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BYD has announced that its net profit fell 33.5% in 2010 due to intense competition in China and rising distribution costs.

BYD posted a net profit of 2.52 billion yuan last year, it said in a statement.

That compared with 3.79 billion yuan in 2009, the statement added.

BYD’s profit fall will heighten concerns over the slowing of China’s car market in 2011 and the possibility of a price war as OEMs fight for share. Some city authorities are taking steps to restrict car sales in the face of chronic traffic congestion.

Last year, BYD’s car sales in China hit 519,800 units, up 15.9% from 2009 but below its target of 600,000.

China’s auto market boomed by 33% to over 18m units in 2010, making it by far the largest vehicle market in the world. However, the government has taken steps to cool an overheating economy and it is widely expected that the car market in 2011 will turn in much slower growth.

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By GlobalData