GEELY POSTS BIGGEST PROFIT IN 8 YEARS

5.1b yuan net profit last year as improved product design, engineering propel sales

BEIJING after the Volvo acquisition, such as its GC9 sedan and Boyue sport-utility vehicle, exceed initial estimates.

Long seen as a no-frills brand, Geely has transformed itself into a carmaker with up-market aspirations, using its Volvo research-and-development advantage to climb the sales table in the world’s largest auto market, where it ranks around seventh.

Come next year, Geely plans its next phase of expansion as it aims to become China’s first carmaker to market its own brand — new Volvo collaboration Lynk & Co — in developed markets, beginning with Europe and the United States.

Entering major markets with an unknown Chinese brand is an expensive risk, analysts say, but investors are unperturbed: Geely’s share price has trebled over the past 12 months.

“It’s a total turnaround story,” said a fund manager at a Taiwanbased investment firm that bought a significant amount of Geely stock last year. “Before it was just a normal domestic brand, but after several new product launches it successfully elevated its brand image.”

Geely’s China sales grew 50 per cent last year to 766,000 vehicles, powered by the GC9 and Boyue, as well as small cars featuring Volvo technology. It aimed to top one million this year, though it could sell far more depending on market conditions, said a Geely official.

For last year, net profit more than doubled to 5.1 billion yuan (RM3.27 billion), its strongest growth since 2008. The figure is set to rise 37 per cent to seven billion yuan this year, showed a Reuters poll of analyst estimates prior to Geely’s filing yesterday.

To be sure, growth has come at a cost. Geely and parent Zhejiang Geely Holding Group Co Ltd had spent 10 billion yuan on R&D in each of the past three to four years, or about 15 per cent of current revenue, said spokesman Victor Yang. Reuters