China’s Geely Automobile flags costs, chip shortage after 12% drop in 2021 profit

SHANGHAI (Reuters) -Geely Automobile Holdings Ltd expects rising raw material prices and global chip shortages to pressure its profitability and sales this year, the Chinese company said on Wednesday, after reporting a 12% fall in 2021 profit.

The world’s highest-profile Chinese automaker, thanks to its investments in Volvo Cars and Daimler AG (DE:MBGn), reported a 2021 profit of 4.85 billion yuan ($761.64 million), compared with 5.53 billion yuan in the previous year. Revenue rose 10% to 101.6 billion yuan.

“The intensified competition in China, the rise in raw material prices, other pandemic-related disruptions and global shortages of chip supply have showed no signs of subsiding and should continue to put pressure on the sales performance and profitability of the Group in 2022,” Geely Automobile said in a statement.

Geely Automobile is targeting to sell 24% more vehicles this year, at 1.65 million vehicles, saying it would look to further expand its export sales to new markets in Southeast Asia, the Middle East and western Europe.

The company also recommended payment of a final dividend of HK$0.21 per ordinary share.

China’s auto sales grew last year, helped by surging sales of new energy vehicles, but industry executives have warned about the impact of a global shortage of semiconductors and rising raw material prices, which have been exacerbated by supply chain disruptions following Russia’s invasion of Ukraine.

Russia calls its actions in Ukraine a “special military operation”.

In an earnings call on Wednesday, Geely Auto Group CEO Jerry Gan said the company’s reliance on custom chips and globalised supply chains meant the semiconductor shortage had a “quite large effect” on production, an issue Geely would tackle via localisation and in-house chip development, among other measures.

($1=6.3678 Chinese yuan)

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