By on August 21, 2019

China’s Geely Automobile Holdings Ltd said on Wednesday that its first-half net profit slipped 40 percent due to the extended economic downturn impacting in the region. According to Reuters, the manufacturer posted a net profit of 4.01 billion yuan ($568.5 million) during the most recent half vs the 6.67 billion yuan it made over the same period a year earlier.

Sales growth is also down. Between January and June, Geely sold 651,680 vehicles — roughly 15 percent less than in the same period in 2018. Finding something to attribute that to will be easy, however. China’s automotive market has been on a downhill slope for 13 consecutive months and we know of at least two reasons why. 

From Reuters:

Profit in the first half “was negatively affected by higher discounts and incentives to reduce dealers’ inventories ahead of the official implementation of China 6 emission standards in some areas,” Geely said in the filing, referring to a stricter vehicle emissions standard China implemented in July.

Total revenue for the first half was 47.56 billion yuan, down from 53.71 billion yuan over the same period in 2018, it said.

We covered how China’s evolving emission standards, combined with economic instability, have negatively impacted auto sales in July. Certain cities, such as Shanghai, have adopted stage-6 standards a year ahead of schedule — meaning dealers cannot sell stage-5 passenger cars that would be legal elsewhere in the country. There have also been discussions of outright bans of internal combustion vehicles further down the line, helping to spook customers who are also witnessing the price of goods skyrocket.

“No local government wants second-hand cars or old-generation cars flooding into their cities or provinces,” said Cui Dongshu, secretary of the China Passenger Car Association, last month. “Local government doesn’t care about the life and death of the companies or dealerships.”

Due to the emission issue and ongoing trade war with the United States, few believe the Chinese market will improve before 2020. Last month, Geely cut its sales target for 2019 to 1.36 million units. The old estimate was set at 1.51 million units, but Geely is hoping to reduce dealer inventories and is worried about the general state of the economy.

[Image: Geely]

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