(Yicai Global) March 28 -- BYD Co.'s shares have lost more than 8 percent of their value after China's biggest maker of electric vehicles warned of a potential steep decline in first-quarter earnings because of subsidy cuts.

The Shenzhen-based company's shares [SHE:002594] ended today at CNY56.19 (USD8.94) each after plunging almost 10 percent in trading. The Shenzhen Component Index fell 1.35 percent.

BYD expects the current quarter's net profit to slump between 75 percent and 92 percent from a year earlier because of a government decision to slash subsidies for new energy vehicles, it said in a statement yesterday.

China is the largest producer and consumer of NEVs. The government has used emissions rules, tax breaks and subsidies since 2010 to help automakers such as BYD keep innovating and boost the number of NEVs rolling off production lines, while keeping the cost attractive to consumers. In January, state-run China Daily reported that the government will release a plan to cut subsidies each year and shed them completely by the end of 2020. Warren Buffet-backed BYD may need to turn out models that continue to attract state support.

In the year ended December, BYD's net profit fell 19.5 percent to CNY4 billion on a 2.4 percent dip in gross turnover to CNY106 billion, the company's report said. Its vehicle business (transport equipment manufacturing) is still the highest by total turnover, but operating income fell 0.7 percent to CNY57 billion.

BYD's NEV sales ranked it first globally for a third straight year in 2017, with NEV sales topping 110,000 units, up 15 percent. The contribution made by NEVs to group income rose to 37 percent. Operating income from new energy vehicles reached CNY39 billion, up 13 percent from a year earlier. 

The late introduction of new fossil-fuel models and the influence of the product cycle on old ones led to their sales volume slumping 25 percent to be about 245,000 for the year.

The government's long-term goal is to phase out vehicles that use gasoline and diesel in the world's biggest auto market as the country works to limit greenhouse gas emissions by 2030 and curtail air pollution. It is unlikely to take measures that choke off the development of the green vehicle sector.