Warren Buffett-backed Chinese carmaker BYD Co Ltd <1211.HK> will raise a less-than-expected 1.42 billion yuan ($219 million) in its initial public offering in Shenzhen, weighed down by weak investor sentiment and worries over its poor performance.

BYD had priced the IPO at 18 yuan a share, it said in a statement to the Shenzhen Stock Exchange on Sunday.

The company had initially aimed to raise 2.19 billion yuan from the share sale, it said.

At 18 yuan a share, the IPO valued BYD at 15.9 times consensus 2011 earnings forecasts and marked only a marginal 0.8 percent premium to the company's Hong Kong-listed shares.

BYD's Hong Kong-listed shares were last traded at HK$21.50 a share.

Despite the modest deal size, the listing of BYD on the Shenzhen Stock Exchange was closely followed in China because local fund managers would finally have a chance to participate in the carmaker that Buffett invested in 2008.

Other mainland IPO hopefuls, such as New China Life, in which Swiss insurer Zurich Financial Services AG owns a 15 percent stake, and Citigroup-controlled Guangdong Development Bank as well as several Hong Kong-listed Chinese automakers, are also looking to the deal for guidance on market demand.

BYD was selling up to 79 million shares in the IPO and proceeds from the sale will be used to fund its lithium ion project, add to research and development and expand its product range, the IPO prospectus said.

Shenzhen-based BYD had tried to return to the mainland stock market over the past three years. It finally obtained the crucial approval from the China Securities Regulatory Commission in May.

But the approval came just as sentiment toward Chinese IPOs has turned sour following a series of less than satisfactory deals earlier this year and growing concerns about the country's economic health.

This month, Nanning Baling Technology Co, a small auto ventilator producer, was forced to scrap its $49 million IPO in Shenzhen after it failed to attract the required 20 institutional investors during book-building.

In April, shares in Pangda Automobile Trade Co Ltd <601258.SS>, the country's first listed car dealer, plunged on its first day of trading after it raised nearly $1 billion in one of the biggest mainland IPOs this year.

The BYD IPO was handled by UBS .

BYD and the wider Chinese car industry are both seeing sales slow. The passenger car market, the world's largest, is expected to grow at a low-teen percentage this year after growing 32 percent last year.

The company has seen its auto sales fall steadily since the second half of 2010. Its May sales slid 9 percent to about 41,000 cars.

The Chinese carmaker, which started business as a battery manufacturer in Shenzhen 16 years ago, also faces international doubts over the design of its cars.

Diplomatic cables revealed by WikiLeaks and provided to Reuters by a third party, as well as interviews with industry consultants and executives who have examined the company's operations, have raised a number of questions about the fledgling carmaker.

But Buffett has maintained his strong support for BYD. Last month, the billionaire investor reiterated that he was happy with its investment in BYD.

($1 = 6.471 yuan) ($1 = 7.790 Hong Kong Dollars)

(Reporting by Soo Ai Peng; Editing by Kazunori Takada and Jane Merriman)

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