Volvo owner's China business posts 43% profit drop on pandemic

[NEW YORK] Geely Automobile Holdings, the Chinese carmaker controlled by Volvo Cars owner Li Shufu, reported a 43 per cent 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 (S$453.9 million), the carmaker said in a statement on Monday. Revenue plunged 23 per cent after car 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 recover in recent months and carmakers are betting on the world's largest market to help them return to growth.

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 carmaker. The deal would unify the bulk of billionaire Mr Li's growing stable of automotive brands and create a company with annual revenue of more than US$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.

Mr Li, who also is Daimler's largest shareholder, has championed consolidation as a way for carmakers to pool resources for initiatives such as 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 car company Proton.

BLOOMBERG