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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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End-of-day quote. End-of-day quote Hong Kong Stock Exchange - 10/29
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Exclusive: GM bets on electric Cadillacs and micro-vans to reverse China slide

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08/19/2020 | 02:09am EDT
FILE PHOTO: Cadillac sport-utility vehicles are seen in front of a cargo vessel at a ro-ro terminal in Tianjin port

General Motors is overhauling its Chinese line-up with a greater emphasis on electric cars and smart-driving technology to stem a slide in sales after more than two decades of growth in a country that contributes nearly a fifth of its profit.

GM's new China boss Julian Blissett told Reuters it would renew its focus on luxury Cadillacs, roll out bigger but greener sports-utility vehicles (SUVs) and target entry-level buyers with low-cost micro electric vehicles (EVs).

He said new technologies such as EVs and cars with near hands-free driving for highways would play a key role in GM's China initiatives, which are part of a push to regain momentum lost in the face of intense competition and shifting tastes.

Blissett, who replaced China veteran Matt Tsien this year, spoke to Reuters ahead of GM's Tech Day event in Shanghai later on Wednesday, where he and Chief Executive Mary Barra are expected to announce some of the new technology and product rollout plans.

"This market is rapidly electrifying. Cadillac is on a path to very heavy electrification. Buick is also going to heavily electrify," said Blissett, adding that GM's Chinese brands Baojun and Wuling would also go down the electric route.

"The market is changing dramatically. So the concept of standing still in China doesn't work."

GM sells its Chevrolets, Buicks and Cadillacs in China as well as its local brands Wuling and Baojun and has been one of the foreign success stories in the world's biggest auto market along with Germany's Volkswagen.

But GM sales have taken a hit, falling to 3.1 million vehicles in 2019 from a record 4 million in 2017.

A slowdown in China's economy and the resulting weakness in its auto market have been a big factor behind GM's sales slump, but analysts say competition has become fierce too.

Toyota, Volkswagen and Honda have been eating into GM's business while Chinese automakers such as Geely and Great Wall are making better-quality cars that can compete more effectively with the global giants.

GM is also facing competition from Tesla while Lynk & Co and Polestar, brands affiliated with Volvo, have rolled out sleek eye-catching designs that Chinese consumers crave.

BACK TO 4 MILLION

In 2017, GM China had a 14.3% share of overall sales of 28.2 million vehicles. By 2019, that had fallen to a share of 12.2% out of 25.4 million cars.

Blissett said the key objective of its strategy was to get back to sales of 4 million vehicles a year as soon as possible.

"Our business is a high engineering cost, high capital cost business, so, without scale, it's quite difficult to make money. We do need to return to that," he told Reuters.

He said he could not give a precise timeframe for when GM would hit its goal because of the uncertainty about how fast economies around the world recover from the coronavirus fallout.

Some GM officials have admitted privately that its brands, especially Chevrolet, have been slow to introduce more SUVs in China as they became increasingly popular.

However, both Buick and Chevrolet now have four SUVs each and Cadillac has three, Blissett said.

Analysts have also said the promotion of its top-end Cadillac brand came at the expense of Buick and Chevy sales, and that it failed to match rivals with their sleeker designs.

Blissett said GM would sell bigger SUVs, many of them electric, for its Chevy, Buick and Cadillac brands, though traditional gasoline-powered SUVs still offered GM "huge opportunities" to boost sales in China.

GM also wants to transform Wuling into a brand more focused on micro, electric "people-mover" vans, he said.

ELECTRIC REVOLUTION

"In the next five years, more than 50% of our capital and engineering deployment will go towards electrification and autonomous-drive technology. That should give you an indication where GM is betting on its future," GM's Blissett said.

"Chinese consumers are very embracing of technology, be that technology on the phone, be that e-commerce, be that intelligent driving technology, be that electrification. Although Europe and the U.S. have fairly significant plans on a governmental and market point of view, the electrification of cars is going to happen much faster here in China," he said.

"We intend to be right in the heart of that market. So, we will heavily play in the EV space. And that's the reason why we are investing as we are."

GM's Wuling and Baojun brands have borne the brunt of falling sales over the past two years as lower-income consumers bought fewer cars in the face of slower growth and as competition from Chinese rivals at the entry level intensified.

There are signs of life at Wuling, however, with sales up 9.7% in the second quarter of 2020.

GM hopes its new Wuling MINI EV launched this year, a micro two-door car, and a series of similar cars in the pipeline, will help it win back share. Before EV subsidies, the MINI EV can cost as little as 28,800 yuan ($4,150) for a basic model.

'WINNERS AND LOSERS'

To be sure, GM has made blunders, such as equipping some compact cars with unpopular three-cylinder engines. That hit GM sales significantly and it had to resurrect a four-cylinder gasoline engine for some models.

Still, analysts said much of the body blow GM's brands took in China has come from local brands that have significantly improved the quality of their cars and as Japanese and German rivals boosted sales despite a weaker overall market.

Beijing's emphasis on greener vehicles has also significantly pushed up the costs associated with the designing and manufacturing cars, which have combined to trigger a shake-up of China's auto industry.

Already, small Chinese brands such as Lifan have gone out of business while French carmaker PSA has scaled back its operations significantly and Renault, which is in a global alliance with Nissan, packed up and left.

"There is a revolution going on in the industry," said Blissett. "There are also winners and losers in the global brands. The trend is actually for the local brands to lose share if you look at the total trend. Luxury is a gain in share."

Analysts expect the consolidation in the auto industry to continue unabated in the coming years, with more failures, and also more mergers and acquisitions.

China auto industry expert Michael Dunne said if GM failed to manage its numerous brands in China properly, one might end up becoming a casualty.

"The introduction of Cadillac has had the effect of knocking Buick down a notch in the eyes of Chinese consumers," he said. "Buick is tilting more towards where Chevy plays, and as a result the two brands are crowding each other and are now throwing weaker punches."

By Norihiko Shirouzu


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GEELY AUTOMOBILE HOLDINGS LIMITED 1.01% 16.06 End-of-day quote.5.38%
GENERAL MOTORS COMPANY 2.35% 34.89 Delayed Quote.-4.67%
HONDA MOTOR CO., LTD. 0.10% 2483 End-of-day quote.-19.88%
NISSAN MOTOR CO., LTD. 0.48% 375.9 End-of-day quote.-40.91%
PEUGEOT SA -0.91% 15.305 Real-time Quote.-28.15%
RENAULT 0.86% 21.115 Real-time Quote.-49.94%
SAIC MOTOR CORPORATION LIMITED 4.51% 22.7 End-of-day quote.-4.82%
TESLA, INC. 1.18% 410.83 Delayed Quote.391.04%
TOYOTA INDUSTRIES CORPORATION 4.70% 6900 End-of-day quote.9.00%
TOYOTA MOTOR CORPORATION -0.03% 6893 End-of-day quote.-10.64%
UNITED STATES DOLLAR (B) / CHINESE YUAN IN HONG KONG (USD/CNH) -0.25% 6.6874 Delayed Quote.-3.67%
VOLKSWAGEN AG 1.13% 126.94 Delayed Quote.-27.97%
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Financials
Sales 2020 92 254 M 13 792 M 13 792 M
Net income 2020 7 232 M 1 081 M 1 081 M
Net cash 2020 17 344 M 2 593 M 2 593 M
P/E ratio 2020 18,4x
Yield 2020 1,37%
Capitalization 137 B 20 327 M 20 407 M
EV / Sales 2020 1,29x
EV / Sales 2021 1,08x
Nbr of Employees 38 000
Free-Float 58,5%
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Mean consensus BUY
Number of Analysts 31
Average target price 16,37 CNY
Last Close Price 13,91 CNY
Spread / Highest target 96,6%
Spread / Average Target 17,7%
Spread / Lowest Target -48,4%
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 LIMITED5.38%20 132
TOYOTA MOTOR CORPORATION-10.64%184 802
VOLKSWAGEN AG-27.97%76 743
DAIMLER AG-10.42%55 649
GENERAL MOTORS COMPANY-4.67%48 786
BMW AG-20.25%44 012