Source: Securities Times.

Author: Anyu Fei

Recently, the news about 'requiring suppliers to reduce prices by 10%' by SAIC Maxus has been continuously brewing. $BYD COMPANY (01211.HK)$ In 2023, $GEELY AUTO (00175.HK)$ the incident where the general manager of a parts procurement company presented a knife to the former president of Bosch China, Chen Yudong, has also been dug up, interpreted as Geely 'sending a knife to cut prices.'

On November 29, Chen Yudong responded in his WeChat Moments, saying: "The knife is real, the person who sent the knife is a good brother, not to reduce the price. At that time, he thought I was overthinking and entangled, and told me to cut through the chaos quickly." Yang Xueliang, senior vice president of Geely Holding Group, also stated on weibo: "This knife is for cutting through the chaos, not for bargaining. Those who spread rumors have ulterior motives."

Geely is striving to reach its annual sales target, with new energy vehicles accounting for nearly 40%.

The recent storm regarding "car companies bargaining with the supply chain" is mainly concentrated in the new energy industry, and Geely's involvement stems from its continuously increasing sales proportion of new energy vehicles.

In the first ten months of 2024,$GEELY AUTO (00175.HK)$total sales reached 1.7164 million vehicles, a year-on-year increase of 32%, setting a new historical record for the same period. Among them, Geely's new energy vehicle sales in the first ten months were 0.6546 million vehicles, an increase of 91.29% year-on-year, accounting for more than 38% of total auto sales. Looking only at October, Geely's new energy vehicle sales reached 0.1087 million vehicles, setting a historical new high, with a year-on-year increase of about 83%.

Previously, Geely had adjusted its annual sales target from 1.9 million vehicles to 2 million vehicles. In the first ten months of 2024, Geely had already achieved 85.8% of its annual sales target, and both November and December are peak months for auto sales. Based on this calculation, Geely's annual sales target is expected to be exceeded.

Overseas markets have also become a growth driver for Geely's vehicle sales, with overseas export sales reaching 0.0325 million vehicles in October 2024, an increase of 18%, and cumulative overseas export sales in the first ten months reached 0.3466 million vehicles.

Recently, Geely Automobile's chairman Li Shufu has increased his shareholding in the company's stocks with real capital, expressing confidence in the company. According to the Hong Kong Stock Exchange, Li Shufu's shareholding in Geely Automobile rose from 41.19% to 41.40%. Documents show that Li Shufu purchased a total of 24.2 million shares of Geely stock over two consecutive days on November 26 and 27, costing approximately 0.316 billion HKD.

The auto industry is currently facing a "bargaining storm."

Recently, many car manufacturers, including Geely, have been involved in a storm of "bargaining" with suppliers. A document titled "Cost Reduction Requirements for BYD Passenger Vehicles by 2025" has circulated online, revealing that BYD is asking suppliers to lower their product prices by 10% starting in 2025.

In response, Li Yunfei, General Manager of BYD Group's Brand and Public Relations Department, stated on social media: "The annual bargaining with suppliers is a common practice in the automotive industry. Based on large-scale procurement, we set price reduction targets for suppliers, which are not mandatory requirements and can be negotiated. " Besides BYD, SAIC Maxus Automobile Co., Ltd. has also been reported to have sent letters to suppliers requesting a "10% cost reduction."

However, different car manufacturers have different attitudes towards "bargaining with suppliers."$Tesla (TSLA.US)$Tao Lin, Vice President of External Affairs, stated on weibo: "Win-win with supplier partners, increasing efficiency and reducing costs through technological innovation enables enterprises to go further, the industry to prosper, and consumers to continuously receive the best products."

Tao Lin stated: "What should be saved should be spent. Quickly returning payment to suppliers does not mean needing to increase product prices. Because cost control = technological innovation to improve efficiency + reducing all unnecessary expenditures (such as luxurious reception centers, advertising costs, executive offices... especially losses from wrong business/technical decisions). While ensuring the interests of suppliers, we continue to invest in R&D and production, striving to provide consumers with better prices and products."

Independent international strategy researcher Chen Jia believes: "The issue of supply chain price suppression seems lively, but from an insider's perspective, it is actually normal. The real concern for domestic supply chain companies, besides the erosion of profit margins, is whether there will be enough orders in the future; this is the core issue."

Editor/Rocky