Shares of China’s second-biggest automaker BYD have fallen after authorities launched an investigation into claims one of the company’s factories was responsible for harmful pollutants that were causing respiratory problems in children near the plant.
Investors had poured into BYD, backed by Warren Buffett’s Berkshire Hathaway, after blockbuster first-quarter results. But following the announcement of the pollution probe over the weekend, its Shenzhen-listed shares closed down 3.86 per cent on Monday.
On Saturday evening about 100 local residents protested outside BYD’s Changsha factory, a city known for its auto industry in central China’s Hunan province, and accused the company of releasing harmful emissions. City authorities announced an investigation late on Sunday, according to a post on the Communist party committee’s Weibo account.
The residents were from a housing compound within 1km from the factory in Changsha’s Yuhua district. Video clips circulating online showed parents holding pictures of children suffering nosebleeds alongside banners that read: “[BYD] spreads toxins day and night.”
BYD, which also produced face masks during the initial years of the pandemic, denied that its factory was causing the nosebleeds in a statement on social media, but declined to provide further comment, citing the government probe.
While other car companies posted lower than expected revenues due to pandemic lockdowns in China, BYD reported a 241 per cent rise in net profit year on year in the first quarter of 2022 to Rmb808.4mn ($123mn).
Analysts partly attributed the strong performance to its integrated model, with the company manufacturing both cars and batteries. Some BYD vehicles use significantly cheaper lithium iron phosphate (LFP) batteries, which do not require nickel or cobalt, raw materials that have become more expensive as a result of the global supply chain disruption.
Western Capital Group, wholly owned by Berkshire Hathaway Energy Company, held a 7.7 per cent stake in BYD as of late April. Berkshire Hathaway Energy Company did not immediately respond to a request for comment.
The factory in Yuhua is BYD’s only production facility for its self-developed “DM-i” hybrid electric and gasoline vehicle system, which was launched in 2020.
Residents in the community said while pollution had been an issue for some time, within the past month there had been a pungent smell coming from the factory that was so strong they had to close their windows at night.
Locals, including children at a nearby primary school, had suffered nosebleeds, dizziness, nausea and persistent coughs, according to the Chinese magazine China Philanthropist.
A Yuhua resident who declined to reveal her name told the Financial Times that residents had become so concerned that they had purchased air testing equipment. “The indoor chemical emission levels were above national standards,” she said.
The social media videos showed a group of police officers surrounding the facility’s gate after the protesters gathered.
Guo Sijun, deputy secretary-general of Yuhua district’s Communist party committee, attempted to placate the crowd. “We’ll hold a late-night meeting today, with district party officials attending,” he said. “We will discuss how to solve the problem.”