Geely's new SUVs to boost profit

PUBLISHED : Thursday, 24 March, 2011, 12:00am
UPDATED : Thursday, 24 March, 2011, 12:00am

Geely Automobile Holdings, whose parent company last year acquired Volvo Car, plans to launch two new SUVs on the mainland this year - part of a broader plan to strengthen its brand in the world's biggest vehicle market.

The Zhejiang-based carmaker said it planned to break from a traditional reliance on lower-cost models to boost average revenue and profit per car sold.

'We are not the Geely of five or six years ago,' chief executive Gui Shengyue said yesterday. The firm would start production on the Emgrand EX7 SUV by June at a newly built factory in Chengdu with an initial annual capacity of 50,000 units, Gui said.

Geely, controlled by chairman Li Shufu, yesterday announced results showing profit fell 4 per cent in the second half of last year to 563.59 million yuan (HK$668.9 million) from 586.3 million yuan in 2009. This was despite a 33.8 per cent rise in revenue to 10.86 billion yuan for the July to December period.

Full-year profit rose 15.7 per cent to 1.37 billion yuan, or 12 per cent below the 1.56 billion yuan profit forecast by a Bloomberg survey of analysts. Sales last year rose 42.9 per cent to 20.1 billion yuan, slightly better than analysts expected.

Shares in Geely fell 5.7 per cent yesterday following the earnings release to close at HK$3. Geely said costs associated with building two new factories weighed on results, and the average sales price of its cars actually rose 12 per cent last year.

Executives said there was a good chance Geely's minority-owned London black cab manufacturing venture could turn profitable this year. The joint venture with London-listed Manganese Bronze has factories in Shanghai and Britain's Coventry. The mainland plant last year started shipping knocked-down car kits to the plant in Britain for assembly instead of making them on site in Coventry, a move Manganese said could save ?,000 (HK$38,000) per car in costs.

Li said the company had no plans to acquire Volvo from its privately held parent, Zhejiang Geely Holding, which bought the Swedish carmaker from Ford for US$1.5 billion.

Geely is targeting sales of 480,000 units this year, a 15 per cent rise from last year. It also aims to nearly double its car exports to markets including Australia, Europe and Korea to 40,000 units this year.

Management said it had yet to see an impact from moves by homegrown competitors, most notably Warren Buffett-backed BYD Automobile, to slash car prices in a bid to grab market share.