Geely’s August sales accelerate 69pc as popularity of SUVs continues in China

Country’s second largest automaker enjoys what analysts say has become the industry’s “new growth driver”

PUBLISHED : Monday, 12 September, 2016, 5:13pm
UPDATED : Monday, 12 September, 2016, 10:22pm

Geely Automobile Holdings, China’s second-largest car maker, reported upbeat sales growth in August, thanks in part to the release of a new sport utility vehicle that has proven to be a hit with consumers.

Sales for the month climbed 69 per cent from a year earlier, and were up 11 per cent from July, according to Geely.

In terms of region, domestic sales were up 70 per cent for the month on year, while exports rose 49 per cent.

The firm’s improved result coincides with a wider uptick in the automotive sector, as nationwide vehicle sales across all brands jumped 24.5 per cent in August on year to 1.8 million units.

In the eight months through to August, nationwide vehicle sales rose 12.7 per cent on the same period last year, according to the China Passenger Car Association.

Geely said orders for its Vision X6 SUV, a new model released in late August, were “better than the management’s initial expectations”.

One automotive analyst attributed Geely’s improved sales almost entirely to the appeal of the Vision X6, a compact sport utility vehicle which is offered at a lower price point than Geely’s sister vehicle Emgrand Boyue.

“Looking ahead, with the ramp-up of its three hot-selling SUV models, and the expected launch of the Emgrand GL in September, we are confident about Geely’s sales outperformance in the second half, and maintain full-year sales target of 700,000 units,” Bank of China analyst Lou Jia said.

Jia forecast Geely could mount a challenge to Great Wall Motor and Changan Automobile for the No 1 spot among domestic automotive manufacturers. He forecast Geely’s sales would increase 40 to 50 per cent between September and December.

Bank of America Merrill Lynch research analyst Jeff Chung agreed the SUV segment was the “new growth driver”.

Both Bank of America Merrill Lynch and Bank of China encouraged investors to buy the company’s stock, and issued a price targets of HK$7.5.

Geely’s Hong Kong shares closed at HK$6.65 on Monday, down 1.92 per cent from their previous close.

Geely’s sales success story comes amid mixed results from the latest MNI China Auto Purchase Sentiment Report, led by senior economist Andy Wu, which found Chinese consumer sentiment towards the car market improved last month, although car ownership and planned buys weakened.

The Car Purchase Indicator for August printed at 91, up from 87.8 in July, but still below the 100 level that separates optimists and pessimists. The index balances consumer plans to buy a car against their views on the fuel price.

“A deterioration in consumers’ balance-sheets and uncertain economic prospects appear to have played down the latest improvement in car buying conditions, with car ownership levels and planned purchases down on the month,” Wu said.

Car ownership rates fell slightly in August to 38.4 per cent from 39.1 per cent in July, well down on 51.6 per cent in January, the survey of over 1000 people in China found. In August, 11.9 per cent of consumers said they were planning to buy a car, down from 19.5 per cent in July.

About 14.5 per cent of respondents said they had a budget above 200,000 yuan to buy a car, down 30 per cent on July and the lowest proportion since November 2015. By contrast, 23.5 per cent of respondents said they had a 150,000 yuan to 190,000 yuan budget, up 33.7 per cent on the month before and the highest proportion since January 2014.

About 17.3 per cent thought it was a good or excellent time to buy a car.

“While not all the data from the latest MNI China Auto Purchase Sentiment Survey was unanimously positive, the rise in car purchase expectations will hopefully help to underpin car sales over the coming months should households’ finances improve,” Wu said.