Geely Automobile Holdings Ltd., one of China’s largest independent carmakers, posted first-half earnings that beat estimates, weathering a price war that continues to hit the industry.
(Bloomberg) — Geely Automobile Holdings Ltd., one of China’s largest independent carmakers, posted first-half earnings that beat estimates, weathering a price war that continues to hit the industry.
Net income rose 1% to 1.57 billion yuan ($215 million) in the six months ended June 30, the company said in a statement Tuesday, beating analyst estimates of 1.51 billion yuan, according to data compiled by Bloomberg. Revenue climbed 26% to 73.18 billion yuan.
Geely launched the first model from its new mass-market clean car range Galaxy L7 to a popular reception from consumers and its premium EV marque Zeekr saw a sales growth of 124% in the first six months, showing steady progress toward electrification.
“We’ve finished laying the groundwork toward the transformation of our products into intelligent and electric driving solutions,” Geely Executive Director Gui Shengyue said during a briefing with investors and media Tuesday.
“From now on, we hope Geely will see a second resurgence in the autos competition,” he said. “In the next few years, I think I won’t have to keep saying sorry but rather bring you exciting performance.”
For more details from the earnings report, click here.
The change in tone came after Gui said in a March briefing that the company ceded the crown as China’s top domestic carmaker to BYD Co., and made strategic mistakes in the past.
Geely still faces many challenges, including a price war, a weak economy and slowing growth in car sales. But other facets of the business are providing a lift.
“The decline of the price of lithium carbonate in the first half of the year resulted in the decrease of battery prices, which exerted a positive influence on the cost control of new energy vehicles,” the company said. “However, the group’s gross profit margin was still impacted by the new energy transformation and intensified competition in the automobile market.”
The price war has forced most of the industry to slash prices on some models, and Geely’s gross margin remained at 14% despite the growth in revenue and decline in battery raw material prices.
Investments in developing clean cars added to that, as Geely tries to speed up its transition to EVs to take on competitors like Tesla Inc. The company’s capitalized product R&D expenses increased by 87% to 5.1 billion yuan in the first half of this year but will be amortized gradually as new models are launched into the market, the company said.
Deliveries of the company’s battery EVs and plug-in hybrids increased by 44% in the first half of the year, faster than the overall market, which grew at 37%, according to the China Passenger Car Association. The new Galaxy range, which will have more models rolling out, is expected to be a growth driver.
Despite the weak economy clouding the outlook for car sales for the rest of the year, Geely said it was still optimistic about achieving its sales target of 1.65 million units. It has delivered 694,045 vehicles as of the end of June.
Geely’s board said it decided against paying an interim dividend.
(Updated with comments from executive and added details on R&D costs in paragraph 11)
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