Geely Auto profits sank by 43 per cent in the first half as the pandemic pushed the ambitious Chinese carmaker to slash its sales target for the year.
The company, the listed division of the Geely Holding group, which owns Volvo Cars, is a near 10 per cent shareholder in Daimler and has aspirations to be China’s first truly global carmaker — weathered the early months of coronavirus better than many of its domestic competitors.
But the slow pace of recovery in the world’s largest car market is now putting pressure on sales.
Profits in the first half of 2020 slid to Rmb2.3bn ($331m) from Rmb4bn during the same period last year. Revenues fell by 23 per cent to Rmb36.8bn.
The Geely brand, which mostly sells mass-market models, has already had to contend with a two-year sales decline in China, which the China Association of Automobile Manufacturers expects to persist into a third year because of the pandemic.
The group had previously maintained it was still on track to meet an annual sales target of 1.41m vehicles but has now lowered that goal to 1.36m.
From January to June, the group shipped 530,446 vehicles, down nearly a fifth compared with the same period last year.
John Zeng, a Shanghai-based analyst at consultancy LMC Automotive, noted that the 19 per cent drop was still marginally above the market average, adding that the group’s outlook for the second half of 2020 was good, given new product launches.
The group, which has a market capitalisation of about Rmb21bn, said the sales drop was partly the result of disruption to its supply chain. It also noted that, despite the overall decline, the group’s market share in China had risen to 6.5 per cent from 6.1 per cent.
“The current headwind is expected to persist in the remainder of the year, making 2020 amongst the most difficult in the group’s history,” Geely said in its Hong Kong stock exchange filing.
A planned merger between Geely Auto and Volvo Cars was put on hold in June while the Chinese brand sought a second listing in the mainland Chinese market.
The postponement might also be informed by Volvo’s weak sales during the pandemic and the worsening trade relationship between China and the US, which made it harder to export China-made cars abroad, according to Mr Zeng of LMC Automotive. “It’s not the best time for Geely to merge with Volvo,” he said.
This story has been updated to clarify that it refers to Geely Auto.
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