On March 20, China’s Geely Automobile Holdings reported solid results for 2023, shrugging off the fierce price competition in the world’s largest automotive market.
An Conghui, a Geely Automobile executive and the president of its parent Zhejiang Geely Holding Group, told reporters that the deep discount by Chinese auto brands are “normal” and a “necessary process for any industry to undergo for progress and development.”
Factors such as overcapacity and weaker consumption have fueled the price war. Xpeng Motors founder and CEO He Xiaopeng, who leads one of China’s most prominent electric vehicle makers, described the latest competitive landscape as a “bloodbath” in a letter to employees last month.
While domestic competitors, especially ones focused on EVs and other new energy vehicles like Xpeng, struggle to be profitable, Geely logged 21% revenue growth to RMB 179.2 billion (USD 24.9 billion) for 2023 and a net profit of RMB 5.3 billion (USD 736.5 million), up 1% on the year.
When a one-off gain in 2022 from the acquisition of a 34% stake in Renault Korea is stripped away, the net profit increase for last year is 51%.
Xpeng said on March 19 that its revenue grew 14% to RMB 30.6 billion (USD 4.2 billion) in 2023 as sales volume increased by 17% to 141,601 units. But the company’s full-year net loss widened to RMB 10.3 billion (USD 1.4 billion) from RMB 9.1 billion (USD 1.2 billion) a year earlier.
The sharp rise in Geely’s bottom line reflects improvement in the gross profit margin, which widened 1.2 percentage points to 15.3% last year. Dai Qing, the CFO, said the main reason was the volume increase. The Hong Kong-listed company sold a total of 1.687 million vehicles in 2023, 18% more than the year before, which resulted in “rising economies of scale,” Dai said.
The volume effect benefitted the group’s luxury brand Zeekr, whose sales grew by 65% to 118,685 units. The unit’s net loss was almost cut in half to RMB 1.1 billion (USD 152.8 million) in 2023.
Xpeng’s full-year gross profit margin, by contrast, shrunk by 10 points to 1.5%.
Geely is a legacy automaker that is seeking to gradually increase plug-in hybrid and battery-only models through a multi-brand strategy. It has three major brands—Geely, Lynk & Co, and Zeekr—respectively serving the mass, medium-to-high, and luxury markets.
Geely has put off its plan to list Zeekr in the US stock market. Gui Shengyue, CEO of Geely Automobile, said that the IPO would come “in the future at an appropriate time.” He also said that even after the IPO, Geely would remain the largest controlling shareholder.
On the future of internal combustion engine cars, Gui stressed that “we have always maintained a position of balanced development” between gasoline engine and electric vehicles. While major portion of the growth of sales volume in 2023 came from NEVs, which increased by 48% by volume, the sales of ICE vehicles still made up over 70% of the 1.687 million autos sold last year.
Gui’s boss, billionaire Li Shufu, the group’s founder and chairman, was quoted in an interview with Chinese state-owned CCTV earlier in the month as saying Geely is “not going to easily give up” on ICE cars. Gui also revealed a comment made by Li during the company’s board meeting on March 20, when he said that the ones struggling to make a profit are those producing only pure EVs.
On chip procurement, the company denied a recent report by Bloomberg that the Chinese government was asking automakers including Geely to purchase local semiconductors amid tech tensions between China and the US.
“The Chinese government has not demanded us or anyone to buy local chips,” An told reporters.
“Companies are making independent decisions” on this matter, An added.
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.