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Negative growth & large inventory test Geely's annual target

From:Internet Info Agency 2018-12-26 16:44:21

The overall growth of the Chinese auto market this year is sluggish, especially in the second half of the year, and the situation is even more severe for Chinese car brands. Geely Automobile, which has been growing in the industry, also appears signs of fatigue. According to data released by the China Passenger Car Association (CPCA), the retail sales volume of Geely Automobile in November was 138,559 units, down 1.1% year-on-year. At the same time, the data released by China Automobile Dealers Association (CADA) showed that, in November, the inventory ratio of Geely Automobile dealers reached 2.3, which was higher than the comprehensive ratio of automobile dealers of 1.92 in the same month and higher than the alert level of 1.5. This is a big challenge for Geely to achieve its annual sales target.

Six main models decline in sales

At the beginning of 2018, Geely set a sales target of 1.58 million vehicles for the whole year. In the first 11 months, Geely's cumulative sales reached 1,387,007 units, with an annual completion rate of 87.8%. In December, that is to say, it needs to complete nearly 13% of sales so as to meet the targeted goal, which will be a big challenge for Geely in the existing market environment.

For monthly retail sales, Geely's growth in the market continued to shrink after entering the second half of the year. After the double-digit sales growth in July, its sales growth slowed down month by month and showed a state of micro growth. The sales growth rate of the past five months was 30.7%, 30.2%, 14.3%, 2.6%, and -1.1% respectively.

The slowing down of Geely's sales growth is due to the sharp decline in sales of its main models. According to official data, the average monthly sales of both the new Emgrand and the Boyue reaches more than 20,000 vehicles, but sales in November shows a decrease of 25.9% and 36.6% respectively. The other two compact SUVs, Emgrand GS and Vision SUV, also see over 20% decrease in sales, reaching 20.3% and 32.2% respectively. The cumulative sales of the Boyue, the new Emgrand and the Vision SUV is lower than that of the same period last year.

Sales of all Geely models

Model

Sales in Nov. (units)

Year-on-Year Growth

Cumulative Sales from Jan-Nov (units)

Emgrand

20,514

-25.9%

231,783

Boyue

19,575

-36.6%

238,623

Emgrand GL

13,438

-5.4%

141,058

Emgrand GS

12,915

-19.8%

140,131

Vision

11,852

-32.2%

146,906

Vision SUV

10,870

-20.3%

110,618

Vision X3

10,248

1.4%

113,864

Binrui

10,197

-

22,806

Binyue

10,139

-

10,139

Borui

4,170

1.6%

42,699

Vision S1

3,793

-

66,089

LYNK&CO 01

5,302

-

87,902

LYNK&CO 03

4,011

-

4,976

LYNK&CO 02

3,008

-

21,751

*Note: The data is the batch quantity announced by the manufacturer.
By Internet Info Agency

In terms of sedans, there was 25.9% decline in sales of the new Emgrand, the Vision and the Emgrand GL also declines. Thanks to the newly launched Binrui, Binyue and the new models of the LYCN&CO 01, 02 and 03, which have been listed since last year, have become sales-growth products. Geely obtained impressive cumulative sales in the first 11 months this year

The consumption stimulus of the auto purchase tax halving policy released last year formed a historical high sales base which posed the year-on-year growth pressure in this Q4. It is estimated that if Geely wants to complete its full-year target, it must complete sales of nearly 190,000 vehicles in December, and the monthly growth rate should be close to 24% (the sales volume in December 2017 was 153,600). It is difficult for them.

Dealer inventory has significantly exceeded the warning line, and manufacturers are facing a dilemma

Affected by the unstable economic environment, the overall demand of the automobile market is shrinking. If the manufacturer blindly increases the dealer inventory in order to complete the sales target, the result will only be the dealer's price reduction sales, which will eventually lead to a decline in profits or even a loss.

According to the survey of the “Auto Dealer Inventory” made by the CADA in November, the comprehensive inventory ratio of auto dealers in November was 1.92, up 50% year-on-year, up 2% over the previous month, and the inventory level was above the warning line. Among them, Geely's stock depth has exceeded 2 months, and the inventory ratio is 2.3, far exceeding the average.

IIA recently visited a number of dealers and learnt that the short-term launching Binrui and Binyue have a small discount, other models such as the Boyue, the Borui, the Emgrand series has a discount of 1-1.5 million. Some of the stock cars that have been in stock for half a year, such as Boyue, can be discounted to more than 25,000 yuan. A sales manager of an authorized dealer of Geely, who resigned due to the high sales pressure, said helplessly: "At the time when I resigned, all stock cars are stocked for at least six months, or even for more than a year."

The higher the dealer inventory ratio, the higher the operational risk of the dealers. According to the international practice, the inventory ratio must operate within an appropriate range between 0.8-1.2. When the inventory ratio is higher than 1.5, which means it reaches the early warning level, the key regulation should be started. When it is close to 2.5, the dealer will face with huge business pressure and risks. At this time, manufacturers need to arrange production plans according to the actual situation of the market, instead of blindly fulfilling their established sales targets.

Dealers are seen as a barometer of manufacturers going deep into the market, and the dealer's operations can be the most direct understanding of market reactions and changes. However, if manufacturers blindly pursue the growth of sales, the contradiction between dealers and manufacturers will grow sharp. Dealers' profits will fall, and even losses will occur. At this point, dealers' willingness to follow a brand will also drop sharply, leading their operating strategies begin to go against the manufacturers.

Under the dual pressure of sales decline and inventory increase, whether Geely will adjust the sales target? IIA has asked Yang Xueliang, vice president of Geely Automobile Group, by telephone text message on this issue, but no reply before the press release.

An industry veteran said in an interview with IIA: "Geely is now in trouble. It is also a dilemma for them. From the perspective of capital market, it is not good news for investors that the annual sales target cannot be reached. However, to complete the sales target means that the dealer must be further backlog inventory which will lead to a series of troubles. To pursuit sales target or to safeguard dealers’ interests, that is a question."

Editor:Yu Ning