An investigation team is already on-site at the plant, and an analyst says a shutdown will inevitably affect production and deliveries.

(Image credit: BYD)

A BYD (OTCMKTS: BYDDY, HKG: 1211) plant that has been in the spotlight for environmental concerns has reportedly halted production, which would slow the delivery process even more.

BYD's plant in Changsha's Yuhua district in Hunan province has stopped production for rectification, local media Cailian said today, citing sources familiar with the matter.

The plant has been accused by nearby residents of causing serious air pollution and health hazards, according to recent reports in several local media.

In a statement posted on Weibo on the evening of May 7, BYD said the company had taken steps in response.

On May 8, the official WeChat account of the Changsha municipal government posted that the city had set up an investigation team to conduct an on-site probe at the plant.

Changsha, BYD's first project in central China, first went into production in 2012 and is currently one of the company's most complete product lines and strategic bases for new energy vehicle (NEV) production.

The plant can produce models for the Dynasty network, including the Qin PLUS DM-i, Song MAX DM-i and Yuan Pro, as well as models for the Ocean network, including the Dolphin and Destroyer 05, and some core components.

In the first quarter, BYD produced 292,000 vehicles, of which 62,500 were produced at the Changsha plant, contributing about 21 percent, Cailian's report noted.

The factory currently involved in the emissions problem is the paint factory, one of the four major processes of vehicle manufacturing, the report quoted Zhang Xiang, a senior automotive industry analyst and director of the NEV Technology Research Institute at Jiangxi New Energy Technology Institute, as saying.

If the plant needs to be shut down during the investigation, it will inevitably affect production and deliveries, Zhang said.

But it's worth noting that BYD has multiple production bases, with sites in Shenzhen, Xi'an, Changsha and Changzhou already in operation, and new plants in Shenzhen, Hefei, Zhengzhou, Jinan and Xiangyang under construction.

With more production bases coming on stream, the temporary consolidation of the Changsha plant may not have a big impact on BYD's overall production capacity, Cailian said, citing unnamed industry sources.

BYD sold 106,042 NEVs in April, up 1 percent from March and up 313 percent from a year earlier, according to figures it released earlier this month.

It was BYD's second consecutive month of sales exceeding 100,000 units, another record high, after it sold 104,878 NEVs in March.

At the end of March, Cailian reported that BYD's order backlog reached 400,000 units and was still increasing month by month, citing minutes of the company's investor meeting.