China’s Geely Automobile Holdings, whose parent bought Ford’s Volvo unit this month, has warned of tougher competition and slower sales after its record first-half earnings beat forecasts.
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Geely posted a CNY804.85m (US$118.4m) net profit for the first six months of this year versus CNY595.91m a year earlier.
The record profit topped an average forecast of CNY756.4m from four analysts polled by Reuters.
The company sold 195,734 cars in the first six months, up 42% year on year. But its July sales growth turned negative, falling 12% to 21,684 year on year.
Geely said it will launch new and higher end car models this year and focus on building its export business to making it less vulnerable to China’s volatile domestic market.
Exports should make up 3.5% of Geely’s total sales this year, down from about 6% in 2009 and would not be a major contributor during the period, executive director Lawrence Ang told Reuters in Hong Kong.
If Geely’s parent, Zhejiang Geely, can turn Volvo around, that could allow Geely to benefit from technology transfers and eventually take over the premium brand, said Man.
Volvo has been profitable since the start of the year, said Geely’s Li Shufu, speaking in Hong Kong after the results, a big change for the luxury brand, which posted a $653m pretax loss last year.
“Geely and Volvo are just like brothers,” said Li. But he played down expectations that the listed Geely would see quick benefits from the Volvo buy.
While the company has the right to use Volvo’s more advanced production technology, Geely is unlikely to use it extensively soon as it will inflate production cost, said Li. Further, while the company hopes to begin producing Volvo cars in China for the domestic market, new production won’t begin in the near term.
“I am very anxious about this, but there needs [to be] detailed study and research by Volvo, which has not started yet, and the board and government approvals,” he added.
Li said Geely was confident that it could achieve its 2010 sales target of 400,000 units, up 22% from 2009.
