AutoBeta(AutoBeta.net)03/31 Report--

According to the results released by Geely Automobile, Geely's revenue in 2019 was 97.401 billion yuan, down 9% from 10.66 billion yuan in 2018, and its net profit was 8.189 billion yuan, down 35% from 12.553 billion yuan in 2018.

Geely said in the report that both operating income and net profit fell due to a larger-than-expected decline in overall sales during the year, as well as pricing pressure caused by weak demand and fierce market competition.

At present, ample cash flow gives Geely the strength to cope with the impact of the epidemic on sales and production. However, Geely still said that "the epidemic has seriously affected the supply chain and production levels, posing a threat to revenue and profitability in 2020, which may be the most difficult year in history."

In this context, a number of car companies have lowered their annual sales targets to reduce the threat of the epidemic to companies through wage cuts and layoffs. However, an Conghui, president of Geely Holdings, said that this year we have set a sales target of 1.41 million vehicles, and there will be no pullback to the sales target, and Geely's long-term plans have not changed. In addition, there is a commitment not to lay off staff, not to cut salaries, not to delay pay, but to adopt organizational innovation and efficiency improvements to deal with the impact of the epidemic. "

Although an Conghui said there would be no reduction in annual sales, the decline in sales in 2020 seemed to be a "consensus". China International Capital Corporation said that in the context of the spread of the global epidemic, China's car market will be greatly affected. Under the neutral assumption, sales are expected to decline by 12%, of which Geely's sales will decline by 8%. The net profit forecasts for 2020 and 2021 will be lowered by 39.1% and 30.9% respectively to 6.254 billion yuan and 8.31 billion yuan.

COVID-19 epidemic has brought a lot of uncertainty to the market, Geely Motor will also face greater challenges in cash flow management. Geely said at the earnings conference that the investment in R & D will drop to 4.5 billion yuan in 2020. At the same time, it will strive for a reduction of 10% or more in sales expenses and management expenses, and capital expenditure is expected to fall from 7.6 billion yuan in 2019 to 6.8 billion yuan in 2020.

Geely will further promote the process of globalization in 2020, and its merger with Volvo may become a top priority in 2020. Gui Shengyue, Geely's CEO, revealed at Geely's 2019 results presentation that he was studying specific plans for the merger of Geely and Volvo, according to CSC. Once the plan takes shape, Geely will announce it to the public in time. If the merger is successful, Geely and Volvo will become real technology companies. Geely wants to achieve not only a breakthrough in self-driving but also a global leader, which can only be achieved through a merger.

According to Geely's insider announcement on Feb. 10, the combined business of Geely and Volvo will be considered for listing in Stockholm, Sweden. Geely said that when the two companies were restructured, they would become a strong global automotive group, achieving synergies between cost structuring and technology development to meet future challenges. After the completion of the restructuring, the uniqueness of Geely, Volvo, Lectra and Star brands will be retained at the same time.

Regarding the process of Volvo's restructuring and merger, Geely Holdings CEO Gui Shengyue said at the earnings conference that the recruitment of consultants on the merger has been completed and the specific plan for the merger is being studied and will be announced in time once it is formed. As for the significance of the merger of Geely and Volvo, it said that it will help reduce costs and enhance R & D capabilities, and play an important role in promoting both sides to become real technology companies and international companies. Li Donghui, vice president of Geely Holdings, said that after the merger, the company will have four grades of electric vehicle brands from high-end to entry, which will further enhance the brand value and international ability.

In terms of internationalization, Geely left relatively early. Geely acquired Volvo cars for $1.8 billion in 2010; Geely signed an agreement with Malaysia's DRB-HICOM Group in June 2017 to acquire 49.9 per cent of DRB-HICOM 's Proton Motor and 51 per cent of luxury sports car brand Lutes; and Geely acquired 9.69 per cent of Daimler Group for 9 billion yuan through its overseas entities in 2018, making it the largest shareholder in Daimler Group.

For Geely, the merger with Volvo is an important part of its global push. At present, Geely has 8 sub-brands of Geely, Lecker, Volvo, POLESTAR, Proton, LOTUS, London Electric car and long-distance car, covering almost most of the passenger car segments. In the next three years, through the strategic project cooperation of Geely, Lecker, Proton, Lutes and smart brands, Geely will accelerate the process of globalization.

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