13 December 2018

Great Wall Motor stumbles on sales growth worries

After losing some traction at the end of December, Great Wall Motors (02333.HK) shares haven’t managed to regain their footing so far in 2014. The stock plummeted 8.5 percent on Thursday and fell further on Friday to a hit the lowest level since August 2013.

The unexpected slide, in sharp contrast to an overall gain of 75.1 percent during the past year, has led to raised eyebrows, given that the company has not made any price-sensitive disclosure.

However, the Hong Kong Economic Journal, EJ Insight’s parent publication, has noted that Great Wall’s communications director Shang Yugui wrote on his microblog Tuesday that the firm expects to sell 880,000 units this year, representing a 16.7 percent increase from last year’s level but marking the lowest growth in three years. The company had average sales growth of 28 percent over the past two years. Great Wall sold 754,200 units in 2013.

The report also noted that Great Wall has confirmed the sales target during a teleconference on Thursday.

It is also reported that Morgan Stanley has cut its 2014-2015 earnings forecast and share price target for the firm by 5 percent. Meanwhile, in an earlier report, Morgan Stanley had lowered its sales forecast for Haval H8 vehicles by more than 28 percent to 25,000 units for the year. H8 is Great Wall’s latest signature SUV model that was unveiled last November to take on competing offerings from foreign models such as Toyota’s RAV4 and Honda’s CR-V.

While the market was apparently grappling with worries over a potential slowdown in Great Wall’s sales growth, the automaker issued a statement Friday to announce that it is not aware of any reason for the price movement, and that there is no information that needs to be disclosed. The firm also clarified that it hasn’t prepared any sales target for the year and the figure revealed by Shang is just his “personal opinion”.

The statement may however fail to reassure investors, as concerns are mounting that the mainland’s largest sport utility vehicle maker may lose its sales momentum.

December figures have shown clear sign of stalling sales. The company sold 62,800 units last month, down 10.3 percent from November. 

A source close to the company said Great Wall had to eliminate some car and pickup truck assembly lines to give way to SUV production. Analysts are worried, as they note that the mainland SUV market is getting saturated with more entrants. Great Wall’s marques would face tougher competition, but at the moment it is not clear what measures the company would take to tackle those challenges.

– Contact the writer at [email protected]



EJ Insight writer

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