By the end of 2021, Geely ranked only 7th in market capitalization among Chinese listed car companies. It’s market capitalization is less than 1/4 of BYD’s, less than half of Great Wall Motors’, and lower than new Internet car makers such as NIO, Xpeng and Li Auto.
On the evening of January 6, Geely Automobile (00175.HK) released its sales figures for 2021. Its total annual vehicle sales (including sales of Lynk brand vehicles) were 1.238 million units, up about 1% year-on-year, reaching 87% of its previously set target of 1.52 million units, and it wants to challenge sales of 1.65 million units in 2022, hoping to achieve a growth rate of 24%.
The target of 2022 is also under considerable pressure.
Although Geely took the top one in 2021 passenger car sales for the fifth consecutive year, its rivals Great Wall Motor and BYD are performing well, further narrowing the gap with Geely.
Among them, Great Wall Motor’s 2021 sales reached 1.2810 million units, up 15.2% year-on-year, with less than 50,000 units separating it from Geely Automobile, and continued to maintain a high growth rate. BYD （002594）was the first to achieve the switch to the new energy vehicle track, selling 593,700 new energy passenger vehicles for the year, an increase of 231.60%.
In 2022, the competition among the top three private car companies will be more intense, and Geely is also facing a severe competitive market situation and the pressure of electrification transformation.
For 2022, Geely Automobile’s Board of Directors has set a target of 1.65 million units, a 24% increase from 2021.
Previously, Geely’s sales record was 1.508 million units set in 2018, but during the three years from 2019-2021, the sales level was around 1.32-1.36 million units due to the cyclical adjustment of the domestic car market, the epidemic, chip shortage and other factors, all of which failed to fulfill the expected sales target set by the board at the beginning of the year.
Lynk is the bright spot for Geely Automobile
Looking at the performance of Geely Automobile’s various brands and sub-categories, the Lynk brand, Geely’s joint venture with Volvo’s mid-to-high-end brand, is the biggest bright spot in 2021.
Data shows that in 2021, the Lynk brand achieved total vehicle sales of 220,500 units, an increase of approximately 26% year-on-year. This is the first time that Lynk has exceeded the 200,000-unit annual sales mark.
In addition, in 2021, Lynk’s Lynk01 HEV and Lynk01 PHEV exported 11,602 units shipped to the European market.
Cumulatively, 5,937 vehicles will be delivered in 2021 under an innovative subscription model (i.e. customers pay a regular subscription fee for the car and use the car and ancillary services during the subscription service).
This is the first time that a Chinese brand passenger car has entered the mainstream European car market, competing head-to-head with foreign brands such as Volkswagen and PSA Peugeot Citroen.
Geely needs to accelerate its development in the NEV field
However, for Geely, despite being in the first-tier echelon of domestic independent brands in the fuel car field, its market position in the field of new energy vehicles is slightly inadequate.
In 2021, Geely’s total sales of new energy and electrified models (including hybrid, mild hybrid, plug-in hybrid and pure electric) will be 100,100 units, an increase of 47% year-on-year. Despite achieving some growth, it failed to outperform the broader market compared to the overall takeoff of the new energy vehicle market.
To drive the electrification transition, Geely launched a new smart premium electric brand ZEEKR in early 2021.
Deliveries of the brand’s first new vehicle, the ZEEKR 001, began in October 2021, with a combined total of 6,007 units delivered for the year.
Geometry, another pure electric brand of Geely’s electrification transition, has continued to be in the doldrums for the past two years, despite having achieved good market performance in the early stage.
At present, due to the high sales of fuel vehicles, a lot of negative fuel consumption points have been generated, and Geely is one of the independent car companies with the greatest double points pressure.
Along with the more stringent double points assessment standards, Geely must accelerate the transformation of electrification.
Market capitalization is less than 1/4 of BYD
In 2021, many domestic auto stocks took off, driven by the NEV concept and smart car concept.
However, under the influence of factors such as sales failing to meet expectations, the termination of the plan to return to the Keitai and the overall market of Hong Kong stocks, Geely Automobile’s share price fell 20.31% and its market capitalization shrank by 44.475 billion yuan to 174.470 billion yuan as of December 31, 2021, compared with the beginning of 2021.
Despite Geely Automobile’s absolute leading position among China’s autonomous car companies in terms of size market, the capital market has not given it a valuation comparable to its market position.
Compared to its competitors who are also private automakers, Geely’s market capitalization is less than 1/4 of BYD’s, less than half of Great Wall Motors’, and lower than new Internet car makers such as NIO, Xpeng and Li Auto.
Several moves Geely Automobile began planning in the secondary market in 2020, but also suffered successive hardship in 2021.
In June 2020, Geely Automobile made an announcement that it planned to list on the STAR Market with the approval of the company’s board of directors. In September of the same year, Geely’s application for listing on the STAR Market was accepted. However, on June 25 last year, Geely Auto also announced that it had withdrawn its application.
Geely’s partnership with Volvo
In February 2020, Geely announced that it was planning a business with Volvo Cars. According to the original plan, the assets of Volvo Cars would be incorporated into Geely Automobile after the restructuring, and a future listing in Stockholm would be considered.
The original plan was to list Volvo Cars as a package with Geely Automobile, and the listed company would house the vast majority of Geely Holdings’ passenger car business.
However, in February 2021, Geely announced that it had reached an “optimal” solution for the merger and restructuring of its business with Volvo Cars.
According to the new proposal, the two companies will undertake a series of business combinations and cooperation while maintaining their existing separate corporate structures. Specifically, the merger will include the powertrain business and technical cooperation related to electrification, intelligent network connection and autonomous driving, and will not involve asset-level merger.
Shortly afterwards, Volvo Cars revealed plans for a separate IPO, and on October 29, 2021, it was officially listed on the Stockholm Stock Exchange in Sweden. As of December 31, 2021, Volvo Cars has a market capitalization of approximately $25.33 billion.
Facing the industry-wide transformation, Geely needs more funds to seek changes and the pressure to reduce leverage is increasing. And in the face of the capital market’s comprehensive re-judgment of car company valuations, Geely needs to tell a new story in the capital market.
Compared with its competitors, Geely is undervalued in the capital market, and the poor electrification transition is one of the key reasons. In 2021, whether it is the launch of the ZEEKR brand, or the joint creation of a set of brands with Baidu, Geely has shown its determination to transform.