(Bloomberg) — Geely Automobile Holdings Ltd. reported first-half income that missed analyst estimates as a spike in car shipments failed to offset a global chip shortage that’s still hampering production.
The Hangzhou, China-based carmaker reported net income of 2.4 billion yuan ($367 million) for the six months ended June 30, versus 2.3 billion yuan the same period a year ago, according to a filing Wednesday. Analysts were looking for 3.2 billion yuan. Revenue rose 22% to 45 billion yuan, lower than average analyst estimates of 48.9 billion yuan.
“The rise in raw material prices should subside in the remainder of the year but chip shortage could persist,” Geely said in a statement, adding that the “launch of more new and competitive vehicle models should enable the group to perform better in the second half.”
Despite an almost 20% pick up in car shipments in the first six months of 2021, Geely isn’t even halfway to meeting its full-year target of 1.53 million units. Like every automaker, it’s been hit by a worsening semiconductor shortage that’s silenced production lines and prompted regulators in China to launch a probe into possible price manipulation.
Geely on Wednesday maintained its full-year sales forecast, which represents growth of 16% from 2020, but said the “recent worsening of the chip shortage and the resurgence of Covid-19 cases globally could pose a significant threat to our sales performance over the next few months, thus undermining our chance to achieve the target.”
Hong Kong-listed Geely, whose parent is Zhejiang Geely Holding Group Co., is China’s largest private carmaker and is controlled by Li Shufu, a billionaire who owns a large stake in Daimler AG and who has amassed interests in European legacy brands such as Lotus and lower-end players like Malaysia’s Proton. Its shares were up 2.7% Wednesday.
The impact of the chips shortage can be seen in Geely’s gross margins. The automaker said gross margins were “relatively stable” for the period compared with 17% in the first half of 2020, as the “impact from higher raw materials costs was largely offset by improving product mix.”
Geely is also pushing into electric cars and has a suite of brands including Geometry, Polestar, Lynk & Co., and, most recently, Zeekr.
“The transformation from conventional vehicles to new-energy vehicles, and the scheduled relaxation of foreign investment restrictions in China’s automobile industry, should represent additional challenges to Chinese passenger vehicle manufacturers,” Geely said. “The group’s response is the creation of Zeekr to fully consolidate resources to strive for better performance in the highly competitive market for electric vehicles.”
The Zeekr range, unveiled prior to the Shanghai auto show in April, is aimed at taking on the car offerings from tech giants like Xiaomi Corp. The first Zeekr 001 model is due to start deliveries next month. Sales of around 8,000 are targeted in the fourth quarter, Geely President Andy Conghui An said in an interview earlier this year.
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