Chinese carmaker Geely’s shares plunge 11.6pc after annual sales fall short of target, warns of dismal year ahead
- Geely Auto Group controlled by Chinese billionaire Li Shufu said that it had only hit 95 per cent of its 1.58 million sales target for 2018
- Sales in December alone fell 44 per cent
Shares of Geely Automobile Holdings slumped as much as 11.6 per cent on Tuesday after the mainland carmaker missed its sales target for 2018 and forecast flat sales for this year amid a bleak market outlook.
The Hong Kong-listed unit of Geely Auto Group controlled by Chinese billionaire Li Shufu said in a filing to the stock exchange on Monday evening that it had achieved 95 per cent of the targeted sales of 1.58 million units in 2018, following a 44 per cent year on year sales drop in December alone.
Tesla to produce cheaper versions of Model 3 electric cars in Shanghai, taking the competition to would-be ‘Tesla killers’
The Hangzhou-based company, viewed as one of the mainland’s most successful car companies, also said that it aimed to sell 1.51 million units this year, nearly unchanged from 2018.
The shares eventually closed the day 11.1 per cent lower at HK$10.24.
Geely’s lacklustre performance, which owns Volvo Cars and a stake in German carmaker Daimler, added to evidence that China’s once buoyant car market had hit a bump after more than two decades of growth in tandem with an economic slowdown and the US-China trade war.
Li warned in a new year’s address posted on social media that 2019 would be pivotal for Geely as it might face a dismal period because of weak market conditions.
“It is tough this year for Chinese carmakers as the auto industry is grappling with consumers’ weak buying interest,” said Ivan Li, an asset manager with Loyal Wealth Management. “The auto companies will set lower targets along with efforts to prevent a sharp drop in sales.”
The mainland’s car market is expected to report a drop in sales in 2018, the first since 1992, according to the China Association of Automobile Manufacturers.
Geely said sales of Lynk-branded vehicles through its 50-50 joint venture with Volvo Cars decreased 39 per cent from a year earlier to 93,333 units in 2018.
Geely, which bought Volvo Cars from Ford in 2010, has been reinforcing its go-global strategy with active purchases of foreign assets, including an 8.2 stake in Swedish truck maker Volvo, 49.9 per cent in Malaysian carmaker Proton and 51 per cent in iconic British sports car marque Lotus Cars last year.
Other Chinese carmaker were also under pressure in 2018.
SAIC Motor, China’s largest carmaker by volume, posted a 10 per cent sales drop in December.
Analysts say the Chinese government could roll out tax incentives to stimulate sales if the world’s largest car market continues to see sharp declines this year.
The last time Beijing rolled out incentives was in 2015, when the vehicle purchase tax was cut to 5 per cent from 10 per cent for cars with engines of up to 1.6 litres as part of its efforts to spur the economy.