China's Geely Adjusts End-of-year Outlook

Matt Posky
by Matt Posky
china s geely adjusts end of year outlook

China’s Geely Automobile Holdings reported a first-half net profit drop of 43 percent on Monday, a tumble that forced it to reduce end-of-year targets. As you may have expected, the coronavirus was named as the biggest obstacle it had to overcome, especially in its home country. That left Geely (parent to Volvo, Lotus, Proton, Lynk & Co, Emerald Automotive, London EV and more) revising 2020 volume estimates by 6 percent to 1.32 million vehicles against the 1.36 million deliveries it enjoyed through 2019.

While enduring a bad financial year in 2020 is hardly breaking news for any major automotive manufacturer, Geely is one of many Chinese firms with global aspirations. Its role as Daimler’s second-largest stakeholder and ownership of Volvo Cars (with which it is planning a full merger) arguably makes it the corporation that’s closest to achieving that goal, too. Yet the current economic and geopolitical situation served to undermine its ultimate goal of becoming Asia’s answer to Volkswagen Group.

Geely posted a January-June profit of 2.3 billion yuan ($331.37 million), versus 4.01 billion yuan in the same period a year prior. Of course, Volkswagen AG didn’t perform so well in China this year, either. VW saw Chinese sales fall by 25 percent through the first half of 2020, something the brand blamed on a slower-than-anticipated recovery in the world’s largest automotive market by volume.

According to Reuters, Geely’s recent failing was to be expected. Despite the company saying it was on point to surpass last year’s volume with 1.4 million sales before January less than a month ago, nobody who seriously watches the industry was betting on that outcome.

“Geely’s 1H20 earnings are largely in line with our expectation, thanks to its significant cost cut efforts, especially in wages and investments in fixed assets,” said Haitong International analyst Shi Ji told the outlet.

From Reuters:

Geely has a market capitalisation [sic] of about $21.2 billion, eclipsing international peers better known outside of China such as Fiat Chrysler Automobiles NV and Nissan Motor Co Ltd.

Its parent, Zhejiang Geely Holding Group Co Ltd, plans to merge the automaker with affiliate Volvo Cars and list the successor in Hong Kong and possibly Stockholm.

Merger talks were suspended in June, however, while the Hong Kong-listed automaker worked on listing shares on mainland China’s Nasdaq-like STAR board.

The Communist Party of China’s decision to impose new security laws on the people of Hong Kong has really complicated the matter. By stripping the island of much of its autonomy, China effectively removed the region’s special status as an autonomous haven of freedom and foreign commerce. U.S. President Donald Trump has already said Hong Kong will now have to be treated as the rest of China in terms of trade, with other nations likely to follow suit — most notably the United Kingdom.

While this will cause new problems for Geely as it endeavors to expand internationally, the company is still equipped to make big moves. Further integration with Volvo Cars seems assured, with the plan being to use a group platform that will eventually be shared between all Geely brands.

[Image: Jenson/Shutterstock]

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  • Neil733 Neil733 on Aug 19, 2020

    Why the "[sic]" in the first line of the Reuters text? Geely's head of PR is English, so it makes sense that they will use English, rather than American spellings, hence the spelling of "capitalisation" with the English "s" rather than the equally-correct American "z".

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