. Government grants made up 23 percent of BYD’s pretax profit in 2017, a jump from 11 percent in 2016.

Yet China remains hugely committed to electric vehicle development. To cut roadside pollution and reduce reliance on oil imports, the government is implementing new energy vehicle production quotas, targeting a seven-fold increase in new energy vehicle sales, and considering a ban on gas guzzlers.

China is also increasing subsidies for longer range electric cars, benefiting leading local makers like BYD. (SD-Agencies)