Geely Automobile drives away from buying Malaysia’s Proton
China’s Geely Automobile Holdings has withdrawn its bid to take a controlling stake in Malaysian car maker Proton, Geely’s president, An Conghui has told the South China
Morning Post. Geely, the owner of the Swedish Volvo brand, yesterday reported better-than-expected earnings for 2016, as net profit soared by 126% from the previous year to 5.1 billion yuan (HK$5.7 billion).
HONG KONG — China’s Geely Automobile Holdings has withdrawn its bid to take a controlling stake in Malaysian car maker Proton, Geely’s president, An Conghui has told the South China Morning Post.
Geely, the owner of the Swedish Volvo brand, yesterday reported better- than- expected earnings for 2016, as net profit soared by 126% from the previous year to 5.1 billion yuan (HK$5.7 billion).
It had been considered the favorite to acquire a controlling stake in Proton, Malaysia’s largest car maker, which also owns the Lotus sports car marque, though Europe’s second-largest car maker Groupe PSA, which owns the Citroen, Peugeot, and DS brands, was also in the running.
Geely’s revenue jumped 78% to 53.7 billion yuan as the group sold 765,970 vehicles in 2016, up 50.2% from the previous year. Of these, 744,191 units were sold in China, up 53.6% from 2015, according to the company’s filing with the Hong Kong stock exchange.
An did not elaborate on the Proton decision. But in an interview earlier this month with Bloomberg, Geely Chairman Li Shufu had indicated the Malaysian firm was uncertain about what it wanted from an overseas partner.
Any successful bidder will get access to Proton’s Tanjung Malim assembly plant, which has an annual production capacity of 150,000 vehicles in two shifts.
Owning a car assembly in Malaysia would also qualify its owner to ship vehicles tax- free anywhere among the 10 members of the Association of Southeast Asian Nations (ASEAN) that has a combined population of 623 million.
Geely’s main ambition is to expand its footprint into Southeast Asia, said Robin Zhu, a Hong Kong- based auto analyst at Sanford C. Bernstein, when the news of Geely’s withdrawal of interest in Proton broke. Last month it revealed a 2017 sales target of one million vehicles, up 34% from last year. It has been actively seeking overseas acquisitions, Hong Kong- based Executive Director Lawrence Ang said earlier this month.
Proton is looking for a strategic partner to assist with research and development as part of conditions to get a 1.5 billion ringgit ( HK$ 2.6 billion) loan from the Malaysian government last year.
The firm, once one of the Malaysia’s flagship companies, has been struggling with losing market share in Malaysia while failing to compete overseas.
As for Geely, the last time it recorded a better annual performance was in 2008, when net profit of that year surged 179% to 866 million yuan from 2007, Reuters figures show.
Geely is proposing HK$ 0.12 per share as a dividend for this year. The only black mark on its earnings was that exports declined by a sharp 15% year on year to 21,779 units. And in the first two months of 2017, it further tumbled 60% from a year earlier. An said the decline was “within expectation and within planning.”
He said Geely still aimed to be one of the top ten “international car makers.”
An said he plans to introduce at least two more new models during the first half of next year, becoming the first Chinese car maker to market its own brand in developed markets, starting with Europe.
In its results filing, the company said 2017 could be another “stellar” year, as demand remains strong for cars launched in 2016. “Uncertainties from international markets, geographical politics, and currency rates are eroding the profit of export, that is why we intentionally brought down export volumes,” he said.
But it also highlighted fierce competition and admitted sales in late 2016 were heavily influenced by the impending halving of tax purchase subsidies in China for compact vehicles to 25% from 2017.
Geely shares rose 5.83% to HK$11.98 yesterday. —