China’s Geely Automobile points to costs and chip shortages after a 12% profit decline in 2021

Geely Automobile Holdings logo is pictured at Auto China 2016 in Beijing, China, 25 April 2016. REUTERS/Kim Kyung Hoon

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SHANGHAI, March 23 (Reuters) – Geely Automobile Holdings Ltd (0175.HK) expects rising commodity prices and global chip shortages to pressure its profitability and sales this year, the Chinese company said on Wednesday after it said had reported a 12% decline in 2021.

The world’s highest-profile Chinese automaker reported 4.85 billion yuan ($761.64 million) in profit for 2021, thanks to its investments in Volvo Cars and Daimler AG, compared to 5.53 billion yuan a year earlier. Revenue rose 10% to 101.6 billion yuan.

“Intensified competition in China, rising commodity prices, other pandemic-related disruptions and global chip supply shortages show no sign of abating and should continue to weigh on the group’s revenue performance and profitability in 2022,” Geely Automobile said in a statement.

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Geely Automobile aims to sell 24% more vehicles this year, namely 1.65 million vehicles, and further expand its export sales to new markets in Southeast Asia, the Middle East and Western Europe.

The company also recommended payment of a final dividend of HK$0.21 per common share.

China’s auto sales rose last year, helped by rising sales of new-energy vehicles, but industry executives have warned of the impact of global semiconductor shortages and rising commodity prices, exacerbated by supply chain disruptions following Russia’s invasion of Ukraine.

Russia calls its actions in Ukraine a “military special operation”.

Jerry Gan, CEO of Geely Auto Group, said in a conference call on Wednesday that the company’s reliance on custom chips and globalized supply chains means semiconductor shortages are having a “pretty big impact” on production, an issue Geely is addressing through localization and internal chips will tackle development among other things.

($1 = 6.3678 Chinese Yuan)

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Reporting by Brenda Goh and Eduardo Baptista; Edited by Subhranshu Sahu and Louise Heavens

Our standards: The Thomson Reuters Trust Principles.

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