China's Geely doubles earnings as Volvo tech boosts sales

Wed Mar 22, 2017 1:31am EDT
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By Jake Spring and Norihiko Shirouzu

BEIJING (Reuters) - China's Geely Automobile Holdings Ltd (0175.HK: Quote) posted its biggest profit growth in eight years on Wednesday, as improved product design and engineering following its 2010 purchase of Sweden's Volvo helped propel it to record sales.

Geely, which also owns the maker of London's black cabs, has already forecast a 31 percent jump in sales for the current year as affordable models introduced 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 an automaker 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 automaker 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 Taiwan-based 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," said the person who was not authorized to speak publicly on the firm's investments and so declined to be identified.

Geely's China sales grew 50 percent last year to 766,000 vehicles, powered by the GC9 and Boyue, as well as small cars featuring Volvo technology. It aims to top 1 million this year, though could sell far more depending on market conditions, a Geely official with direct knowledge of the matter told Reuters.   Continued...

FILE PHOTO: Employees work along a Geely Automobile Corporation assembly line in Cixi, Zhejiang province June 21, 2012.   REUTERS/Carlos Barria/File Photo