(Bloomberg) — Geely Automobile Holdings Ltd., the Chinese automaker controlled by Volvo Cars owner Li Shufu, reported a 43% drop in first-half profit after the coronavirus outbreak shuttered factories and decimated demand.
Net income in the six months through June was 2.3 billion yuan ($331 million), the carmaker said in a statement Monday. Revenue plunged 23% after auto deliveries sank. The company cut its annual sales target to 1.32 million vehicles from 1.41 million.
The pandemic kept consumers away from showrooms and forced carmakers to suspend production, exacerbating an industry slump that lasted for more than two years. With the outbreak receding in China, sales have started to revive in recent months and automakers are betting on the world’s largest market to help them return to growth.
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Geely said headwinds are set to persist, making “2020 among the most difficult year in the group’s history.” It also warned “the intense market competition in China could worsen further.”
Shares of Geely fell 2.9% in afternoon trade in Hong Kong. The stock has added about 7% this year.
While earnings are under pressure, Geely is among a few major automakers that have remained profitable during the slump, joining Toyota Motor Corp. and Tesla Inc. To curb expenses, Geely reduced its workforce by about 12% during the first half to 38,000.
In February, Geely’s parent company announced plans to merge Geely Auto with Volvo Cars, a move that could pave the way for creation of China’s first global automaker. The deal would unify the bulk of billionaire Li’s growing stable of automotive brands and create a company with annual revenue of more than $40 billion.
Geely was discussing different structures for the Volvo deal with advisers, and no final decision had been made on details, including the timeline and size, people familiar with the matter said in March.
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Li, who also is Daimler AG’s largest shareholder, has championed consolidation as a way for automakers to pool resources for initiatives like self-driving cars and electrification. He’s built a global carmaking empire over the past two decades, securing stakes in European legacy brands such as Lotus as well as investing in Malaysian auto company Proton.
(Updates with shares in fifth paragraph, staff reduction in sixth.)
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