China’s electric vehicle maker BYD unveiled its first commercial monorail on Friday,  as part of its efforts to diversify its portfolio to mass transit and compensate the loss amidst plummeted sales of its electric cars.

The “Skyrail” monorail is lauded as a cheaper and viable alternative to subway to solve congestion problems. BYD primarily targets the metropolitan Chinese cities, where congestion and pollution are endemic, but it also plans to export the monorail system.  The first “Skyrail” monorail went into operation in the Northwest provincial capital of Yinchuan on Friday after a brief officiating ceremony held on Thursday. BYD noted that more than 100 cities have expressed interests towards its “Skyrail” technology, including New York City and Cape Town in South Africa. Lower cost, and precisely, one-fifth of the capital cost to build a subway system, is part of the reasons why the monorail system has attracted a lot of interests. Moreover, according to BYD, the monorail can be built three times faster than a subway system. Twenty cities, mainly in China, plan to adopt the system in the foreseeable future and BYD’s first foreign customer will be Iloilo city of the Philippines.

For BYD, diversifying into mass transit is also a hedge against the uneven fortunes of its electric cars portfolio. Last year, it was the world’s largest seller of electric passenger vehicles though mainly to the Chinese market. But in the first half of this year, its sales fell after the government slashed subsidies.  Analysts blamed BYD for the sales decline because the company refused to cut prices even when subsidies were slashed — a move by the Chinese government that would have hit profits hard. According to China Association of Automobile Manufacturers and industry analysis by Carsalesbase.com, there was a 20% year-on-year decline in the sales of BYD’s hybrid and pure electric cars in the first half of 2017 although the segment has performed well in the previous well with more than 70% of annual growth rate. The implication is profound - the Shenzhen-based company was stripped of its position as China’s and the world’s biggest seller of new-energy vehicles to BAIC, its local rival.

BYD’s gross profit for the half year registered a 4.1% decrease to Rmb8.2bn ($1.2bn), partly because subsidies for electric vehicle were slashed.  Ni Yujing, an analyst at a Hong Kong based company, Everbright Securities, said subsidy cuts had put BYD under pressure in the first half of 2017 but the company is likely to rebound in the second half of the year.  However, the monorail business is unlikely to have significant effect on BYD’s financial performance for the next three to five years. New energy vehicles remained central to BYD's business, contributing 35% of total revenues in the first half of 2017, she said. BYD’s Hong Kong-listed share price, in which Warren Buffett’s Berkshire Hathaway owns around 8%, has risen 13% this year. However, it is still one of the worst performing shares among major Chinese car companies, most of which have had notable gains this year. 

BYD has been looking for other ways to sell its expertise in making batteries since the company grew out of making rechargeable batteries in 1995. It is now making smartphones, consumer electronics, combustion engine cars and even electric buses. Last year it was one of the China’s top manufacturers of electric buses, which run in cities from Warsaw to Copenhagen. The first BYD double decker electric buses appeared on London streets last year.