Great Wall Motor shares fall after second SUV sales delay
Carmaker sees shares plunge as it suspends sales of new flagship Haval H8 vehicle
Great Wall Motor tumbled the most in more than five years in Hong Kong trading yesterday after China's biggest maker of SUVs pushed back sales of its new flagship Haval H8 vehicle for the second time this year.
The shares, suspended from trading on Thursday pending the announcement, fell 16.9 per cent to HK$27.25, while the company's Shanghai-traded shares slumped by the 10 per cent daily limit.
The company, led by billionaire chairman Wei Jianjun, said on Thursday it had suspended sales of the H8 after customers reported hearing "knocking noises" in the transmission system when driving at high speeds. Great Wall said it would delay sales of the vehicle until it was able to make the H8 of a "premium standard", without specifying a date.
Great Wall's stumbles with the H8 highlight a reversal of fortune for a firm that had seen its stock jump 40-fold over five years as its knack of keeping costs low helped it generate higher profit margins than any listed carmaker in the world. In January, it delayed the introduction of the H8, its most expensive SUV, after the automotive media panned it following test drives, causing its Hong Kong-listed shares to fall 12 per cent the next day.
"The company faces monumental challenges in trying to move up a league in the automotive world, and the problems faced by the H8 confirm Great Wall is struggling with technology," wrote Max Warburton, a car analyst at Sanford C. Bernstein in Singapore. "Serious questions will now be asked about Great Wall's growth potential."
Thursday's H8 announcement prompted Ole Hui, a Hong Kong-based car analyst with Mizuho Financial, to cut his investment rating on Great Wall to neutral from buy. Citigroup and China International Capital Corp also lowered their ratings on the company.
UBS analysts Yankun Hou and Ming Xu, who have a neutral rating on the stock, said in a note to clients on Thursday that other new models were unlikely to be delayed.
"But we believe the company has to increase R&D spending in order to remain competitive, even if short-term earnings growth is to be compromised," they wrote.
Great Wall reported on Thursday that its sales fell 11 per cent year on year last month.
