For the three months ending September 30, net income totaled 11.3 million yuan ($1.7 million). Quarterly revenue rose just 0.3 percent from a year earlier to 10.3 billion yuan, as BYD failed to keep pace with its rivals.

In September, BYD's vehicle sales slumped 25 percent to 33,100 vehicles even as industry car sales rose 19 percent.

"Profit was pretty disappointing and well below our estimations," said Galant Ng, an analyst at Taifook Securities Group Co. in Hong Kong. BYD suffered from declining car sales and higher costs, Ng said in an interview.

The profit plunge is yet another setback for the Shenzhen-based automaker, which was ordered to surrender seven facilities earlier this month after China's government said it built them illegally.

BYD, China's fastest-growing automaker last year, cut its 2010 sales target 25 percent in August as it struggled to maintain momentum amid higher taxes on small cars. The company now expects to sell 600,000 cars this year, down from its earlier target of 800,000 units.

"Most local brands suffered from the government policy tax revision," Ricon Xia, a Hong Kong-based senior analyst at Mitsubishi UFJ Asset Management, said. BYD's fourth quarter also "won't be very strong," he said.

"Most local brands suffered from the government policy tax revision," Ricon Xia, a Hong Kong-based senior analyst at Mitsubishi UFJ Asset Management, said. BYD's fourth quarter also "won't be very strong," he said.