Geely’s sales target of 2 million vehicles this year was shelved, shrinking to 1.41 million vehicles.

On the evening of January 6th, Geely Automobile (00175.HK) announced its sales in December 2019 and the whole year. In December, Geely Automobile’s sales increased by 39.3% year-on-year to 130,000 vehicles, successfully fulfilling the annual target of 1.36 million vehicles. However, compared with 2018, Geely’s sales in 2019 still fell by 9.3% year-on-year. When releasing the annual sales performance, Geely also announced the annual target of 1.41 million vehicles in 2020, an increase of less than 4% over 2019.

Geely Automobile’s Hong Kong stocks rose slightly today, closing up 1.68% at noon.

According to the prediction of China Automobile Industry Association and other associations, the automobile market may continue to decline in 2020. In the face of this year’s uncertain auto market, Geely and Link brands under Geely Automobile will launch as many as six new cars this year. According to the data of Guosheng Securities, although Geely sold 130,000 vehicles in December last year, its terminal retail sales reached 170,000 vehicles in that month. It can be seen that in the past year, Geely’s achievements in terminal inventory management of dealers can make dealers "go into battle lightly" to sprint for the goal of 2020.

Geely’s sales volume declined in 2019, and most of the decline was the old models of Geely brand, including 211,000 new Emgrand, down 14.4% year-on-year; The prospect is 80,000 vehicles, down 44.4% year-on-year; Bo Yue has 232,000 vehicles, down 9.1% year-on-year; Emgrand GS sold 113,000 vehicles, down 28.5% year-on-year; Emgrand GL7.9 79,000 vehicles, down 46.5% year-on-year; There were 82,000 prospective SUVs, down 27.7% year-on-year. The new models with higher prices (including Binrui, Binyue, Jiaji and Xingyue) and the Lexus models sold a total of 278,000 and 128,000 respectively, accounting for 20% and 9.4% of Geely’s sales respectively, up 16.7 and 1.4 percentage points year-on-year. The improvement of sales structure is conducive to the continuous improvement of ASP(average selling price).

According to the market research data of Guosheng Securities, in terms of market price, the terminal discount of Geely Automobile also narrowed in December 2019, with an average discount rate of 9.93%, down 0.89 percentage points from November, which was the first narrowing since the fourth quarter. As a result, Guosheng Securities predicts that under the improved inventory situation and market conditions, with the continuous launch of new products in 2020 and the merger of engine business with Volvo Cars, the gross profit margin of Geely Automobile will rise, and it is predicted that 1.41 million vehicles will be a "conservative figure" for Geely.

Although the organization is optimistic about Geely’s expectation in 2020, from the target figure of 1.41 million, Geely is relatively conservative about the market in 2020. As early as November 2016, Geely Automobile released the "20200 Strategy", which is to achieve the sales target of 2 million vehicles in 2020. An Conghui, who served as CEO and President of Geely Automobile Group at that time, and is now President of Geely Holding Group and CEO and President of Geely Automobile Group, said in an interview that "it is Geely Automobile’s 2020 strategy to sell 2 million vehicles, and this goal is unshakable."

Since the sales volume increased by 50% year-on-year to 760,000 vehicles in 2016, Geely Automobile has started a high-speed and arrogant development rhythm. By 2018, the sales volume of Geely Automobile exceeded 1.5 million vehicles, and the sales volume doubled within two years. At the same time, pressure also exists. In terms of sales volume, Geely’s sales growth in the past few years is largely due to the great richness of products and models. On the one hand, it makes up for the shortcomings of SUVs, on the other hand, it uses the family strategy to arrange troops in every market segment. The advantage of high-speed iterative product launch rhythm is that new cars are constantly stimulating the market and grabbing dividends. However, this also puts pressure on the market cycle and rhythm of products.

Since 2018, Geely’s advantages in the field of cars have been gradually eroded under the joint venture brand. In the car market, Emgrand has been in the top ten of the car market rankings before, and it is also the only independent model that has entered the top ten list of car sales for many years. However, in 2019, Emgrand was squeezed out of the top ten by joint-venture brand cars, and the sales volume of Geely cars in 2019 was 543,000, down 13.2% year-on-year. The same is true in the SUV field. Many models in the same market segment have also begun to "grab food" each other. For example, Binyue, which is in the same compact SUV field, is also considered to have a "grab food" market with Emgrand GS.

In the second half of 2018, Geely has already felt the pressure of rapid development on the whole system and started to make adjustments. Judging from the market and price system in 2019, Geely has made some breakthroughs in market adjustment and basic work over the past year, but the development in 2020 is still full of challenges. Although Geely will no longer aggressively raise the annual sales target of 2 million vehicles, it has previously mentioned that the sales of new energy vehicles will account for 90% of the total sales in 2020, and whether it is achieved or not is also very uncertain. Also, in terms of vehicle layout, three of Geely’s six models to be launched in 2020 will be A0-class SUVs (including a pure electric vehicle). How to grasp the market rhythm and avoid competing with existing models is also a big test. In addition, in terms of high-end, from the situation in 2019, due to the decline of joint venture brands and the downturn of the entire automobile market, the high-end brand of Geely Automobile was also under pressure from the market level in 2019, and sales began to fluctuate, and the terminal price system was also turbulent. The pressure may not be reduced in 2020.