Geely’s Shanghai Listing Plan Hits the Brakes on Pending Regulatory Approval

Geely Automobile Holdings Ltd., the domestic carmaker controlled by Volvo Cars’ Chinese owner, has waited longer than usual for a regulatory approval to list on Shanghai’s Nasdaq-style STAR Market, fueling concerns that flotation may hit a snag.

Geely Automobile said Tuesday in an earnings briefing that it is still waiting for the go-ahead from the China Securities Regulatory Commission (CRSC) for the Shanghai listing. CEO Gui Shengyue said the company has yet to receive any feedback from the regulator.

The Hong Kong-listed company in June unveiled the plan to raise as much as 20 billion yuan ($2.9 billion) through a secondary listing in Shanghai. The company received sign-off from the Shanghai bourse in September. It usually takes less than three months for companies to get CSRC registration after they won the nod from the exchange.

Geely Automobile didn’t elaborate reasons of the prolonged review. A Bloomberg report said the securities regulator is questioning the company’s qualification for the high tech-savvy STAR Market, citing unidentified sources.

The slow move reflected the regulator’s tightening scrutiny of first-time STAR Market share sales to ensure firms have technology credentials in line with its aspirations for the board and sound financial health, said the report.

Geely Automobile, which is controlled by Zhejiang Geely Holding Group Co., is China’s largest private carmaker. Its planned Shanghai debut was supposed to be the first for any automaker on the STAR board, which was launched in 2019 to host high-tech and innovative companies.

Hangzhou-based Geely Automobile said it planed to use the money to help develop new technologies and vehicle models as well as finance mergers and acquisitions and replenish working capital.

The share sale proposal came as carmakers in China suffered pandemic fallouts that worsened a market downturn since 2019. In 2020, China’s total passenger car sales declined 6% from the previous year.

According to its financial report released Tuesday, Geely Automobile’s 2020 revenues dropped 5% to 92.1 billion yuan. Net profit plunged 32% year-on-year to 5.5 billion yuan.

The company’s 2020 gross profit margin declined by 1.36 percentage points from the previous year to 16%, reflecting deeper discounts offered to lure buyers.

Geely Automobile sold 1.32 million cars last year, down from 1.36 million units in 2019. It expects to sell 1.53 million cars this year.

Weakening business added pressures to the company’s capital chain. According to the financial report, the company had net capital outflow of 3.2 billion yuan by the end of June. It recovered to a net inflow of 1.6 billion yuan in the second half 2020, but was 12.5 billion less than the same period a year ago.

Geely said it will focus on investments in smart driving and energy saving for automobiles this year, shifting from previous focuses on research and development of auto architectures and engine systems.

The company also said Tuesday it will jointly invest 2 billion yuan with parent Zhejiang Geely to form a new electric-vehicle joint venture, and launch a new brand called Zeekr. Geely Automobile will hold 51% of the new venture while the parent owns 49%. The venture is set to deliver its first model in the fourth quarter.

Geely Automobile has collaborated with other partners in its electric-vehicle push. The company announced a plan in January to set up a joint venture with iPhone assembler Foxconn Technology Group to provide electric vehicle contract manufacturing for global automakers. It also linked up with Chinese search giant Baidu to co-develop intelligent electric vehicles.

Bloomberg contributed to the story

Contact reporter Han Wei (weihan@caixin.com)

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