The Chinese automaker’s profit declined 14% despite a surge in sales, highlighting the intense pressure on margins from rising costs and fierce competition in the electric vehicle market.
HONG KONG – Shares of Geely Automobile (HK:0175) dropped on Thursday after the company reported a 14% fall in its first-half net profit, blaming higher costs and an intense price war in China’s competitive electric vehicle (EV) sector.
The automaker announced a profit attributable to shareholders of 9.29 billion yuan ($1.29 billion) for the six months ending June 30, a decrease from the 10.79 billion yuan reported in the same period last year. This profit decline occurred despite a significant 27% increase in revenue, which rose to 150.3 billion yuan.
The results were squeezed by several factors, including a 21% jump in research and development expenses to 7.33 billion yuan. Furthermore, fierce competition in the domestic EV market forced the company to offer discounts, leading to a drop in average selling prices and pressuring profit margins. Foreign exchange volatility also contributed to the weaker bottom line.
In response to the news, Geely’s Hong Kong-listed shares fell 3% to HK$15.65 in morning trading.
Despite the profitability challenges, Geely achieved record sales performance. The company’s total vehicle sales surged by 47% to a record 1.41 million units. Notably, sales of electric vehicles accounted for over half of all deliveries, underscoring the company’s successful pivot towards electrification.
Looking ahead, Geely maintained its ambitious full-year sales target of 3 million vehicles. However, in a sign of caution, the company did not declare an interim dividend for shareholders.
