Geely Automobile Is A Major BEV Producer Despite Being Overlooked (GELYF)

Introduction

Entrepreneur Eric Li Shufu’s Zhejiang Geely Holding Group (“ZGH”) manages multiple brands such as Volvo Car (OTCPK:VLVOF) (OTCPK:VLVCY), Polestar (PSNY) and the many brands under Geely Automobile (OTCPK:GELYY) (OTCPK:GELYF). Though Volvo Car and Polestar are in the US, this article is about Geely Automobile whose brands are not in the US. Geely Automobile is often overlooked in the battery electric vehicle (“BEV”) space seeing as they aren’t in the US, they aren’t a pure-play BEV producer, they don’t have a top 10 plug-in model and their BEV growth rate has slowed. My thesis is that Geely Automobile will continue to be a major BEV producer despite being overlooked frequently.

Quoting Dr. Qingyuan Song, chief engineer of policy and regulatory affairs at Geely Powertrain, F+L Magazine says there is no future for conventional internal combustion engine (“ICE”) vehicles in China (emphasis added):

Conventional ICE vehicles have no chance of survival in China, says Song. The powertrain will lose its cost advantage over BEVs after 2025, he says. The cost of battery material continues to fall, whereas pollution and more stringent global emissions regulations mean higher costs for ICE vehicles. In 2030, the expected lower battery price and low usage cost will also make BEVs cost competitive with [plug-in hybrid electric vehicles] (“PHEVs”). From an OEM standpoint, technology innovations to achieve price and value advantages are key to meeting the demands of both consumers and governments, says Song.

Geely Automobile already sells a large number of BEVs despite the fact that they are overlooked in the headlines. Given the mindset of Dr. Song and others in the Geely ecosystem, I believe they will continue to do whatever it takes to sell even more BEVs in the years ahead.

At the time of this writing, RMB 1,000 is equivalent to about $136.75.

Overlooked

Seeing as they make ICE vehicles in addition to BEVs and PHEVs, Geely Automobile is often left out of the discussion of electrification efforts in China. Despite the fact that Geely Automobile sells many BEVs on an annual basis, they aren’t a pure-play BEV producer and they aren’t even mentioned apart from their Zeekr brand in a recent FT article about electric carmakers in China:

Per Motorsport, 8 of the top 10 plug-in models from June are made in China and even the #1 Tesla Model Y and #2 Tesla Model 3 have some of their units made in China. Geely Automobile is absent from this list despite having a high volume of BEVs overall. Not having a top 10 BEV model is another reason why Geely Automobile is sometimes left out of BEV discussions:

Geely Automobile sold 32,961 BEVs in September 2023 which is only 9% more than the 30,277 sold in September 2022. This slowdown in growth causes them to be overlooked, but they still sell a large volume of BEVs relative to most OEMs.

Serious Volume

Geely Automobile’s table in their Unaudited Sales Volume In September 2023 announcement shows a combined 170,472 total for ICE, PHEV and BEV units for the month composed of 119,963 non-Galaxy Geely units, 13,089 Galaxy units, 12,053 Zeekr units, 21,859 Lynk units and 3,517 Livan units. On a year-to-date (“YTD”) basis, Geely shows 1,155,278 units:

There are both wholesale and retail lists in the CPCA September 2023 Retail Sales Ranking Express report. The CPCA’s wholesale figures of 170,472 units for September and 1,155,278 for year-to-date match the figures we see above from Geely themselves. Looking at the September numbers from Best Selling Cars Blog, the current month and YTD figures for Zeekr of 12,053 units and 79,028 units, respectively, match the figures from Geely’s table. The other brands in Best Selling Cars Blog do not match Geely Automobile’s direct numbers but the Lynk numbers are fairly close. The blog numbers are close enough for us to gain insight into key Geely Automobile models.

Geely’s top sellers are mainly ICE models at this time but they seem to be looking towards the future with PHEV and BEV developments with these models. The Boyue is a compact crossover SUV which is one of Geely’s best-selling vehicles and 20,101 units were sold in September per Best Selling Cars Blog. In Malaysia, it is the Proton X70 and a PHEV version of the Boyue is the Geely Galaxy L7. A mid-size crossover SUV, the Geely Xingyue L, is a large and luxurious vehicle with September unit sales of 18,014 per Best Selling Cars Blog. A June 2021 release says this high-end SUV is the most advanced SUV ever to be launched by Geely Automobile. Per CnEVPost, the Hi-P variant offers BEV, EREV and PHEV type driving experiences:

The Xingyue L Hi-P is Geely’s first electric vehicle based on the e-CMA architecture, allowing consumers to use only the battery for city trips and rely on extended-range technology to provide extra mileage on long trips, Geely said. The CMA architecture, jointly created by Geely and Volvo, is known as Compact Modular Architecture, and has great flexibility and scalability. Consumers who choose a Xingyue L Hi-P will have the equivalent of an electric vehicle that offers BEV, EREV and PHEV driving experiences at the same time, Geely said in an article on its WeChat account.

New energy vehicles (“NEVs”) include both BEVs and PHEVs. Unfortunately, the CPCA only breaks down NEV sales on the retail level and not on the wholesale level. Looking at the January to September NEV sales from CPCA, Geely is in fifth place with respect to retail NEV manufacturing in China with 286,490 units. Here are the top 10 retail NEV rankings from the CPCA September 2023 Retail Sales Ranking Express list:

Again, the above numbers include PHEVs. Looking at BEVs only, Geely sold 166,292 in the first nine months of 2022 and this went up 37% to 228,534 for the first nine months of 2023 relative to nine-month NEV figures of 205,317 and 286,490, respectively. Geely’s 1H23 BEV numbers from EV volumes are on par with some of the most well-known OEMs in the world like Mercedes-Benz (OTCPK:MBGAF) and BMW (OTCPK:BMWYY):

Geely sold 92,758 BEVs in 3Q23 which was a 15% increase from the 80,475 in 3Q22 and we see Zeekr is doing especially well:

*100% of Zeekr units are shown above despite the fact that Geely Automobile and their subsidiaries only own about 55% of Zeekr per the 1H23 interim report. In other words, we see above that 79,028 Zeekr BEVs were sold from January to September but Geely Automobile’s 55% interest is only equivalent to about 43,465 of these units. Per Best Selling Cars Blog, the 12,053 Zeekr units sold in September were composed of 8,701 Model 001 units plus 1,725 Model X units plus 1,627 Model 009 units. Per CnEVPost, Zeekr is targeting 140,000 units for 2023 and they aim to have annual sales of 650,000 units by 2025:

Apart from Zeekr, most of the remaining BEVs for Geely appear to come from their Geometry brand if we include the Panda Mini. Looking at Geely’s Unaudited Sales Volume in September 2023 as an example, 12,053 Zeekr BEVs are shown and 32,961 total BEVs are shown meaning there were 20,908 non-Zeekr BEVs. Jining Friendly Auto Trading says 19,053 Geometry BEVs were sold in September which accounts for the substantial majority of the 20,908 non-Zeekr BEVs. We can look at 2022 numbers to further bolster the conclusion that most of the non-Zeekr BEVs are from the Geometry line. Per Geely’s reports, 71,941 Zeekr BEVs were sold in 2022 and 262,253 total BEVs were sold in the year such that 190,312 non-Zeekr BEVs were sold. Per Electrek, Geely sold 149,389 Geometry BEVs in 2022 which is the bulk of the 190,312 non-Zeekr BEVs for the year.

The cute little Geely Panda Mini model has the most volume of all the Geely BEVs with 10,221 units for September and 68,862 for January through September per Best Selling Cars Blog. The LFP battery is one reason why this vehicle is very inexpensive, starting at under $10 thousand USD. The Zeekr 001 model had 8,701 wholesale units for September and 52,998 units for the first nine months of the year per Best Selling Cars Blog. Per Automotive News Europe, the Zeekr 001 FR goes from 0 to 100km per hour in 2.07 seconds which is a little faster than the Tesla Model S Plaid which has a time of 2.1 seconds. Per Best Selling Cars Blog, the Geometry Model E is another impressive model on the electric side with 4,332 units in September and 19,267 for the first nine months of the year.

Valuation

Looking at the 2022 annual report and the 1H23 interim results, trailing twelve month (“TTM”) profit for shareholders, gross profit and revenue through June 2023 were RMB 5,279 million, RMB 22,960 million and RMB 162,963 million, respectively. Converting to USD, that’s about $722 million in profit for shareholders. I don’t think it is terribly unreasonable for Geely Auto as a whole to sell for a high P/E ratio; a range of 15 to 20x profit for shareholders which implies a valuation range of $11 to $14.5 billion when rounding to the nearest half billion. The share capital section of the 1H23 interim results shows 10,056,973,786 shares. Multiplying these shares times the October 24 GELYF price of $1.12 gives us a market cap of $11.3 billion. The market cap is within a valuation range that seems reasonable so I’m neutral on the stock.

Disclaimer: Any material in this article should not be relied on as a formal investment recommendation. Never buy a stock without doing your own thorough research.

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