"Investor Network" Ge Fanmei
On March 9, Geely Automobile (0175.HK) announced that the company has submitted an application to the Stock Exchange for the addition of RMB counters, in order to support the new Hong Kong dollar-RMB dual-counter model plan launched by the Stock Exchange. This means that Geely Automobile is expected to become the first batch of Hong Kong-listed companies to join the dual-counter model.
The announcement said Geely believed the dual-counter arrangement could provide investors with new trading currency options and potentially more liquidity. The HKD-RMB dual-counter model also allows bookmakers to provide liquidity to their RMB counters and narrow the price differential between their HKD and RMB counters.
In the capital markets, Geely Automobile’s "RMB Hong Kong stock" is about to be realized. In terms of business, the company has made a bad start this year. In late February, the company launched a new energy sub-brand "Geely Galaxy", and soon fell into the "plagiarism door".
For Geely Automobile, an old car company with a 25-year history of car manufacturing, in addition to the plagiarism scandal, its continued decline in performance and loneliness in the new energy field may be more embarrassing. Now, Geely Automobile has high hopes for "Geely Galaxy", can it help it achieve corner overtaking in the field of new energy vehicles?
Trapped in the "plagiarism door"
On February 23, Geely Automobile launched a new mid-to-high-end new energy series – "Geely Galaxy", and released the prototype of Geely Galaxy "Galaxy Light".
According to reports, the "Geely Galaxy" series will launch seven new models within two years, of which the Galaxy intelligent electric hybrid L series will launch four products, the first electric hybrid SUV Galaxy L7 and the first electric hybrid car Galaxy L6 will be delivered in the second and third quarters of this year respectively; Galaxy intelligent pure electric E series will launch three products, of which the first pure electric product E8 will be delivered in the fourth quarter of this year.
However, less than a week later, "Geely Galaxy" ushered in plagiarism doubts. On February 28, a lawyer’s letter sent by Chongqing Baijun Law Firm, the law firm entrusted by Changan Automobile, pointed out that the prototype of Geely Galaxy’s "Galaxy Light" has a lot of similarities with Changan Automobile’s concept car and mass-produced models. It is suspected that a large number of copies of the appearance of Changan Automobile’s released models have seriously infringed the relevant intellectual property rights of Changan Automobile.
According to the comparison chart circulated on the Internet, the outside world pointed out that the original model of Geely Galaxy and Changan Automobile Deep Blue SL03, UNI-V and other models have similarities in the front face, headlights and tail shape. According to the data, the Deep Blue SL03 was launched in July 2022, priced between 17-200,000 yuan, providing pure electric version, extended range version and hydrogen electric version. As of the end of February this year, the cumulative delivery volume reached 37,328 vehicles.
(Image source: Sina Weibo)
In response to the plagiarism rumors, Geely Automobile directly denounced the above-mentioned lawyer’s letter as "seriously untrue and groundless, misleading the public, and causing serious damage to our brand and goodwill." According to a statement released by Geely Automobile on February 28, Geely Galaxy Light is an original design of Geely, and there is no plagiarism and infringement of others’ intellectual property rights.
(Image source: Geely Automobile official Weibo)
It is worth mentioning that Chen Zheng, vice president of design of Geely Automobile Group, joined Geely in March 2022 after working for Changan Automobile for 20 years and served as the global design director of Changan Automobile Group.
However, Geely Automobile has already applied for the Galaxy series trademark. Qichacha shows that Geely Automobile applied for the registration of the "Galaxy Light" trademark on March 2, which is internationally classified as a means of transportation, and the current trademark status is "under registration application". Previously, Geely has also applied for "Geely Galaxy", "Jizhi Galaxy", "Haoqing Galaxy" and other Galaxy series trademarks.
(Source: Qichacha)
New energy vehicle "underachiever"?
Lin Jie, vice president of Geely Automobile Group, once said that the sales goal of each product of the Galaxy series is to become the top three in the market segment, and the joint geometry brand will cover 65% of the future new energy vehicle market.
In fact, Geely Automobile has already made big claims about its new energy layout, but the reality is not as good as it wants. As early as November 2015, Geely Automobile announced the implementation of a five-year development strategy called "Blue Geely Action", with the goal of "reaching 90% of new energy vehicle sales by 2020."
However, by 2020, Geely Automobile’s annual sales of new energy vehicles 68,000, down 39.7% year-on-year, accounting for only 5.2%. In 2021, Geely Automobile’s new energy vehicles were delivered 61,000, down 10% year-on-year, and still failed to achieve the new energy sales target. Geely Automobile, which is brave in the fuel vehicle market competition, has frequently lost in the new energy battlefield.
In fact, from the perspective of peer companies, it is not difficult to find that Geely Automobile’s layout in new energy vehicles is relatively late. When NIO, Li Auto, and XPeng Motors were launched in the United States in September 2018, July 2020, and August 2020 after four, five, and six years of establishment respectively, Geely Automobile really began to make big moves in the field of new energy vehicles.
Geely Automobile established Geometry Automobile in April 2019, positioning it as a new brand of mid-to-high-end pure electric vehicles, but the development of Geometry Automobile was not smooth in the first two years. Data show that in 2019 and 2020, the annual sales of Geometry Automobile remained at about 10,000 vehicles. In order to occupy a place in the field of new energy vehicles, Geely Automobile and its parent company established the new energy brand of Extreme Krypton Automobile in March 2021.
Entering 2022, the new energy vehicles under Geely Automobile began to exert force. According to Geely Automobile data, the cumulative sales of pure electric vehicles under Geely Automobile in 2022 were 262,000, an increase of 328% year-on-year, and 66,000 plug-in hybrid vehicles, an increase of 219% year-on-year. Although it is far higher than the industry’s 90% year-on-year growth rate, it is still unable to compare with the giants Tesla and BYD in scale. In 2022, BYD’s cumulative sales were 1.8635 million, an increase of 208.64% year-on-year. Among them, the sales of pure electric vehicles exceeded 910,000; while Tesla’s annual sales were 1.31 million, and about 440,000 in China.
As a traditional automaker with independent core technologies, Geely Automobile has followed in the footsteps of BYD’s transformation from traditional automakers to new energy vehicles.
Data show that BYD’s annual sales in 2018 were 520,000, only one-third of Geely Automobile’s total sales, but BYD’s new energy vehicle sales accounted for 47.5% at this time. Since March 2022, BYD has stopped the production of fuel vehicles, becoming the first car company in the world to officially announce the suspension of fuel vehicles. Until February this year, Geely Automobile’s new energy vehicles accounted for 21.4%, and fuel vehicles are still the company’s main sales force.
In January 2023, BYD sold 151,341 units, an increase of 62.44% year-on-year. During the same period, while BYD’s sales were growing, Geely Automobile’s sales fell sharply, achieving sales of 103,452 units, a decrease of about 29% year-on-year. Regarding the decline in sales, Geely Automobile explained that it was "mainly affected by the early Spring Festival holiday."
The performance is "under great pressure"
In 2022, Geely Automobile’s total sales volume was 1.43 million, an increase of about 8% year-on-year. Among them, the cumulative sales volume of new energy throughout the year was 328,727, and new energy accounted for about 23%.
In fact, compared with Geely Automobile’s previous sales target of 1.53 million vehicles in 2022, the company has not met the target. This is already the fifth consecutive year that Geely Automobile has not met the sales target. However, for 2023, Geely Automobile sets the sales target at 1.65 million vehicles, of which the sales target of new energy vehicles is more than 100% higher than the total sales achieved in 2022.
The continuous improvement of sales targets may be to ensure the full implementation of the "Smart Geely 2025" strategy. The strategy was proposed by Geely Automobile in 2021 and announced that the total sales target of 2025 cars is 3.65 million, of which 650,000 are Krypton cars and 3 million are Geely cars.
Extreme Krypton, a well-known new energy vehicle brand under Geely Automobile, sold only 71,900 vehicles in 2022. Since its establishment in March 2021, Extreme Krypton’s capital movements have been frequent. When the Pre-A round of strategic financing was completed in August 2021, the post-money valuation was about 9 billion US dollars, and the recent completion of 750 million US dollars financing, the post-money valuation was 13 billion US dollars, about 89.80 billion yuan; Geely Automobile is planning to spin off Extreme Krypton. Compared with the new car-making forces NIO, Xiaopeng, Ideal, and Zero Run, which have sold more than 100,000 cars in 2022, as of March 10, the valuation of the corresponding four companies is 102.40 billion yuan, 59.80 billion yuan, 154.90 billion yuan, 27 billion yuan; It is not difficult to see that the valuation of polar krypton is higher.
For new car manufacturers, profitability is still a problem. Extreme Krypton Auto’s net losses in 2021 and the first half of 2022 reached 1.01 billion yuan and 759 million yuan respectively. In just one and a half years, Extreme Krypton has lost up to 1.769 billion yuan.
Geely Automobile’s continued losses and huge demand for capital may also put pressure on Geely Automobile. Geely Automobile disclosed that in the first half of 2022, Geely Automobile’s gross profit margin fell by 2.6 percentage points year-on-year to 14.6%, and the sharp decline in net profit was mainly due to the negative impact of the increase in raw material costs and the increase in the proportion of new energy vehicles.
In recent years, Geely Automobile’s net profit decline has become a trend. Wind data shows that from 2019 to 2021, the company’s net profit was 8.19 billion yuan, 5.534 billion yuan and 4.847 billion yuan, respectively, down 34.76%, 32.43% and 12.4% year-on-year; in the first half of 2022, Geely Automobile’s net profit further decreased by 34.81% year-on-year, to 1.552 billion yuan.
In terms of profitability, Geely Automobile’s gross profit margin in 2018 fell from 20.2% to 14.6% in the first half of 2022, but the expense ratio rose from 7.8% in 2018 to 13.7% in the first half of 2022, and the expense ratio continued to rise. In comparison, BYD’s gross profit margin in the first half of 2022 was 13.51% and the expense ratio was 8.58%. During the same period, Geely Automobile’s gross profit margin was slightly higher than BYD, but the expense ratio was much higher than BYD.
At the same time, Geely Automobile’s inventory is high. As of the end of June 2022, Geely Automobile’s inventory was 7.567 billion yuan, a significant increase from 5.522 billion yuan at the end of 2021. In the inventory, the inventory of manufactured goods increased sharply from 2.94 billion yuan at the end of 2021 to 4.063 billion yuan at the end of June 2022. How to remove inventory also tests Geely Automobile’s management ability. (Produced by Thinking Finance) ■