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MarketScreener Homepage  >  Equities  >  Hong Kong Stock Exchange  >  Geely Automobile Holdings Limited    175   KYG3777B1032

GEELY AUTOMOBILE HOLDINGS LIMITED

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In China's auto market, worries grow that cashback deals and gifts presage damaging price war

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05/24/2020 | 09:25pm EDT
Model stands next to a Chevrolet vehicle at a sales event in Shanghai

By Yilei Sun and Brenda Goh

Cashback offers, up to 10 free oil changes, generous prepaid gasoline cards - these are just some of the giveaways China's auto dealerships are using to woo customers out and about after spending much of February and March in lockdown.

For the most part, they are getting the job done.

Cui Peng, a Geely sales manager in the eastern city of Hangzhou, says unit sales at his dealership jumped 30% in April from March and they are hoping for 25% growth in May.

That is partly due to delayed demand after China shut down to contain the coronavirus. But it is also thanks to an offer of six free engine oil changes, worth around 3,000 yuan ($420), for customers who buy models such as the Binyue sport utility vehicle.

"Although car retail prices are not much different from usual, customers get to enjoy these complimentary services that do not impact our budget much in the short term," he said.

In the nearby city of Ningbo, a Toyota Motor Corp dealership offering 10 free oil changes saw April vehicle sales return to pre-virus levels and is aiming for sales in May to climb 10% month-on-month, its marketing manager Chen Xiaotian told Reuters.

Even some luxury brands were offering deals, with one Lexus store in Hangzhou enticing customers with thousands of yuan in cashbacks.

Visits and phone calls by Reuters to dozens of dealerships in the world's biggest auto market showed most have notched up double-digit percentage jumps in unit sales for April compared to March and many expect May sales to grow at least another 10%.

Their efforts helped China log its first positive growth in vehicle sales in nearly two years, up 4.4% in April from the same month a year earlier.

But the industry remains deeply worried. Any momentum from demand that was locked up in February and March is expected to peter out by the end of May. After that, the outlook for consumer spending is bleak as the coronavirus pandemic continues to hammer the global economy, including China's exports.

Moreover, industry executives believe the generous deals currently being offered to customers are priming the market for a return to price wars.

Feng Xingya, general manager of state-owned automaker GAC which has partnerships with Toyota and Honda Motor Co, believes a bruising price war is on the cards.

"When there is not much demand amid a pickup in production, price competition will obviously increase," he told an investor conference in April, adding GAC "cannot be afraid of or refuse to enter any price war."

Slipping back into price war mode would be easy enough in a crowded market where pandemic-hit automakers are desperate to gain what sales they can.

The industry has already been there twice in the recent past. In 2018, sticker prices took a hit as China's auto market began to weaken after two decades of strong growth while in mid-2019, dealers offered big incentives after the chaotic implementation of new emissions standards.

"Offering gifts and cashbacks suggests a lack of substantial customer demand," said Alan Kang, a senior LMC Automotive analyst, adding more brands could offer incentives across more segments to maintain market share.

Kang believes China auto sales will be either flat or show slight growth in the second half of this year.

Dealers noted customers had recently become far more price sensitive.

"We are repeatedly asked by customers about whether Hangzhou will roll out policies to support car demand such as subsidies," said Avery Wu, marketing manager at a Hangzhou-based Volkswagen dealership.

She added some customers were holding off on purchases in the belief that such subsidies will be forthcoming.

($1 = 7.1037 Chinese yuan)

(Reporting by Yilei Sun and Brenda Goh, additional reporting by Shanghai newsroom; Editing by Edwina Gibbs)

Stocks mentioned in the article
ChangeLast1st jan.
GEELY AUTOMOBILE HOLDINGS LIMITED -0.35% 16.94 End-of-day quote.11.15%
HONDA MOTOR CO., LTD. -0.31% 2717.5 End-of-day quote.-12.31%
LINE CORPORATION 0.91% 5530 End-of-day quote.3.36%
LONDON BRENT OIL -2.08% 41.5 Delayed Quote.-34.38%
SAIC MOTOR CORPORATION LIMITED 0.73% 19.32 End-of-day quote.-18.99%
THE EASTERN COMPANY -1.60% 16.64 Delayed Quote.-45.50%
THE GLOBAL LTD. -4.50% 212 End-of-day quote.-54.99%
TOYOTA INDUSTRIES CORPORATION -1.07% 5540 End-of-day quote.-12.48%
TOYOTA MOTOR CORPORATION -0.28% 6709 End-of-day quote.-13.03%
UNITED STATES DOLLAR (B) / CHINESE YUAN IN HONG KONG (USD/CNH) 0.11% 7.00684 Delayed Quote.0.51%
VOLKSWAGEN AG 0.47% 136.22 Delayed Quote.-23.06%
WORLD CO., LTD. -3.41% 1501 End-of-day quote.-44.22%
WTI -2.26% 38.7 Delayed Quote.-33.37%
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Financials
Sales 2020 93 350 M 13 325 M 13 325 M
Net income 2020 8 066 M 1 151 M 1 151 M
Net cash 2020 17 960 M 2 564 M 2 564 M
P/E ratio 2020 17,8x
Yield 2020 1,37%
Capitalization 150 B 21 449 M 21 415 M
EV / Sales 2019
EV / Sales 2020 1,41x
Nbr of Employees 43 000
Free-Float 58,5%
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Technical analysis trends GEELY AUTOMOBILE HOLDINGS
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Income Statement Evolution
Consensus
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Mean consensus OUTPERFORM
Number of Analysts 30
Average target price 14,42 CNY
Last Close Price 15,29 CNY
Spread / Highest target 78,9%
Spread / Average Target -5,71%
Spread / Lowest Target -52,8%
EPS Revisions
Managers
NameTitle
Sheng Yue Gui Chief Executive Officer & Executive Director
Wen Ze Xu President
Shu Fu Li Chairman
Siu Lun Ang Executive Director
Jian Yang Vice Chairman
Sector and Competitors
1st jan.Capitalization (M$)
GEELY AUTOMOBILE HOLDINGS LIMITED11.15%21 449
TOYOTA MOTOR CORPORATION-13.03%173 054
VOLKSWAGEN AG-23.06%79 409
HONDA MOTOR CO., LTD.-12.31%43 753
DAIMLER AG-26.78%43 700
BMW AG-21.47%41 877