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China’s Car Boom Puts Volvo Owner on Track to Double Profit

The Chinese owner of Volvo Car said full-year profit at its local automaking unit probably doubled, topping analysts’ estimates and allowing billionaire founder Li Shufu to turn his focus to another major acquisition in Sweden.

Net income at Geely Automobile Holdings Ltd. increased “around 100 percent” from the 5.11 billion yuan ($783 million) in 2016, the Hong Kong-listed unit of Li’s Zhejiang Geely Holding Group Co. said Tuesday in an exchange filing. That would exceed the 9.46 billion-yuan average estimate in a Bloomberg survey of 36 analysts.

The maker of Emgrand sedans and X7 SUVs is among automakers getting a boost in the world’s biggest car market, where sales rose to a record for a 27th consecutive year. Geely forecast deliveries will rise 27 percent to 1.58 million units this year after a surge in demand last year, which may place the company as the biggest-selling domestic brand in China, according to analysts.

That performance is already getting its reward in the stock market with shares of Geely more than tripling last year in Hong Kong.

 

 

Last month, the parent company Zhejiang Geely Holding announced purchasing a stake in Swedish truckmaker Volvo AB. The parent already owns the Volvo Car nameplate after purchasing it from Ford Motor Co. In 2013, Zhejiang Geely agreed to purchase Manganese Bronze Holdings Plc, rescuing the maker of London’s iconic black taxis after the U.K. automaker entered administration.

Li is turning his attention to the Swedish company’s heavy vehicles in a bid to bulk up outside China. The stake would mark Hangzhou-based Geely’s first foray into the heavy-truck segment.

“2017 has been an extraordinary and memorable year, in which we have taken significant steps forward on several fronts,” Li told employees in his new year message. “The brands under Geely Holding Group have made exceptional progress.”

Li started out making refrigerator parts and later turned a bankrupt state-owned manufacturer into China’s biggest privately owned carmaker. He cemented his reputation as a savvy dealmaker after reviving Volvo Car in the face of widespread industry skepticism following the purchase from Ford in 2010.

The premium Volvo brand is going to help Geely outperform peers in the future, Bloomberg Intelligence analyst Steve Man said.

“That’s part of the sales growth they saw this year and that’s likely to extend to next year,” he said. “It really depends on how quickly they roll out the new vehicles from the new venture with Volvo.”

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