HONG KONG (Nikkei Markets) -- Geely Automobile Holdings' single-digit monthly sales decline in September is fueling some expectations that there could be better times ahead after months of gloom and doom.
The Chinese company, whose privately owned parent group owns the Volvo and Proton car brands, on Thursday reported sales of 113,832 units in September. That represents a wider-than-expected 9% drop from a year ago but an improvement after it posted five straight months of declines in the double-digit percentages, including a 29% slump in June.
Rising sales of some of its new models and a statistical base effect were likely to lead to better sales in coming months even as the outlook for the broader industry remains under a cloud because of macroeconomic headwinds, say analysts.
China's slowing economy and the added negative influence of the Sino-American trade war have weighed on consumer demand in the mainland, sending overall auto sales in the country down 6.9% in August - a 14th consecutive month of declines, according to data from the China Association of Automobile Manufacturers. The anemic performance follows a weak year in 2018, when sales in the world's largest automobile market fell for the first time in nearly three decades.
Geely itself has had a poor show for several months against that backdrop. Its sales in the first nine months of 2019 contracted 16% from a year ago to 958,110 units, or 70% of its annual target of 1.36 million units - a figure that the company revised lower in July from 1.51 million units at the beginning of 2019.
Credit Suisse reckons one reason for the drop in Geely's sales is because the premise of "high value for money" for some of its older products was undermined by rivals launching new products at "very aggressive" price discounts. It now expects a 10% increase in Geely's sales in the fourth quarter, helping it reach its revised annual target.
The brokerage noted that Geely's decision last month to cut prices of its sports-utility vehicle Boyue by up to 10% reflects its effort to "fight for volumes." At the same time, sales of some other sedan, SUV and multi-purpose vehicles it launched since 2018 have been stable because of "superior technology of these products via operational collaboration with Volvo car," Credit Suisse added.
Sales of Boyue SUV have been steadily increasing over the past several months, climbing to 21,378 units in September from 13,527 in May.
Company officials had said in August that Geely was on its way to launching upgraded as well as new energy and electrified-vehicle versions of all major existing models. Geely was also on track to enter the European market in 2020 with its Lynk & Co brand, which it jointly owns with Volvo Cars, they added.
Among Geely's rivals, Guangzhou Automobile Group has reported a 3% fall in sales for the first eight months of 2019 while those for Dongfeng Motor Group have declined 4.9%. Great Wall Motor's January-to-August sales have risen 5.8% from a year ago. All three companies have yet to report their September sales.
In its report on Friday, Credit Suisse kept its price target on Geely unchanged at HK$14, but cut its recommendation to neutral from outperform, following a recent rally in the shares.
Geely's shares ended 0.1% higher at HK$13.88 in Hong Kong on Friday, trimming their gains over the past three months to nearly 16%. Hong Kong's benchmark Hang Seng Index, up 2.3% on Friday, has retreated almost 9% over the past three months.
Not everyone is upbeat, however, amid weak consumer sentiment.
"An improved retail figure could reduce inventory, and the market could be optimistic. But personally, I won't be," said Zhuang Dan, an analyst at RHB Securities, who expects Geely's fourth-quarter sales to decline 7% to 8%.
"The auto market is not warming up. We still see a decline for the overall car market," Zhuang said.
Analysts at Daiwa Capital Markets kept their buy rating on Geely after the September sales, although they acknowledged weaker-than-expected sales and increases in average selling prices of Geely's vehicles as key risks facing the company.
The brokerage said it expects a fourth-quarter recovery for the industry following poor performance in the last few months of 2018, along with an improvement in investor sentiment.
Geely's sales had tumbled as much as 39% in December 2018, when it "proactively" reduced high inventory levels at its dealerships.
"We believe the rebound from local brands will be more significant given a much lower base last year," the Daiwa analysts wrote in their report on Friday. "Among local brands, we expect Geely to remain the leading player in China."
-- Benny Kung & Dhanya Ann Thoppil
