From：Internet Info Agency 2019-04-05 14:53:03
Geely Automobile Holdings Co., Ltd. (GEELY AUTO) released its 2018 financial report recently, stating that Geely Auto's annual revenue exceeded 100 billion yuan (106.6 billion yuan), a year-on-year increase of 15%, and net profit reached 12.67 billion yuan, an increase of 18%. After the release of the financial report, many securities and financial institutions have raised the rating of Geely Auto, and the stock market has risen sharply. On the other hand, the mystery of Geely Auto R&D cost and profit amount has been discussed again.
Only 1.9 billion yuan of R&D investment?
Li Donghui, director, executive vice president and CFO of Geely Holding Group Co., Ltd. said at the financial report conference: "At present, Geely's average R&D investment for the past ten years is in the range of 5%-7%, which is the same as that of the other luxury automakers. At the same time, Geely's investment in research and development continues to lead compared to the Chinese independent automakers."
According to this data, Geely Auto's annual research and development expenses are roughly around 5.3-7.5 billion yuan.
IIA reviewed the financial report of Geely Auto from 2009 to 2018, which only provided data on the expensed R&D investment. The data on capitalized R&D investment was only mentioned in the 2018 financial report. According to statistics, Geely Auto's total cost of R&D investment for the decade was 2.322 billion yuan, accounting for 0.56% of the annual revenue.
|
GEELY AUTO’s revenue and R&D cost comparison in the past 10 years |
|||
|---|---|---|---|
|
YEAR |
REVENUE(100M yuan) |
R&D COST(100M yuan)* |
R&D COST PROPORTION(%) |
|
2009 |
140.7 |
0.65 |
0.46% |
|
2010 |
201 |
0.97 |
0.48% |
|
2011 |
209.6 |
1.1 |
0.52% |
|
2012 |
246.3 |
2.1 |
0.85% |
|
2013 |
287.1 |
2.8 |
0.98% |
|
2014 |
217.4 |
2.1 |
0.97% |
|
2015 |
301.4 |
2.6 |
0.86% |
|
2016 |
537.2 |
2.1 |
0.39% |
|
2017 |
927.6 |
3.3 |
0.36% |
|
2018 |
1066 |
5.5 |
0.52% |
|
TOTAL |
4134.3 |
23.22 |
0.56% |
|
*Note: Only the expensed R&D investment was included. |
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While no one could figure out the exact amount of the total capitalized R&D investment of the past 10 years. But even with the capitalized R&D investment, in 2018, for example, the total R&D investment accounted for less than 2% of the revenue, and there is still a big gap with the claimed proportion of 5%-7%.
There is no such thing as free lunch in the world. Geely as the No.1 in all Chinese independent automakers, has been in a leading position in many aspects, such as design, technology and quality. In recent years, the R&D investment are supposed to rise with the launching of many new models. However, the announced R&D cost only accounted for 2% of the revenue. Not only that it’s much lower than the cost of Giant automakers, but also that it ranks pretty low among those Chinese independent brands. It’s hard to imagine.
|
Top 5 automakers in R&D investment |
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|---|---|---|---|
|
AUTOMAKER |
REVENUE($100M) |
R&D COST($100M) |
PROPORTION |
|
VOLKSWAGEN |
2770 |
158 |
5.7% |
|
TOYOTA |
2598 |
100 |
3.9% |
|
FORD |
1568 |
80 |
5.1% |
|
GM |
1456 |
73 |
5% |
|
DAIMLER |
1973 |
71 |
3.6% |
|
DATA SOURCE: PWC released the list of R&D investment of global companies |
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In this regard, Yang Xueliang, vice president of Geely Group, said in a public speech at the 6th "Automobile and Environment" Innovation Forum held in December 2018: "The automotive industry is a high-input, high-output industry. In recent years, Geely Auto invested more than 10 million yuan in research and development, excluding the part of Volvo Car Group. A lot of investment in research and development and production technology has greatly improved the quality of our products."
An industry insider told the IIA: "According to the development speed of Geely in the past few years, the annual R&D cost of more than 10 billion yuan is relatively reliable and true."
However, the data provided by the financial report is far from 10 billion yuan. Even with the capitalized R&D cost, the total amount of 2018 is only 1.926 billion yuan. What is the rest 8 billion for?
"Inflated" the profits of listed companies?
Yang Xueliang has repeatedly stated publicly that the research and development expenses of Geely Auto are mainly borne by Geely Holding Group.
The question is, why is R&D expenses mainly provided by the parent company Geely Holding Group, not Geely Auto itself?
Sanford C. Bernstein gave an answer in a newsletter published in March 2018. In 2017, Geely Auto's profit increased by 108%, surpassing RMB 10 billion for the first time. Bernstein Research said: "We believe that Geely's earnings report essentially exaggerates the actual profitability. It is well known that there is a complex trading network between Geely Auto's parent company and its listed companies."
Analysts added: "Zhejiang Geely Holding Group has been providing cost subsidies for Geely Auto's R&D investment. This practice has effectively relieved Geely Auto's pressure on the income statement."
A Chinese securities expert told the IIA recently: "When most of the research and development expenses come from the parent company, it is called as related transaction. The parent company needs clearing fees for providing services to listed companies. Otherwise, the research and development expenses that should be borne by the listed company are not included in the financial report of the listed company, and the profits of the listed company will be inflated. ”
Further question: Why does Geely complicate the issue of R&D and profit?
On the afternoon of March 28th, IIA called Yang Xueliang to seek answers to relevant questions, but has not received a reply until the deadline for publication. The mystery of Geely Auto's R&D cost and profit may eventually be answered by Geely itself.
