Dongfeng Motor Group saw a 17 per cent slide in vehicle sales across the mainland China market in the first half amid the Covid-19 pandemic. Still, the nation’s third-largest car manufacturer said it will aim for the “best report card” without giving excuses this year.
The Wuhan-based carmaker, which has local ventures with Nissan Motor, Honda Motor, and PSA Peugeot, told staff to step up efforts to complete or surpass seven key tasks and goals in the second half, including completing an A share stock offering on the ChiNext board in Shenzhen.
“Regardless of the severity of the situation, the complexity of the tasks, and the difficulty in achieving the goals, we shall implement them with a strong style,” chairman Zhu Yanfeng said in a statement on Friday in which six-month earnings crashed by 64 per cent.
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“All units will follow the group’s assigned goals by not making excuses, not negotiating for more favourable conditions, sticking to the goals in a determined manner, working hard for victory, and eventually obtaining the best report card,” he added.
China’s economic recovery has gathered some momentum after coming out from its worst quarter since the Cultural Revolution when the Covid-19 outbreak was first detected in Wuhan in January. That has encouraged the car industry association to project a rebound in sales in the second half and next year.
Dongfeng expects China’s overall auto industry sales to shrink by 7.3 per cent this year, while its own sales rebound slightly by 1.4 per cent, versus a 3.9 per cent contraction in 2019.
The group sold 1.14 million units of vehicles in the first six months, a 16.7 per cent drop from a year earlier, mirroring the 17 per cent decline in the broader mainland market. Its passenger vehicle volume fell 22.2 per cent, with both Nissan and Honda brands each selling 17 per cent fewer units. Commercial vehicle sales, mainly through its venture with Volvo, rose 9 per cent.
First-half earnings fell to 3 billion yuan (US$437 million) from 8.5 billion yuan a year earlier, the company said, as it derived sharply lower profits from joint ventures and associate companies.
The auto group is pushing ahead with its plan to raise fresh capital by selling A shares on ChiNext, on the Shenzhen stock exchange, after the board of directors approved several resolutions last week, including calling a meeting of shareholders to approve the stock offering.
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Dongfeng plans to sell 957.3 million A shares to the public, with an over-allotment option that can expand the total offering to 1.1 billion shares, according to a separate exchange filing. It has not disclosed the indicative price range.
It has compiled the listing plan, utilisation of proceeds and a feasibility report on undisclosed investment projects, which will be presented to shareholders soon for their approval.
Dongfeng’s shares recently gained 2 per cent to HK$5.52 (71 US cents) in Hong Kong trading on Monday. They have lost 25 per cent this year, versus a 9.8 per cent drop in the Hang Seng Index. Jefferies upgraded its recommendation for the stock to “buy” from “hold”, with a target price of HK$6.70, following the result announcement.
“The confirmed secondary listing and partnership with tech giants to launch the brand-new premium [electric vehicles] in July are signs of accelerated reform to meet emission rules and boost the [long-term] growth outlook,” Jefferies analysts led by Alexious Lee wrote in a report on Monday.
More from South China Morning Post:
- Wuhan-based Dongfeng Motor’s profits to take a hit as carmaker delays resuming production at all its plants
- Dongfeng partners with Tencent and China Mobile to map out internet of cars services as 5G era beckons
- Xpeng seeks to raise up to US$1.1 billion in New York IPO as electric car maker prepares to challenge Tesla in China
- ChiNext, Star Market, China’s rival tech boards, target Hong Kong ‘red chip’ secondary listings as competition heats up
- China car sales surge in July, clocking up fourth straight month of gains