Sales Performance - The group recorded new car sales of 19,100 units, an increase of 8.7% compared to 17,571 units in the same period last year[1]. - Vehicle sales amounted to 19,100 units in the first half of 2024, representing an increase of 8.7% year-on-year, with BMW (including MINI) deliveries at 12,351 units, down 8.5%[32]. - The penetration rate of new energy vehicles in the domestic market reached 48.4%, up from 34.9% in the previous year, with sales of approximately 4.1 million units, a growth of 33.1%[30]. Revenue and Profitability - The group reported revenue of RMB 7,466.3 million, a decrease of 7.9% from RMB 8,109.5 million in the same period last year[1]. - Revenue from automobile sales and other services decreased by 8.4% to RMB 6,273.6 million compared to the previous year[1]. - The gross profit decreased by 37.0% to RMB 366.3 million in the first half of 2024, with a gross margin of 4.9%[36][37]. - The after-sales service revenue was RMB 1,170.5 million, a decrease of 4.9% from RMB 1,231.4 million in the previous year, accounting for 15.7% of total revenue[34]. - The group recorded a net loss of RMB 74.7 million, compared to a net profit of RMB 208.3 million in the same period of 2023[1]. - The group recorded a loss of RMB 76,275,000 for the six months ended June 30, 2024, compared to a profit of RMB 201,224,000 for the same period in 2023[21]. Financial Position - The group's non-current assets totaled RMB 4,597.2 million as of June 30, 2024, an increase from RMB 4,498.9 million as of December 31, 2023[4]. - Current assets amounted to RMB 6,004.4 million, a decrease from RMB 6,336.2 million as of December 31, 2023[4]. - The total liabilities decreased from RMB 4,308.1 million to RMB 4,136.9 million during the same period[4]. - The equity attributable to the owners of the company decreased from RMB 5,572.3 million to RMB 5,578.4 million[6]. - As of June 30, 2024, the group's cash and deposits totaled RMB 1,192.2 million, with a net cash inflow from operating activities of RMB 125.2 million for the six months ended June 30, 2024[41]. - The company maintained a stable liquidity position, with a debt-to-asset ratio of 47.4% as of June 30, 2024, slightly down from 47.7% as of December 31, 2023[45]. Expenses and Costs - Financial expenses increased to RMB 78,937,000 from RMB 64,303,000, reflecting a rise of 22.9%[15]. - The sales and service costs decreased by 5.7% to RMB 7,100.0 million compared to RMB 7,528.1 million in the previous year[35]. - The cost of automobile sales was RMB 6,377,811,000, compared to RMB 6,801,967,000 in the previous year, indicating a reduction of 6.2%[18]. - Financial expenses increased by 22.7% to RMB 78.9 million due to rising leasing interest from the expansion of international distribution networks[38]. Capital Expenditures and Investments - Capital expenditures for the reporting period were RMB 178.2 million, significantly higher than RMB 18.4 million for the six months ended June 30, 2023, primarily for properties, plants, and equipment related to sales outlets[43]. - The group acquired property, plant, and equipment amounting to RMB 204,174,000 during the six months ended June 30, 2024[22]. - There were no significant investments, acquisitions, or disposals involving subsidiaries, associates, or joint ventures during the reporting period[56]. Corporate Governance and Compliance - The company has adhered to the Corporate Governance Code as of June 30, 2024, ensuring high standards of governance to enhance transparency and accountability[55]. - The Audit Committee has reviewed the unaudited interim results for the six months ending June 30, 2024, and confirmed compliance with relevant accounting standards[58]. - The company maintains sufficient public float as required by listing rules as of the announcement date[57]. Employee and Operational Metrics - The group employed a total of 3,902 employees as of June 30, 2024, an increase from 3,642 employees as of December 31, 2023, with employee costs amounting to RMB 235.9 million for the six months ended June 30, 2024[48]. - The average inventory turnover days increased to 40.3 days in the first half of 2024, compared to 35.6 days in the same period last year[32]. - Inventory increased by RMB 179.0 million to RMB 1,658.7 million as of June 30, 2024, with an average inventory turnover period of 40.3 days, up from 35.6 days in the same period of 2023[44]. Dividends - The group did not declare an interim dividend for the six months ended June 30, 2024, compared to no dividend declared in 2023[19]. - The board resolved not to declare an interim dividend for 2024, consistent with the previous year[54]. Strategic Focus - The company plans to continue focusing on its core business in mainland China while strategically participating in mergers and acquisitions to enhance market share[33]. - The company has established over 20 international distribution points as part of its global expansion strategy in the new energy vehicle sector[32].

Financial Performance - The company reported a loss attributable to owners of the company of RMB 15 million per share, compared to a loss of RMB 1.08 million per share in the previous year, indicating a significant decline in performance[76]. - The total comprehensive income for the year ended December 31, 2023, was reported as (1,654,057) thousand RMB, reflecting a significant loss compared to the previous year[84]. - The company reported a net profit of (1,627,762) thousand RMB for the year, indicating a decline in profitability[84]. - The total revenue for the year was 5,941,682 thousand RMB, showing a decrease from the previous year's revenue[84]. - Gross profit decreased to RMB 964,034 thousand in 2023 from RMB 1,079,669 thousand in 2022, reflecting a decline of 10.67%[103]. - The operating loss significantly improved to RMB 37,630 thousand in 2023 compared to an operating loss of RMB 1,382,308 thousand in 2022[103]. - The net loss for the year was RMB 241,524 thousand, a substantial reduction from RMB 1,622,804 thousand in the previous year, indicating a decrease in loss of 85.14%[103]. - The company reported a total comprehensive loss of RMB 268,838 thousand for 2023, down from RMB 1,654,057 thousand in 2022, marking an improvement of 83.76%[103]. - Cash generated from operating activities was RMB 357,354 thousand, a decrease from RMB 781,120 thousand in 2022, reflecting a decline of 54.30%[115]. - The financial expenses for the year were RMB 132,036 thousand, compared to RMB 121,289 thousand in 2022, showing an increase of 8.69%[103]. Assets and Liabilities - Non-current assets totaled RMB 4,498,947 thousand in 2023, down from RMB 4,860,204 thousand in 2022, reflecting a decrease of approximately 7.4%[79]. - Current assets increased to RMB 6,336,219 thousand in 2023 from RMB 5,942,353 thousand in 2022, representing an increase of about 6.6%[79]. - Current liabilities rose to RMB 4,308,122 thousand in 2023, compared to RMB 3,899,527 thousand in 2022, marking an increase of approximately 10.5%[79]. - The total equity attributable to owners of the company decreased to RMB 5,665,167 thousand in 2023 from RMB 6,026,707 thousand in 2022, a decline of about 6%[82]. - The company’s cash and bank balances decreased to RMB 1,048,193 thousand in 2023 from RMB 1,161,992 thousand in 2022, a reduction of approximately 9.7%[79]. - The company’s non-current liabilities totaled RMB 861,877 thousand in 2023, slightly down from RMB 876,323 thousand in 2022, indicating a decrease of about 1.6%[82]. Risk Management and Internal Controls - The company has established risk management procedures, requiring each operational department to identify key risks related to their work and the company's strategy[42]. - The company has received confirmation from management regarding the effectiveness of its risk management and internal control systems[41]. - The audit committee assists the board in reviewing financial information and internal control systems[50]. - The company has not identified any significant control deficiencies or weaknesses during the reporting period[41]. - The company has established a whistleblowing policy to allow employees and stakeholders to raise concerns confidentially and anonymously, enhancing internal governance[72]. - The internal audit department plays a crucial role in monitoring the company's internal controls and compliance, conducting regular audits across all branches and subsidiaries[69]. - The company aims to improve its internal control and risk management processes through regular audits and assessments[92]. - The company has implemented anti-corruption policies to prevent bribery and corruption within its operations, reinforcing ethical standards among employees[72]. Employee and Board Diversity - The group employed a total of 3,642 employees as of December 31, 2023, a decrease from 3,925 employees in 2022[11]. - The company achieved a target of having at least 40% (1,437) female employees, indicating a satisfactory level of gender diversity[31]. - The board is committed to diversity, with 11% of board members being female, while 40% of the overall workforce is female[55]. - The board has conducted annual reviews of the implementation and effectiveness of its diversity policy[57]. Shareholder and Dividend Information - The company declared a dividend of (281,012) thousand RMB for the year, which is a reduction compared to the previous year's dividend[84]. - The board may propose a final dividend of HKD 0.066 per share for the year ending December 31, 2023, totaling HKD 100.1 million, equivalent to RMB 88.7 million, which was paid on August 11, 2023[177]. - The company has adopted a dividend policy without a preset payout ratio, allowing the board to propose dividends based on the financial condition and other factors[131]. - The company’s major shareholder, Eagle Seeker Company Limited, holds 99.9927% of the total shares, indicating a highly concentrated ownership structure[132]. Strategic Focus and Market Position - The company plans to enhance its market expansion strategies and invest in new product development to drive future growth[84]. - The company is focused on maintaining shareholder communication and transparency through its annual general meetings and updates on its website[88]. - The company has a strategic focus on enhancing its market presence and operational efficiency in the automotive sector[141]. - The company is actively involved in the management and expansion of its luxury automotive service offerings[136]. - The company reported a significant focus on expanding its brand portfolio, including luxury brands such as BMW, Lexus, Ferrari, and Rolls-Royce[136]. - The competitive landscape includes not only automotive dealers but also the automotive repair industry and e-commerce, necessitating timely strategic adjustments to maintain service levels[188]. Economic and Industry Considerations - The automotive industry is highly correlated with macroeconomic fluctuations, and the company must adjust its business planning and marketing strategies in response to economic changes[161]. - The company is closely monitoring industry policy changes in China's automotive sector, which may impact profitability due to new taxes and sales restrictions imposed by local governments[186]. - The company is actively monitoring the economic environment to mitigate potential impacts on vehicle sales due to macroeconomic cycles[161]. Management and Leadership - The company has not appointed any new directors or made significant changes in the past three years, maintaining stability in its leadership[135]. - The company’s executive director and chairman, Feng Changge, has been involved in the automotive industry since 2005, indicating significant experience in the sector[135]. - Liu Fenglei, the president, has approximately 19 years of experience in the automotive industry and has been with the group since 2003[138]. - Zhang Lei, the Chief Financial Officer, has 20 years of experience in the automotive finance sector and has been with the company for 17 years[147]. - The management team has a strong background in both operational and financial roles within the automotive industry[138]. Procurement and Supply Chain - Approximately 88.0% of the total procurement was made from the top five suppliers, with the largest supplier accounting for 59.6%[164]. - The company has a significant reliance on a few suppliers, indicating potential risks in supply chain management[164].

Revenue and Sales Performance - Total revenue from customer contracts reached RMB 16,529,150 thousand in 2023, up from RMB 16,261,600 thousand in 2022, representing a growth of approximately 1.6%[8] - The revenue from after-sales services was RMB 1,437,264 thousand in 2023, up from RMB 1,152,069 thousand in 2022, marking an increase of approximately 24.8%[21] - For the year ended December 31, 2023, the company's revenue was approximately RMB 16,579.2 million, an increase of 1.6% compared to RMB 16,321.7 million in the same period of 2022[51] - The company sold 38,475 new vehicles in the year ended December 31, 2023, representing an increase of 8.4% compared to the same period in 2022[51] - Total revenue from automobile sales and other income was RMB 14,209.3 million in 2023, accounting for 85.7% of total revenue, a slight decrease of 0.8% from RMB 14,324.8 million in 2022[95] - After-sales service revenue increased by 19.8% to RMB 2,319.8 million in 2023, compared to RMB 1,936.8 million in 2022[95] Financial Performance - The company reported a net loss for the year, with total expenses including depreciation and amortization amounting to RMB 15,615,198 thousand in 2023, compared to RMB 15,241,990 thousand in 2022[21] - The company recorded a net loss of RMB 241.5 million for the year ended December 31, 2023, compared to a net loss of RMB 1,622.8 million in 2022[51] - The adjusted profit for the year, excluding non-recurring losses, was RMB 171.6 million[51] - The group's annual loss for 2023 was RMB 241.5 million, while the adjusted profit, excluding non-recurring losses of RMB 413.1 million, was RMB 171.6 million[102] - The basic and diluted loss per share for the year ended December 31, 2023, was RMB 0.17[51] Costs and Expenses - The cost of automobile sales was RMB 14,177,934 thousand in 2023, compared to RMB 14,089,921 thousand in 2022, indicating an increase of about 0.6%[21] - The financial expenses for 2023 totaled RMB 132,036 thousand, an increase from RMB 121,289 thousand in 2022, reflecting a rise of approximately 8.7%[15] - The cost of sales for 2023 was RMB 14,177.9 million, up 0.6% from RMB 14,089.9 million in 2022, while after-sales service costs rose by 24.8% to RMB 1,437.3 million[122] - Employee benefits expenses included in the after-sales service costs were RMB 167.8 million for 2023, compared to RMB 142.4 million in 2022[47] Assets and Liabilities - The company’s equity attributable to owners decreased to RMB 5,572,299 thousand in 2023 from RMB 5,946,823 thousand in 2022, a decline of about 6.3%[22] - The company’s total liabilities included lease liabilities of RMB 806,261 thousand in 2023, slightly down from RMB 819,071 thousand in 2022, a decrease of about 1.6%[3] - As of December 31, 2023, the company's current liabilities totaled RMB 4,308,122,000, an increase from RMB 3,899,527,000 in 2022[77] - The company's trade receivables amounted to RMB 253,424,000 as of December 31, 2023, compared to RMB 197,882,000 in 2022[76] - The total non-current assets decreased to RMB 4,498,947,000 in 2023 from RMB 4,860,204,000 in 2022[76] - The company's debt-to-asset ratio increased to 47.7% as of December 31, 2023, compared to 44.2% as of December 31, 2022, reflecting a growth of 3.5%[156] Market and Operational Insights - The total retail sales volume of the Chinese passenger car market reached 21.7 million units in 2023, representing a year-on-year growth of 5.6%[71] - The luxury car market in China saw sales of 3.4 million units in 2023, with BMW leading at 824,900 units, followed by Mercedes-Benz at 765,000 units, and Audi at 729,000 units[115] - The forecast for 2024 predicts a 3% increase in overall retail sales of passenger cars to 22.2 million units, with the new energy vehicle market expected to grow by 22% to 11 million units[117] - The company maintained a cautious optimism regarding market recovery, emphasizing efficient operations and strong cash flow to enhance profitability and market share[72] Share Repurchase and Dividends - As of December 31, 2023, the company repurchased a total of 7,340,000 ordinary shares at a total cost of approximately HKD 6,821,944.79, excluding transaction costs[139] - The total number of shares repurchased reached 22,271,500, which were canceled on May 2 and June 7, 2023[139] - The board may propose a final dividend for the year ended December 31, 2023, with the previous year's dividend being HKD 0.066 per share[143] Employee and Operational Changes - The company employed a total of 3,642 employees as of December 31, 2023, down from 3,925 employees in 2022[158] - The company has adopted a share incentive plan effective from February 28, 2019, allowing for the grant of existing shares to selected participants, with a maximum of 60,000,000 shares available for purchase[137] - As of December 31, 2023, 30,000,000 shares have been granted and vested under the share incentive plan, with 59,987,500 shares purchased since the plan's adoption[137]

Financial Performance - Operating profit for the reporting period was RMB 336.8 million, a turnaround from an operating loss of RMB 774 million in the first half of 2022[11] - Profit attributable to equity holders of the parent was RMB 201.2 million, compared to a loss of RMB 914.8 million in the same period of 2022[12] - The company recorded revenue of RMB 8,109.5 million for the first half of 2023, an increase of 2.1% compared to RMB 7,940.1 million in the same period last year[73] - Revenue from automobile sales and others decreased by 0.8% to RMB 6,852.6 million, accounting for 84.5% of total revenue in the first half of 2023[73] - Revenue from after-sales services increased by 23.0% to RMB 1,231.4 million, representing 15.2% of total revenue in the first half of 2023[73] - Gross profit decreased by 16.0% to RMB 581.3 million compared to RMB 691.8 million in the first half of 2022[74] - The group reported a net profit of RMB 208,255 thousand for the period, compared to a net loss of RMB 908,360 thousand in the same period last year[175] Assets and Liabilities - Total bank loans and borrowings amounted to RMB 1,864.2 million, a reduction of 10.5% from RMB 2,083 million as of December 31, 2022[5] - The group's debt-to-asset ratio was 41.6% as of June 30, 2023, down by 2.6% from December 31, 2022[5] - Current assets net increased by 12.1% to RMB 2,289.4 million compared to RMB 2,042.8 million as of December 31, 2022[19] - As of June 30, 2023, the total current liabilities decreased to RMB 3,555,071 thousand from RMB 3,899,527 thousand, representing a reduction of approximately 8.8%[159] - The total assets less current liabilities rose to RMB 7,056,442 thousand compared to RMB 6,903,030 thousand, reflecting an increase of approximately 2.2%[159] - The equity attributable to the owners of the parent company increased to RMB 6,110,421 thousand from RMB 5,946,823 thousand, marking an increase of about 2.8%[159] Inventory and Sales - Inventory decreased by RMB 147.4 million to RMB 1,393 million as of June 30, 2023, with an average turnover period of 35.6 days, up from 30.6 days in the same period of 2022[4] - In the first half of 2023, the company achieved sales of 17,571 units, representing a year-on-year growth of 2.2%[40] - The sales of luxury brands such as Lincoln, Volvo, Audi, and Land Rover increased by 17.2%, 10.1%, 9.6%, and 36.0% respectively[40] - The sales of BMW electric vehicles reached 44,900 units in the first half of 2023, a significant year-on-year increase of 283%[34] - The overall profit margin from new car sales for dealers dropped from 19.7% at the end of 2022 to 4.9% in the first half of 2023[34] - The group sold 3,799 used cars in the first half of 2023, reflecting a year-on-year growth of 24.0%[52] Employee and Operational Efficiency - The group employed a total of 3,787 employees as of June 30, 2023, down from 3,925 employees as of December 31, 2022[8] - The group plans to continue optimizing expense ratios and improving operational efficiency to enhance profitability[53] - The group has established a systematic training system to enhance employees' business capabilities and professional skills, emphasizing talent development[65] Cash Flow and Financial Management - The group's cash and deposits totaled RMB 1,255 million as of June 30, 2023, with a net cash inflow from operating activities of RMB 448.5 million during the first half of 2023[13] - Net cash generated from operating activities was RMB 448,548 thousand, down from RMB 618,081 thousand year-on-year, indicating a decrease of approximately 27.5%[175] - Cash and cash equivalents as of June 30, 2023, amounted to RMB 1,254,957 thousand, a slight decrease from RMB 1,622,352 thousand at the end of 2022[178] Corporate Governance and Compliance - The company complied with the Corporate Governance Code and maintained high standards of corporate governance throughout the reporting period[137] - The audit committee reviewed the unaudited interim results for the six months ended June 30, 2023, and found them to comply with relevant accounting standards[153] Market Trends and Future Outlook - The government policies supporting the new energy vehicle market are expected to continue driving growth, with a stable outlook for the second half of 2023[39] - The luxury car retail market showed strong performance with a year-on-year growth of 11% from January to July 2023[38] - The company aims to actively collaborate with domestic new energy vehicle brands to support industry development[41] - The cumulative retail sales volume of new energy vehicles in China for the first half of 2023 was 3.086 million units, representing a significant year-on-year growth of 37.3%[49] Share Options and Awards - As of January 1, 2023, the company had 42,191,000 unexercised stock options, representing approximately 2.7% of the issued shares[73] - As of June 30, 2023, the company still had 42,191,000 unexercised stock options, now representing approximately 2.8% of the issued shares[73] - The company adopted a share award plan on February 28, 2019, aimed at incentivizing and retaining employees and aligning their interests with shareholders[117] - The share award plan does not grant new shares but allows for existing shares to be awarded to selected participants[117] - The company has no outstanding stock options that were granted under the stock option plan as of June 30, 2023[110]

香港交易及結算所有限公司及香港聯合交易所有限公司（「聯交所」）對本公告的內容概不負責， 對其準確性或完整性亦不發表任何聲明，並明確表示概不就因本公告全部或任何部分內容而 產生或因倚賴該等內容而引致的任何損失承擔任何責任。 China Harmony Auto Holding Limited 中 國 和 諧 汽 車 控 股 有 限 公 司 （於開曼群島註冊成立的有限公司） （股份代號 ：03836） 截 至 2023 年 6 月 30 日 止 六 個 月 的 中 期 業 績 公 告 業績摘要 截至2023年6月30日止六個月： ‧ 本集團錄得新車銷量17,571台，較上年同期增加2.2%。 ‧ 本集團2023年上半年錄得收入為人民幣8,109.5百萬元，較上年同期的人 民幣7,940.1百萬元增加2.1%。其中， — 銷售汽車及其他的收入較上年同期減少0.8%至本年度的人民幣6,852.6 ...

Supplier Relationships - The company maintains long-term and stable relationships with major automotive suppliers such as BMW, Maserati, Lexus, Land Rover, and Ferrari, ensuring stable development in automotive sales [2]. - The company has established over 15 years of business relationships with its top five suppliers, indicating strong supplier partnerships [3]. - The company regularly evaluates supplier performance to enhance supply standards and maintain relationships with high-performing suppliers [2]. - The company maintained stable partnerships with 206 domestic and 6 overseas suppliers for automotive-related equipment and parts during the reporting period [120]. Employee Management - Employee retention is prioritized through competitive salaries, excellent working conditions, and regular performance reviews, which are linked to the company's profitability [3]. - The company emphasizes equal and fair treatment of all employees, fostering a harmonious and healthy work environment [3]. - The company has established a comprehensive training system to enhance employees' business capabilities and professional skills [115]. - The training program saw 2,043 grassroots employees trained, representing 84% of the total, with an average training time of 10.49 hours per employee [118]. - The company has implemented a structured training program for new employees, including basic and position-specific training [144]. - The employee gender ratio was 1.50 males to 1 female in 2022, slightly increasing from the previous year [108]. - The number of employees decreased to 3,797 in 2022 from 4,551 in 2021, primarily due to the impact of the pandemic on store operations [108]. - The company reported a total of 2,277 employees in 2022, with a turnover rate of 52%, up from 47% in 2021 [139]. - The company has established a health and safety program for employees, including regular health check-ups and monitoring for occupational diseases [140]. - The company has taken measures to ensure employee safety during the COVID-19 pandemic, including temperature checks and remote communication [142]. Financial Performance - The company reported a net loss attributable to shareholders of RMB 1,627,762,000 for the year ended December 31, 2022, compared to a profit of RMB 673,155,000 in 2021 [178]. - Total revenue from operating activities was RMB 1,007,795,000, slightly down from RMB 1,132,537,000 in the previous year [168]. - The company reported a loss per share of 1.08 RMB in 2022, compared to a profit of 0.44 RMB per share in 2021 [162]. - The company's cash and bank balances were RMB 1,161,992 thousand in 2022, a significant decrease from RMB 1,629,199 thousand in 2021, representing a drop of approximately 29% [164]. - Current assets totaled RMB 5,942,353 thousand in 2022, down from RMB 7,096,574 thousand in 2021, indicating a decrease of about 16.3% [164]. - Total liabilities decreased to RMB 3,899,527 thousand in 2022 from RMB 4,355,319 thousand in 2021, reflecting a reduction of approximately 10.5% [164]. - The total comprehensive income attributable to the company's owners for the year was RMB 619,837 thousand, down from RMB 637,563 thousand in the previous year, a decline of about 2.5% [166]. - The company's financing lease receivables increased to RMB 485,205 thousand in 2022 from RMB 421,189 thousand in 2021, reflecting a growth of about 15.2% [164]. - The company declared a dividend of RMB 281,012,000 for the year, up from RMB 101,506,000 in 2021 [184]. Environmental and Social Responsibility - The company emphasizes compliance with national environmental laws and regulations, including the Environmental Protection Law of the People's Republic of China [61]. - The company has implemented various energy-saving measures, including encouraging employees to use public transportation and optimizing air conditioning usage [75]. - The company has adopted waste reduction initiatives, such as encouraging employees to bring their own utensils to minimize single-use waste [69]. - The company has established a robust ESG data collection system, although it is still in development, aiming for comprehensive and accurate reporting [53]. - The company is committed to improving its ESG performance and addressing stakeholder expectations through various initiatives [60]. - The company has established a governance structure for ESG management, including an ESG Governance Committee and a dedicated ESG Working Group [87]. - The company has actively participated in community service and social responsibility initiatives during the reporting period [154]. - The company made donations amounting to RMB 141,965 in the fiscal year 2022, a decrease from RMB 1,107,000 in 2021 [50]. - The company donated 129,000 RMB for community development on April 1, 2022 [125]. - The hazardous waste generated by the company showed a significant reduction compared to the previous year, adhering to strict management protocols [96]. Shareholder and Stock Management - The company has a stock option plan that allows options to be exercised within a period not exceeding 10 years from the offer date [10]. - As of December 31, 2022, the total number of stock options granted and not exercised was 43,516,000 [15]. - The company’s board believes that share repurchases align with the best interests of the company and its shareholders [47]. - The company repurchased a total of 32,366,000 shares at approximately HKD 96,263,669.53, enhancing earnings per share and benefiting shareholders [47]. - The remaining term of the share incentive plan is 2 years and 3 months, effective from February 28, 2019, to June 26, 2025 [21]. - The company has no maximum allocation for eligible participants under the share incentive plan, with no participant receiving more than 1% of the issued share capital [22]. - The company has not disclosed any tax benefits enjoyed by shareholders due to their holdings [34]. Market Focus and Strategy - The company plans to focus on the luxury and ultra-luxury market, enhancing customer retention and satisfaction while improving operational efficiency and quality [55]. - The company operates as a leading luxury and ultra-luxury car dealership group in China, with established dealership networks in 40 cities [61]. - The company emphasizes customer privacy protection and has strict policies in place to safeguard consumer information [122]. - The company is committed to enhancing customer satisfaction through continuous service improvement and feedback mechanisms [151]. Financial Reporting and Compliance - The group adopted all new and revised Hong Kong Financial Reporting Standards effective from January 1, 2022, without significant changes to accounting policies or reported amounts [187]. - The consolidated financial statements are prepared in accordance with the applicable disclosure requirements of the Hong Kong Financial Reporting Standards and the Stock Exchange Listing Rules [189]. - The acquisition costs exceeding the fair value of identifiable assets and liabilities of subsidiaries are recognized as goodwill [195]. - Non-controlling interests are initially measured at the proportionate share of identifiable assets and liabilities of the subsidiary at the acquisition date [197]. - The group recognizes its share of profits or losses from associates in the consolidated income statement after acquisition [199].

[Annual Results Announcement](index=1&type=section&id=Annual%20Results%20Announcement) The Group's FY2022 revenue, new car sales, gross profit, and net profit attributable to owners all significantly declined, resulting in a full-year loss, with basic and diluted loss per share at RMB 1.08 [Performance Highlights](index=1&type=section&id=Performance%20Highlights) The Group's FY2022 revenue, new car sales, gross profit, and net profit attributable to owners all significantly declined, resulting in a full-year loss, with basic and diluted loss per share at RMB 1.08 FY2022 Performance Highlights | Metric | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 16,321.7 | 17,981.1 | -9.2% | | New Car Sales (units) | 35,506 | - | -13.0% | | Gross Profit | 1,079.7 | 1,751.3 | -38.3% | | Loss for the Year | (1,622.8) | 691.3 | N/A | | Profit after Non-Recurring Losses | 164.8 | - | N/A | | Basic and Diluted Loss Per Share (RMB) | (1.08) | 0.44 | N/A | - Gross profit from car sales and other businesses decreased by **64.6%** year-on-year, while gross profit from after-sales services decreased by **24.7%** year-on-year[33](index=33&type=chunk) [Annual Results](index=2&type=section&id=Annual%20Results) The Group transitioned from profit to loss in FY2022, with significant declines in revenue and gross profit, alongside a negative shift in other income and net gains [Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=2&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) The Group shifted from profit to a loss of RMB 1,622.8 million in FY2022, with significant declines in revenue and gross profit, and a negative turn in other income and net gains leading to an operating loss Key Data from Consolidated Statement of Profit or Loss and Other Comprehensive Income | Metric | 2022 (RMB thousand) | 2021 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 16,321,659 | 17,981,051 | -9.2% | | Cost of Sales and Services | (15,241,990) | (16,229,787) | -6.1% | | Gross Profit | 1,079,669 | 1,751,264 | -38.3% | | Other Income and Net Gains | (1,232,990) | 442,989 | N/A | | Operating (Loss)/Profit | (1,382,308) | 1,057,569 | N/A | | (Loss)/Profit for the Year | (1,622,804) | 691,271 | N/A | | (Loss)/Profit for the Year Attributable to Owners of the Company | (1,627,762) | 673,155 | N/A | | Basic (Loss)/Earnings Per Share (RMB) | (1.08) | 0.44 | N/A | - Total comprehensive loss for the year was **RMB 1,654.1 million**, compared to a total comprehensive income of **RMB 637.9 million** in 2021[49](index=49&type=chunk) [Consolidated Statement of Financial Position](index=4&type=section&id=Consolidated%20Statement%20of%20Financial%20Position) As of December 31, 2022, the Group's total assets and net assets decreased, with significant declines in non-current and current assets, particularly prepayments and other receivables, while trade payables and bills payable substantially increased Key Data from Consolidated Statement of Financial Position | Metric | 2022 (RMB thousand) | 2021 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | **Assets** | | | | | Total Non-Current Assets | 4,860,204 | 6,152,024 | -21.0% | | Total Current Assets | 5,942,353 | 7,096,574 | -16.3% | | Inventories | 1,540,438 | 1,129,635 | +36.4% | | Trade Receivables | 197,882 | 148,149 | +33.6% | | Prepayments, Other Receivables and Other Assets | 2,534,426 | 3,760,416 | -32.6% | | Cash and Bank Balances | 1,161,992 | 1,629,199 | -28.7% | | **Liabilities** | | | | | Total Current Liabilities | 3,899,527 | 4,355,319 | -10.5% | | Bank Loans and Other Borrowings | 2,083,023 | 2,629,978 | -20.8% | | Trade Payables and Bills Payable | 635,135 | 217,265 | +192.3% | | Total Non-Current Liabilities | 876,323 | 850,717 | +3.0% | | **Equity** | | | | | Net Assets | 6,026,707 | 8,042,562 | -25.1% | | Total Equity | 6,026,707 | 8,042,562 | -25.1% | - Investments at fair value through profit or loss decreased from **RMB 1,217,011 thousand** (non-current) and **RMB 81,504 thousand** (current) in 2021 to zero in 2022, indicating disposal or impairment of related investments[41](index=41&type=chunk) [Notes to Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section details the Group's general information, accounting policies, segment reporting, and specific financial statement items, including revenue, expenses, and balance sheet components [General and Group Information](index=6&type=section&id=General%20and%20Group%20Information) China Harmony Auto Holding Limited was incorporated in the Cayman Islands in 2012 and listed on the HKEX in 2013, primarily engaging in car sales and after-sales services in mainland China, with Cititrust Private Trust (Cayman) Limited as the ultimate holding company and Mr. Feng Changge as the controlling shareholder - The Company was incorporated in the Cayman Islands on **September 24, 2012**, and listed on the Main Board of the HKEX on **June 13, 2013**[58](index=58&type=chunk) - The Group's principal activities are car sales and after-sales services in mainland China[58](index=58&type=chunk) - The Company's ultimate holding company is Cititrust Private Trust (Cayman) Limited, and Mr. Feng Changge is the Chairman, Executive Director, and controlling shareholder of the Company[59](index=59&type=chunk) [Basis of Preparation](index=7&type=section&id=Basis%20of%20Preparation) The consolidated financial statements are prepared in accordance with Hong Kong Financial Reporting Standards issued by the HKICPA, applicable disclosure requirements of the HKEX Listing Rules, and the Hong Kong Companies Ordinance - The consolidated financial statements are prepared in accordance with Hong Kong Financial Reporting Standards (HKFRSs) issued by the HKICPA, and the applicable disclosure requirements of the HKEX Listing Rules and the Hong Kong Companies Ordinance[72](index=72&type=chunk) [Adoption of New and Revised HKFRSs](index=7&type=section&id=Adoption%20of%20New%20and%20Revised%20HKFRSs) The Group adopted all new and revised HKFRSs effective from January 1, 2022, this year, with no significant changes to its accounting policies, consolidated financial statement presentation, or reported amounts - All new and revised HKFRSs effective from **January 1, 2022**, have been adopted this year, with no significant impact on accounting policies or financial statements[73](index=73&type=chunk) [Operating Segment Information](index=7&type=section&id=Operating%20Segment%20Information) The Group's primary business is car sales and after-sales services, with all revenue and over 90% of non-current assets and liabilities located in mainland China, thus no geographical segment information is presented, operating as a single business unit - The Group's principal activities are car sales and after-sales services, operating as a single business unit with one reportable segment[74](index=74&type=chunk) - No geographical segment information is presented as all revenue and over **90%** of non-current assets and liabilities are located in mainland China[64](index=64&type=chunk) - No sales to a single customer reached **10%** or more of the Group's revenue during the year, thus no major customer information is presented[77](index=77&type=chunk) [Revenue (Note 4)](index=8&type=section&id=Revenue%20(Note%204)) The Group's total revenue in 2022 was **RMB 16,321.7 million**, a **9.2%** year-on-year decrease, with car sales and other revenue being the largest component but declining, after-sales service revenue also decreasing, while finance lease service revenue increased Revenue Classification | Revenue Source | 2022 (RMB thousand) | 2021 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Car Sales and Other | 14,324,782 | 15,609,705 | -8.2% | | After-Sales Services | 1,936,818 | 2,326,282 | -16.7% | | Finance Lease Services | 60,059 | 45,064 | +33.3% | | **Total Revenue** | **16,321,659** | **17,981,051** | **-9.2%** | - Total revenue from customer contracts decreased from **RMB 17,935,987 thousand** in 2021 to **RMB 16,261,600 thousand** in 2022[68](index=68&type=chunk) - Performance obligations for car sales and other businesses are satisfied upon customer receipt of goods, typically requiring upfront payments; after-sales service obligations are satisfied upon service provision, with payments usually collected at the time of service[78](index=78&type=chunk)[84](index=84&type=chunk) [Other Income and Net Gains (Note 5)](index=10&type=section&id=Other%20Income%20and%20Net%20Gains%20(Note%205)) The Group's other income and net gains were a negative **RMB 1,233.0 million** in 2022, compared to a positive **RMB 443.0 million** in 2021, primarily due to a significant increase in impairment losses on investments at fair value through profit or loss Other Income and Net Gains | Item | 2022 (RMB thousand) | 2021 (RMB thousand) | Change | | :--- | :--- | :--- | :--- | | Commission Income | 412,049 | 420,628 | -2.0% | | Bank Interest Income | 23,572 | 14,472 | +62.9% | | Government Grants | 9,920 | 7,383 | +34.4% | | Impairment Loss on Investments at Fair Value Through Profit or Loss | (1,298,515) | (58,763) | N/A | | Impairment Loss on Equity Investments Loan at Fair Value Through Other Comprehensive Income | (354,577) | — | N/A | | Impairment Loss on Loans to Third Parties | (40,296) | — | N/A | | **Total** | **(1,232,990)** | **442,989** | **N/A** | - Government grants include various subsidies received by the Company's subsidiaries from relevant government authorities, with no unfulfilled conditions or contingencies[86](index=86&type=chunk) [Finance Costs (Note 6)](index=11&type=section&id=Finance%20Costs%20(Note%206)) The Group's finance costs in 2022 were **RMB 121.3 million**, a **7.3%** year-on-year decrease, primarily due to a reduced average borrowing balance and improved loan management capabilities Composition of Finance Costs | Item | 2022 (RMB thousand) | 2021 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Interest on Bank Loans and Other Borrowings | 72,480 | 90,996 | -20.4% | | Interest on Leases | 51,871 | 48,785 | +6.3% | | Less: Capitalized Interest | (3,062) | (8,928) | -65.7% | | **Total** | **121,289** | **130,853** | **-7.3%** | [Income Tax Expense (Note 7)](index=11&type=section&id=Income%20Tax%20Expense%20(Note%207)) The Group's income tax expense in 2022 was **RMB 115.5 million**, a significant decrease from **RMB 235.7 million** in 2021, with mainland China subsidiaries taxed at **25%**, Hong Kong subsidiaries having no taxable profit, and Cayman Islands and BVI registered companies being tax-exempt Income Tax Expense | Item | 2022 (RMB thousand) | 2021 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Current Mainland China Corporate Income Tax Annual Provision | 123,733 | 246,397 | -49.8% | | Deferred Tax | (8,214) | (10,703) | -23.2% | | **Total Income Tax Expense** | **115,519** | **235,694** | **-51.0%** | - The income tax rate for mainland China subsidiaries is **25%**[95](index=95&type=chunk) - Hong Kong registered subsidiaries had no taxable profit in 2022, thus no provision for Hong Kong profits tax was made[88](index=88&type=chunk) [Loss/Profit for the Year (Note 8)](index=13&type=section&id=Loss%2FProfit%20for%20the%20Year%20(Note%208)) The Group transitioned from profit to a loss of **RMB 1,622.8 million** in 2022, primarily impacted by impairment losses on investments at fair value through profit or loss and write-offs of property, plant, and equipment Major Deductions/(Additions) in Loss/Profit for the Year | Item | 2022 (RMB thousand) | 2021 (RMB thousand) | Change | | :--- | :--- | :--- | :--- | | Amortization of Intangible Assets | 6,455 | 5,818 | +10.9% | | Cost of Car Sales | 14,089,921 | 14,945,370 | -5.7% | | Cost of After-Sales Services | 1,152,069 | 1,284,417 | -10.3% | | Depreciation of Property, Plant and Equipment | 201,377 | 193,928 | +3.8% | | Impairment Loss on Investments at Fair Value Through Profit or Loss | 1,298,515 | 58,763 | N/A | | Total Employee Costs | 421,902 | 464,061 | -9.0% | - Impairment provision for inventories of **RMB 4,223 thousand** was made in 2022, compared to none in 2021[1](index=1&type=chunk) - After-sales service costs included employee benefit expenses of **RMB 142,382 thousand**, an increase from **RMB 120,497 thousand** in 2021[1](index=1&type=chunk) [Earnings/Loss Per Share (Note 9)](index=14&type=section&id=Earnings%2FLoss%20Per%20Share%20(Note%209)) The Group's basic and diluted loss per share in 2022 was **RMB 1.08**, compared to basic and diluted earnings per share of **RMB 0.44** in 2021, with diluted loss per share being the same as basic loss per share in 2022 due to the anti-dilutive effect of share options Loss/Earnings Per Share | Metric | 2022 (RMB) | 2021 (RMB) | | :--- | :--- | :--- | | Basic (Loss)/Earnings Per Share | (1.08) | 0.44 | | Diluted (Loss)/Earnings Per Share | (1.08) | 0.44 | - The loss/profit for the year attributable to owners of the Company used to calculate basic loss/earnings per share was **RMB (1,627,762) thousand** (2021: **RMB 673,155 thousand**)[104](index=104&type=chunk) - Due to the anti-dilutive effect of the Group's share options, diluted loss per share for the year ended **December 31, 2022**, was the same as basic loss per share[99](index=99&type=chunk) [Inventories (Note 10)](index=15&type=section&id=Inventories%20(Note%2010)) As of December 31, 2022, the Group's total inventories were **RMB 1,540.4 million**, a **36.4%** year-on-year increase, with car inventories being the largest component, and some inventories pledged as collateral for bank loans and bills payable Composition of Inventories | Item | 2022 (RMB thousand) | 2021 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Cars | 1,363,572 | 948,003 | +43.8% | | Parts and Accessories | 176,866 | 181,632 | -2.6% | | **Total** | **1,540,438** | **1,129,635** | **+36.4%** | - As of **December 31, 2022**, the Group pledged certain inventories with a total carrying amount of approximately **RMB 434,570 thousand** as collateral for bank loans and other borrowings[4](index=4&type=chunk) - As of **December 31, 2022**, the Group pledged certain inventories with a total carrying amount of approximately **RMB 206,671 thousand** as collateral for bills payable[101](index=101&type=chunk) [Trade Receivables (Note 11)](index=15&type=section&id=Trade%20Receivables%20(Note%2011)) As of December 31, 2022, the Group's total trade receivables were **RMB 197.9 million**, a **33.6%** year-on-year increase, with receivables within three months accounting for the largest portion, and the Group strictly monitors receivables through its credit control department, using lifetime expected credit loss provisions Aging Analysis of Trade Receivables | Aging | 2022 (RMB thousand) | 2021 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Within 3 months | 191,481 | 128,297 | +49.2% | | 3 months to 1 year | 6,401 | 19,852 | -67.8% | | **Total** | **197,882** | **148,149** | **+33.6%** | - The Group is committed to strictly monitoring outstanding receivables and has a credit control department to minimize credit risk[106](index=106&type=chunk) - The Group applies the simplified approach under HKFRS 9, using lifetime expected credit loss provisions for all trade receivables[108](index=108&type=chunk) [Trade Payables and Bills Payable (Note 12)](index=16&type=section&id=Trade%20Payables%20and%20Bills%20Payable%20(Note%2012)) As of December 31, 2022, the Group's total trade payables and bills payable were **RMB 635.1 million**, a substantial **192.3%** year-on-year increase, with payables within three months accounting for the largest portion Aging Analysis of Trade Payables and Bills Payable | Aging | 2022 (RMB thousand) | 2021 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Within 3 months | 596,491 | 212,083 | +181.2% | | 3 to 6 months | 16,257 | 2,762 | +488.6% | | 6 to 12 months | 21,429 | 636 | +3272.5% | | Over 12 months | 958 | 1,784 | -46.3% | | **Total** | **635,135** | **217,265** | **+192.3%** | - As of **December 31, 2022**, certain of the Group's bills payable were secured by inventories with a total carrying amount of approximately **RMB 206,671 thousand**[113](index=113&type=chunk) [Dividends (Note 13)](index=17&type=section&id=Dividends%20(Note%2013)) The Board does not recommend declaring any dividend for the year ended December 31, 2022, whereas a dividend of HKD 0.21 per share was distributed in 2021 - The Board does not recommend declaring any dividend for the year ended **December 31, 2022** (2021: **HKD 0.21** per share, totaling **RMB 281,012 thousand**, paid on **August 15, 2022**)[114](index=114&type=chunk)[145](index=145&type=chunk) [Management Discussion and Analysis](index=18&type=section&id=Management%20Discussion%20and%20Analysis) This section reviews the industry and company performance in 2022, outlines future business strategies, and provides a detailed financial overview, including revenue, costs, profitability, liquidity, and capital resources [Industry Review](index=18&type=section&id=Industry%20Review) In 2022, China's passenger car market grew **1.9%** amidst the pandemic, with luxury car sales up **6%** to **3.09 million units**, driven by a **49%** surge in new energy luxury vehicles, while top luxury brands like BBA saw sales decline but actively pursued electrification and increased China investments - In 2022, China's passenger car market recorded cumulative retail sales of **20.543 million units**, a **1.9%** year-on-year increase[30](index=30&type=chunk) - In 2022, luxury car market sales reached **3.09 million units**, a **6%** year-on-year increase, with the new energy luxury car market surging by **49%** against the trend[9](index=9&type=chunk) - BBA sales in China collectively declined (BMW **-6.4%**, Mercedes-Benz **-0.9%**, Audi **-8.4%**), but all announced the launch or production of pure electric vehicle factories in China with significant investments[9](index=9&type=chunk)[22](index=22&type=chunk) - In 2022, domestic new energy passenger vehicle retail sales reached **5.674 million units**, a **90%** year-on-year increase, with high-end electric vehicles increasingly becoming a mainstream family choice[115](index=115&type=chunk) [Industry Outlook](index=19&type=section&id=Industry%20Outlook) With fading pandemic impacts and stabilizing supply chains, the 2023 overall auto market is expected to improve, with new energy vehicles maintaining strong growth, potentially reaching a **36%** penetration rate, and luxury brands launching more new energy models while advancing brand reshaping, business model and channel optimization, and digital management - New energy passenger vehicle sales are expected to reach **8.5 million units** in 2023, with a projected penetration rate of **36%**[23](index=23&type=chunk) - The BBA family plans to launch more new energy vehicle models in 2023, with electrification transformation extending beyond product line enrichment to brand reshaping, business model and channel optimization, and advanced digital management models[116](index=116&type=chunk) [Company Review](index=20&type=section&id=Company%20Review) In 2022, the Company's total sales declined **13.0%** to **35,506 units** due to intermittent store closures and disrupted sales rhythms from pandemic lockdowns, with BMW (including MINI) and Lexus sales decreasing, but ultra-luxury brands like Ferrari, Bentley, and Rolls-Royce showing strong growth, while the Company continued to focus on used cars and EVs, strategically investing in Dangdang New Energy and securing authorizations for multiple mainstream EV brands - The Company's total sales in 2022 were **35,506 units**, a **13.0%** year-on-year decrease[112](index=112&type=chunk) 2022 Key Brand Sales Changes | Brand | 2022 Sales (units) | Year-on-Year Change (%) | | :--- | :--- | :--- | | BMW (incl. MINI) | 26,756 | -13.5% | | Lexus | 3,875 | -7.6% | | Ferrari | - | +250.0% | | Bentley | - | +14.1% | | Rolls-Royce | - | +7.3% | - The Company's operating network added a Bentley Beijing store and received awards such as '2022 Dealer of the Year' for Ferrari Greater China[16](index=16&type=chunk) - Average inventory turnover days increased by **7.0 days** year-on-year to **32.0 days**[16](index=16&type=chunk) - Strategic investment Dangdang New Energy has obtained authorizations from mainstream EV brands such as Li Auto, NIO Group, and XPeng, aiming to provide comprehensive sales and after-sales services[16](index=16&type=chunk) [Business Outlook](index=21&type=section&id=Business%20Outlook) The Company anticipates continued strong vitality in the high-end car market, will maintain its advantageous brand portfolio (BMW, Lexus, Ferrari, Bentley, and Rolls-Royce), and will pursue M&A strategies to expand market share, while enhancing profitability through optimized expense ratios and operational efficiency, and actively embracing electric and intelligent transformation to explore new business models - The Company will maintain its current advantageous brand portfolio and, when appropriate, pursue M&A strategies to consolidate and expand market share and influence[18](index=18&type=chunk) - The Company will further enhance profitability by optimizing various expense ratios and improving operational efficiency[18](index=18&type=chunk) - The transition to electric vehicles has become one of the Company's important mid-to-long-term strategies, and it will continue to focus on exploring new business models for traditional dealers under new trends[18](index=18&type=chunk) - Significant growth potential remains in the luxury and ultra-luxury brand segments, and the Company will actively embrace the transformation towards electric and intelligent vehicles[117](index=117&type=chunk) [Financial Overview](index=22&type=section&id=Financial%20Overview) The Group's 2022 financial performance faced challenges with declining revenue and gross profit, recording significant non-recurring losses, and while liquidity tightened, the Board believes existing resources are sufficient to meet funding needs, with the Company actively managing costs, debt, and employee remuneration and incentives - The Group's revenue in 2022 was **RMB 16,321.7 million**, a **9.2%** decrease compared to 2021[27](index=27&type=chunk) [Revenue](index=22&type=section&id=Revenue_Financial_Overview) In 2022, revenue from car sales and other businesses was **RMB 14,324.8 million**, an **8.2%** year-on-year decrease, while after-sales service revenue was **RMB 1,936.8 million**, a **16.7%** year-on-year decrease Revenue Composition | Revenue Source | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Car Sales and Other | 14,324.8 | 15,609.7 | -8.2% | | After-Sales Services | 1,936.8 | 2,326.3 | -16.7% | - Revenue from car sales and other businesses accounted for **87.8%** of total revenue in 2022, while after-sales service revenue accounted for **11.9%**[19](index=19&type=chunk) [Cost of Sales and Services](index=22&type=section&id=Cost%20of%20Sales%20and%20Services) In 2022, cost of sales and services was **RMB 15,242.0 million**, a **6.1%** year-on-year decrease, consistent with the overall revenue decline, with both car sales and other costs and after-sales service costs decreasing Composition of Cost of Sales and Services | Cost Type | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Cost of Car Sales and Other | 14,089.9 | 14,945.4 | -5.7% | | Cost of After-Sales Services | 1,152.1 | 1,284.4 | -10.3% | | **Total** | **15,242.0** | **16,229.8** | **-6.1%** | - The decrease in costs was primarily due to lower revenue from car sales and other businesses, as well as after-sales services[28](index=28&type=chunk) [Gross Profit and Gross Margin](index=22&type=section&id=Gross%20Profit%20and%20Gross%20Margin) In 2022, gross profit was **RMB 1,079.7 million**, a **38.3%** year-on-year decrease, with gross margin at **6.6%**, down **3.1 percentage points**, primarily due to pandemic lockdowns and market oversupply affecting car sales and other gross margins, and reduced vehicle usage frequency impacting after-sales service gross margins Gross Profit and Gross Margin | Metric | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Gross Profit (RMB million) | 1,079.7 | 1,751.3 | -38.3% | | Gross Margin | 6.6% | 9.7% | -3.1 percentage points | | Gross Margin for Car Sales and Other | 1.6% | 4.2% | -2.6 percentage points | | Gross Margin for After-Sales Services | 40.5% | 44.8% | -4.3 percentage points | - Gross profit from car sales and other businesses was **RMB 234.9 million**, a **64.6%** year-on-year decrease; gross profit from after-sales services was **RMB 784.7 million**, a **24.7%** year-on-year decrease[29](index=29&type=chunk) - The decline in gross margin was primarily due to weakened market demand from pandemic lockdown measures, and oversupply leading to lower selling prices after manufacturers pre-stocked due to chip shortages[29](index=29&type=chunk) [Other Income and Net Gains](index=23&type=section&id=Other%20Income%20and%20Net%20Gains_Financial_Overview) In 2022, other income and net gains were a negative **RMB 1,233.0 million**, primarily impacted by **RMB 1,787.6 million** in total non-recurring losses, including full impairment provisions for FMC equity investment, independent after-sales company loans, 4S store closures and relocations, William Financial Holdings M&A fund investment, and third-party loans Total Non-Recurring Losses | Loss Source | Amount (RMB million) | | :--- | :--- | | Full Impairment Provision for FMC Equity Investment | 1,217.0 | | Impairment Loss on Independent After-Sales Company Loans and Advances | 354.6 | | Impairment Loss on Property, Plant and Equipment (4S Store Closures/Relocations) | 94.2 | | Full Impairment Provision for William Financial Holdings M&A Fund Investment | 81.5 | | Full Impairment Provision for Third-Party Loans | 40.3 | | **Total** | **1,787.6** | - Commission income was **RMB 412.0 million**, and interest income was **RMB 71.6 million**[149](index=149&type=chunk) [Sales and Administrative Expenses](index=23&type=section&id=Sales%20and%20Administrative%20Expenses) In 2022, sales and administrative expenses were **RMB 1,229.0 million**, an **8.1%** year-on-year increase, primarily due to one-off repair costs from store renovations and increased depreciation and lease costs for operational store assets Sales and Administrative Expenses | Metric | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Sales and Administrative Expenses | 1,229.0 | 1,136.7 | +8.1% | - The increase was primarily due to one-off repair costs from store renovations and increased depreciation and lease costs for operational store assets[152](index=152&type=chunk) [Finance Costs](index=24&type=section&id=Finance%20Costs_Financial_Overview) In 2022, finance costs were **RMB 121.3 million**, a **7.3%** year-on-year decrease, primarily due to a reduced average borrowing balance and improved loan management capabilities during the reporting period Finance Costs | Metric | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Finance Costs | 121.3 | 130.9 | -7.3% | [Loss/Profit for the Year Attributable to Owners of the Company](index=24&type=section&id=Profit%2FLoss%20for%20the%20Year%20Attributable%20to%20Owners%20of%20the%20Company) In 2022, the loss for the year attributable to owners of the Company was **RMB 1,627.8 million**, which would have been a profit of **RMB 159.8 million** excluding the impact of non-recurring losses Loss/Profit for the Year Attributable to Owners of the Company | Metric | 2022 (RMB million) | | :--- | :--- | | Loss for the Year Attributable to Owners of the Company | (1,627.8) | | Profit after Non-Recurring Losses | 159.8 | [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) The Group's cash and bank balances totaled **RMB 1,162.0 million**, a **28.7%** year-on-year decrease, with liquidity needs primarily met through short-term bank loans and operating cash flows, and the Board believes existing resources are sufficient Cash and Bank Balances | Metric | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Cash and Bank Balances | 1,162.0 | 1,629.2 | -28.7% | - The Group's liquidity needs are primarily met through a combination of short-term bank loans and cash flows from operating activities[163](index=163&type=chunk) - The Board believes that the Group's liquidity needs can be met[164](index=164&type=chunk) [Capital Expenditure](index=25&type=section&id=Capital%20Expenditure) Capital expenditure in 2022 was **RMB 386.4 million**, a **26.1%** year-on-year decrease, primarily for purchasing property, plant, and equipment related to sales outlets Capital Expenditure | Metric | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Capital Expenditure | 386.4 | 522.7 | -26.1% | [Cash Flow](index=25&type=section&id=Cash%20Flow) In 2022, net cash from operating activities was **RMB 781.1 million**, net cash from investing activities was **RMB 4.7 million**, and net cash used in financing activities was **RMB 1,080.4 million** Cash Flow | Activity Type | 2022 (RMB million) | | :--- | :--- | | Net Cash from Operating Activities | 781.1 | | Net Cash from Investing Activities | 4.7 | | Net Cash Used in Financing Activities | (1,080.4) | [Net Current Assets](index=25&type=section&id=Net%20Current%20Assets) As of December 31, 2022, the Group's net current assets were **RMB 2,042.8 million**, a **25.5%** year-on-year decrease, primarily due to impairment of current assets Net Current Assets | Metric | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Net Current Assets | 2,042.8 | 2,741.3 | -25.5% | - The decrease was primarily due to impairment of current assets, as detailed in the 'Other Income and Net Gains' section[165](index=165&type=chunk) [Inventories](index=26&type=section&id=Inventories_Financial_Overview) As of December 31, 2022, inventories increased **36.4%** from **RMB 1,129.6 million** to **RMB 1,540.4 million**, with average inventory turnover days increasing by **7 days** to **32 days**, primarily due to strict pandemic prevention policies in mainland China Inventories and Turnover Days | Metric | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Inventories (RMB million) | 1,540.4 | 1,129.6 | +36.4% | | Average Inventory Turnover Days (days) | 32 | 25 | +7 days | - The increase in inventories and inventory turnover days was primarily due to strict pandemic prevention policies in mainland China, such as lockdowns[166](index=166&type=chunk) [Bank Loans and Other Borrowings](index=26&type=section&id=Bank%20Loans%20and%20Other%20Borrowings) As of December 31, 2022, total bank loans and other borrowings were **RMB 2,083.0 million**, a **20.8%** year-on-year decrease, with some borrowings secured by assets like inventories, property, plant, and equipment, and land use rights, or guaranteed by directors, subsidiaries, or legal representatives, resulting in a **44.2%** gearing ratio, an increase of **4.9 percentage points** Bank Loans and Other Borrowings | Borrowing Type | 2022 (RMB thousand) | 2021 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Bank Loans (within one year) | 1,436,133 | 1,622,591 | -11.5% | | Other Borrowings (within one year) | 646,890 | 1,007,387 | -35.8% | | **Total** | **2,083,023** | **2,629,978** | **-20.8%** | | Gearing Ratio | 44.2% | 39.3% | +4.9 percentage points | - Pledged assets include inventories of **RMB 434.6 million**, property, plant, and equipment of **RMB 13.1 million**, and land use rights of **RMB 4.4 million**[168](index=168&type=chunk) - Some bank loans and other borrowings are guaranteed by certain directors of the Company, subsidiaries of the Group, or legal representatives of certain subsidiaries of the Company[168](index=168&type=chunk) [Interest Rate Risk and Foreign Exchange Risk](index=27&type=section&id=Interest%20Rate%20Risk%20and%20Foreign%20Exchange%20Risk) The Group faces interest rate fluctuation risk, where rising rates could increase borrowing costs, and currently does not use financial derivatives to hedge this risk; while its business is primarily RMB-denominated, some cash deposits and bank borrowings are in HKD or USD, potentially leading to exchange differences from currency fluctuations, but no significant direct foreign exchange risk is currently perceived - The Group is exposed to risks arising from fluctuations in loan interest rates, where rising rates could lead to increased borrowing costs[174](index=174&type=chunk) - The Group does not use any financial derivative instruments to hedge interest rate risk[174](index=174&type=chunk) - The Group's business is primarily denominated in RMB, and it does not currently perceive any significant direct foreign exchange risk, nor does it use financial derivative instruments to hedge foreign exchange risk[169](index=169&type=chunk) [Employees and Remuneration Policy](index=27&type=section&id=Employees%20and%20Remuneration%20Policy) As of December 31, 2022, the Group employed **3,925** staff, a **13.7%** year-on-year decrease, with employee costs in 2022 at **RMB 421.9 million**, a **9.0%** year-on-year decrease, and the Company has share option and share award schemes to incentivize, reward, attract, and retain talent Employee Count and Costs | Metric | 2022 | 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Employee Count (persons) | 3,925 | 4,551 | -13.7% | | Employee Costs (RMB million) | 421.9 | 464.1 | -9.0% | - Employee remuneration packages are determined based on work experience, responsibilities, and performance, and are subject to annual review[175](index=175&type=chunk) - The Company has a share option scheme (effective 2015, approximately two years and three months remaining) and a share award scheme (adopted 2019, approximately two years and three months remaining), aimed at incentivizing and rewarding employees, and attracting and retaining talent[176](index=176&type=chunk)[183](index=183&type=chunk) [Other Information](index=29&type=section&id=Other%20Information) This section covers share repurchases, post-reporting period events, off-balance sheet arrangements, dividend policy, corporate governance, and administrative details for the upcoming AGM [Purchase, Sale or Redemption of Listed Securities](index=29&type=section&id=Purchase%2C%20Sale%20or%20Redemption%20of%20Listed%20Securities) For the year ended December 31, 2022, the Company repurchased **32,366,000** ordinary shares on the HKEX for approximately **HKD 96,263,669.53**, with **15,974,000** repurchased shares cancelled on **June 10, 2022**, as the Directors believe share repurchases are in the best interest of the Company and its shareholders, enhancing earnings per share 2022 Share Repurchase Details | Month of Repurchase | Number of Shares | Total Consideration (HKD) | | :--- | :--- | :--- | | January 2022 | 5,638,500 | 26,325,433.25 | | February 2022 | 3,847,000 | 15,469,714.30 | | ... | ... | ... | | December 2022 | 1,139,500 | 1,394,200.00 | | **Total** | **32,366,000** | **96,263,669.53** | - **15,974,000** repurchased shares were subsequently cancelled on **June 10, 2022**[126](index=126&type=chunk) - The Directors believe that the share repurchases are in the best interests of the Company and its shareholders, and that such repurchases can enhance the Company's earnings per share[118](index=118&type=chunk) [Post-Reporting Period Events](index=29&type=section&id=Post-Reporting%20Period%20Events) As of the date of this announcement, no significant events have occurred that would have a material impact on the Group - No significant events that would have a material impact on the Group have occurred from the end of the reporting period on **December 31, 2022**, up to the date of this announcement[143](index=143&type=chunk) [Off-balance Sheet Commitments and Arrangements](index=30&type=section&id=Off-balance%20Sheet%20Commitments%20and%20Arrangements) As of the date of this announcement, the Group has not entered into any off-balance sheet transactions - As of the date of this announcement, the Group has not entered into any off-balance sheet transactions[144](index=144&type=chunk) [Final Dividend](index=30&type=section&id=Final%20Dividend) For the year ended December 31, 2022, the Company's Board of Directors recommends not declaring an annual dividend (2021: HKD 0.21 per ordinary share) - For the year ended **December 31, 2022**, the Company's Board of Directors recommends not declaring an annual dividend (2021: **HKD 0.21** per ordinary share)[145](index=145&type=chunk) [Compliance with Corporate Governance Code](index=30&type=section&id=Compliance%20with%20Corporate%20Governance%20Code) For the year ended December 31, 2022, the Company complied with the applicable principles and code provisions of the Corporate Governance Code as set out in Appendix 14 of the HKEX Listing Rules - For the year ended **December 31, 2022**, the Company complied with the applicable principles and code provisions of the Corporate Governance Code as set out in Appendix 14 of the HKEX Listing Rules[146](index=146&type=chunk) - The Board will continue to review and monitor the Company's corporate governance practices to comply with the Corporate Governance Code and maintain a high standard of corporate governance practices[121](index=121&type=chunk) [Standard Code for Securities Transactions by Directors](index=30&type=section&id=Standard%20Code%20for%20Securities%20Transactions%20by%20Directors) The Company adopted the Standard Code for Securities Transactions by Directors of Listed Issuers, as set out in Appendix 10 of the Listing Rules, as its code of conduct, and all Directors confirmed compliance for the year ended December 31, 2022 - The Company has adopted the Standard Code for Securities Transactions by Directors of Listed Issuers, as set out in Appendix 10 of the Listing Rules, as its code of conduct[128](index=128&type=chunk) - All Directors have confirmed compliance with the Standard Code for the year ended **December 31, 2022**[128](index=128&type=chunk) [Significant Investments, Acquisitions and Disposals of Subsidiaries, Associates and Joint Ventures](index=30&type=section&id=Significant%20Investments%2C%20Acquisitions%20and%20Disposals%20of%20Subsidiaries%2C%20Associates%20and%20Joint%20Ventures) Except as disclosed in this announcement, the Group did not undertake any significant investments, acquisitions, or disposals of subsidiaries, associates, and joint ventures during the reporting period - Except as disclosed in this announcement, the Group did not undertake any significant investments, acquisitions, or disposals of subsidiaries, associates, and joint ventures during the reporting period[129](index=129&type=chunk) [Sufficiency of Public Float](index=30&type=section&id=Sufficiency%20of%20Public%20Float) Based on publicly available information and the Directors' knowledge, the Board confirms that the Company maintained sufficient public float as required under the Listing Rules during the reporting period - The Directors confirm that the Company maintained sufficient public float as required under the Listing Rules during the reporting period[130](index=130&type=chunk) [2023 Annual General Meeting](index=31&type=section&id=2023%20Annual%20General%20Meeting) The Company will hold its 2023 Annual General Meeting on Tuesday, June 13, 2023, with the notice of meeting to be published and dispatched to shareholders in due course in accordance with the Listing Rules - The Company will hold its 2023 Annual General Meeting on **Tuesday, June 13, 2023**[132](index=132&type=chunk) [Closure of Register of Members for 2023 Annual General Meeting](index=31&type=section&id=Closure%20of%20Register%20of%20Members%20for%202023%20Annual%20General%20Meeting) To determine eligibility for attending and voting at the 2023 Annual General Meeting, the Company will suspend its share transfer registration from Thursday, June 8, 2023, to Tuesday, June 13, 2023 - The Company will suspend its share transfer registration from **Thursday, June 8, 2023**, to **Tuesday, June 13, 2023**[123](index=123&type=chunk) - Investors should submit all share transfer documents to the Company's share registrar branch no later than **4:30 p.m. on Wednesday, June 7, 2023**, for registration[123](index=123&type=chunk) [Auditor's Scope of Work](index=31&type=section&id=Auditor%27s%20Scope%20of%20Work) The consolidated financial statement figures for the Group for the year ended December 31, 2022, in the preliminary announcement have been agreed by the Group's auditor, ZHONGHUI ANDA CPA Limited, but their work does not constitute an assurance engagement under HKICPA standards, thus no assurance is given on the preliminary announcement - The consolidated financial statement figures for the Group for the year ended **December 31, 2022**, in the preliminary announcement have been agreed by the Group's auditor, ZHONGHUI ANDA CPA Limited[134](index=134&type=chunk) - The auditor's work does not constitute an assurance engagement issued by the HKICPA, thus no assurance is given on the preliminary announcement[134](index=134&type=chunk) [Audit Committee](index=31&type=section&id=Audit%20Committee) The Company has established an Audit Committee in compliance with the Listing Rules and Corporate Governance Code, which has reviewed the annual results for the year ended December 31, 2022, and comprises three independent non-executive directors, with Mr. Wang Nengguang as Chairman - The Company has established an Audit Committee in accordance with the Listing Rules and Corporate Governance Code, and has formulated written terms of reference[135](index=135&type=chunk) - The Audit Committee comprises three independent non-executive directors: Mr. Wang Nengguang (Chairman), Mr. Liu Guoxun, and Mr. Chen Yinglong[135](index=135&type=chunk) - The Audit Committee has reviewed the annual results for the year ended **December 31, 2022**[136](index=136&type=chunk) [Publication of Annual Results and Annual Report on HKEX and Company Website](index=32&type=section&id=Publication%20of%20Annual%20Results%20and%20Annual%20Report%20on%20HKEX%20and%20Company%20Website) The annual results announcement is published on the HKEX website and the Company's website, and the annual report will be dispatched to shareholders and made available on both websites in due course - The annual results announcement is published on the HKEX website (http://www.hkexnews.hk) and the Company's website (http://www.hexieauto.com)[138](index=138&type=chunk) - The annual report will be dispatched to shareholders and made available on the HKEX website and the Company's website in due course[138](index=138&type=chunk) [Acknowledgement](index=32&type=section&id=Acknowledgement) The Board sincerely thanks all employees for their loyalty and contributions, and shareholders and business partners for their trust and support, enabling the Group's growth and progress amidst competition and challenges - The Board sincerely thanks all employees for their loyalty and contributions, and all shareholders and business partners for their trust and support[139](index=139&type=chunk)

Sales Performance - In the first half of 2022, China Harmony Auto Holding Limited delivered a total sales volume of 17,190 units, representing a year-on-year decline of 23.4%[12] - The sales of luxury brands showed resilience, with Ferrari, Bentley, and Rolls-Royce achieving year-on-year sales growth of 365.2%, 10.3%, and 2.4% respectively[12] - BMW (including Mini) deliveries totaled 13,090 units, down 23.5% year-on-year, while Lexus deliveries were 1,828 units, a decrease of 23.3%[12] - The overall luxury brand market share decreased from 14.8% to 13.7% year-on-year, indicating a 1 percentage point drop[8] - The overall retail market for passenger vehicles in China saw a sales volume of 9.396 million units in the first half of 2022, a decline of 6.8% year-on-year[8] Financial Performance - The company's revenue for the first half of 2022 was RMB 7,940.1 million, a decrease of 15.3% compared to RMB 9,373.9 million in the same period last year[17] - New car sales revenue decreased by 16.3% to RMB 6,906.3 million, accounting for 87.0% of total revenue[17] - The company recorded an operating loss of RMB 774.0 million, compared to an operating profit of RMB 564.9 million in the first half of 2021[25] - The gross profit decreased by 19.5% to RMB 691.8 million, with a gross margin of 8.7%[20] - The net loss for the six months ended June 30, 2022, was RMB 908,360 thousand, compared to a profit of RMB 400,586 thousand in the previous year[83] Inventory and Market Strategy - The average inventory level for dealers was approximately 1.68 months, slightly higher than the 1.55 months recorded in the same period of 2021[9] - The average inventory turnover days increased by 6.9 days to 30.6 days due to strict COVID-19 prevention policies[31] - The company aims to expand its market share in the luxury segment, particularly for Ferrari, which accounted for nearly 25% of its total sales in mainland China during the first half of 2022[12] - The company plans to focus on electric vehicle transformation as a key medium to long-term strategy[16] - The automotive industry in China is expected to see structural growth driven by policies promoting vehicle consumption, despite ongoing challenges such as chip shortages and high raw material prices[11] Cash Flow and Assets - The company’s cash and deposits totaled RMB 1,622.4 million as of June 30, 2022[27] - The company’s total assets as of June 30, 2022, were RMB 7,093,927 thousand, compared to RMB 8,042,562 thousand as of January 1, 2022, indicating a decrease of approximately 11.8%[103] - Cash and bank balances stood at RMB 1,622,352 thousand as of June 30, 2022, slightly down from RMB 1,629,199 thousand at the end of 2021[91] - Operating cash flow for the six months ended June 30, 2022, was RMB 618,081 thousand, an increase from RMB 462,541 thousand in the same period of 2021, reflecting a growth of approximately 33.6%[106] - The company’s financing activities resulted in a net cash outflow of RMB (595,553) thousand for the six months ended June 30, 2022, compared to RMB (120,818) thousand for the same period in 2021[106] Shareholder Information - The company has a total of 42,191,000 stock options remaining unexercised as of June 30, 2022, after 1,325,000 options were canceled during the period[61] - The company believes that the share repurchase is in the best interest of the company and its shareholders, potentially increasing earnings per share[71] - The company’s major shareholder, Foxconn, holds 128,734,000 shares, representing approximately 8.32% of the equity[67] - The company has not granted any shares under the share incentive plan during the six-month period ending June 30, 2022[65] - The company did not recommend the payment of an interim dividend for the six months ended June 30, 2022[77] Liabilities and Financial Health - As of June 30, 2022, the group's debt-to-asset ratio was 41.4%, an increase of 2.1 percentage points from December 31, 2021[34] - The group had no significant contingent liabilities or guarantees as of June 30, 2022, consistent with December 31, 2021[35] - The company’s total equity as of June 30, 2022, was RMB 7,093,927 thousand, a decrease from RMB 8,042,562 thousand at the end of 2021[98] - The company incurred a fair value loss on financial assets of RMB 1,217,011 thousand for the six months ended June 30, 2022, compared to a loss of RMB 13,665 thousand in the same period of 2021[153] - The income tax expense for the six months ended June 30, 2022, was RMB 76,704 thousand, a decrease of 26.0% from RMB 103,699 thousand in the same period of 2021[148] Employee and Operational Metrics - The group employed 3,901 employees as of June 30, 2022, down from 4,551 employees as of December 31, 2021[38] - There were no significant acquisitions, disposals, or investments in subsidiaries or associates during the six months ended June 30, 2022[39] - The company acquired property, plant, and equipment amounting to approximately RMB 271,040 thousand during the six months ended June 30, 2022[158] - The company has capital commitments of RMB 82,948,000 for property, plant, and equipment as of June 30, 2022[181] - The company has not used any financial derivatives to hedge interest rate risks as of the reporting date[37]

Financial Performance - In 2021, China Harmony Auto achieved new car sales of 40,791 units, representing a year-on-year growth of 11.5%, surpassing the industry average growth rate[27]. - The total revenue for 2021 was RMB 18.4 billion, an increase of 22.0% compared to the previous year, with new car sales revenue contributing RMB 15.6 billion, up 21.1%[27]. - The net profit for 2021, after excluding non-recurring items, reached RMB 757 million, marking a significant year-on-year increase of 49.6%[27]. - The net cash generated from operating activities was RMB 776 million, indicating a stable financial position[27]. - The gross profit for 2021 was RMB 1,751.3 million, up 34.8% from RMB 1,298.8 million in 2020[51]. - The gross margin improved to 9.7% in 2021, compared to 8.8% in 2020, with new car sales gross margin at 4.3%[51]. - The company's revenue for 2021 was RMB 17,981.1 million, an increase of 21.9% compared to RMB 14,746.9 million in 2020[49]. - New car sales revenue reached RMB 15,609.7 million, growing by 21.1% from the previous year[49]. - The company's net cash from operating activities was RMB 776.1 million in 2021[59]. - Capital expenditures for 2021 amounted to RMB 522.7 million, primarily for new sales network establishment[61]. Sales and Market Trends - The sales volume in the second half of 2021 decreased by 16.5% to 18,344 units, while the first half saw a growth of 53.6%[43]. - The sales of BMW (including Mini) showed resilience with a year-on-year growth of 11.4% despite semiconductor shortages[43]. - The demand for ultra-luxury brands drove significant sales increases, with Ferrari, Rolls-Royce, Bentley, and Maserati achieving year-on-year growths of 94.3%, 36.7%, 126.9%, and 35.4% respectively[43]. - Electric vehicle sales in China surged by 169% in 2021, contrasting with a 4% decline in fuel vehicle sales[40]. - The penetration rate of electric vehicles in China rose from 5% in 2019 to 17% by the end of 2021[40]. - The overall retail market sales in China for 2021 reached 20,145,868 units, with a year-on-year growth of 4.4%[39]. Business Strategy and Expansion - The company plans to focus on core business operations, emphasizing luxury and ultra-luxury brand 4S store operations, while supporting investments in new energy vehicle manufacturing and after-sales services[29]. - The strategic focus for 2022 includes enhancing the positioning as a "full luxury and ultra-luxury automobile dealer group" and expanding into potential growth areas[29]. - The company plans to continue focusing on the luxury and ultra-luxury car market, optimizing brand structure and expanding the distribution network[35]. - The company added 5 new retail outlets, including 2 Ferrari, 2 Lexus, and 1 Lamborghini store, while also obtaining authorization for 4 additional outlets[28]. - The company aims to enhance operational efficiency through a flat organizational structure and performance-based reforms[34]. Corporate Governance - The company is committed to high standards of corporate governance and has complied with the relevant rules of the Hong Kong Stock Exchange[77]. - The company established three committees: Audit Committee, Remuneration Committee, and Nomination Committee to oversee specific affairs[92]. - The Audit Committee held four meetings during the year ending December 31, 2021, to review interim and annual financial performance and reports[96]. - The Remuneration Committee conducted two meetings in the year ending December 31, 2021, to review the remuneration of executive directors and senior management[98]. - The Nomination Committee is responsible for reviewing the composition of the board and providing recommendations for appointments and succession planning[100]. - The board currently consists of 7 male directors and 1 female director, reflecting the company's commitment to board diversity[100]. - The company emphasizes the importance of continuous professional development for directors to ensure informed contributions to the board[91]. - The company has adopted a board diversity policy to support its strategic goals and sustainable development[100]. Employee and Talent Management - Employee count increased to 4,551 as of December 31, 2021, from 4,206 in 2020, primarily due to business expansion[73]. - Employee costs for 2021 were approximately RMB 464.1 million, up from RMB 352.8 million in 2020[73]. - The company values employee relationships, providing competitive salaries and a superior working environment to retain talent and enhance productivity[178]. - The company has a stock option plan established in June 2015, aimed at attracting and retaining talented employees by offering them the opportunity to purchase shares[192]. - The company granted stock options for a total of 20 million shares to eligible employees in December 2019, further incentivizing employee performance[193]. Risk Management and Compliance - The company faced significant risks and uncertainties during the year, which were discussed in the management discussion and analysis section of the annual report[153]. - The board believes that the current risk management and internal control systems are effective and sufficient, and has accepted the improvement suggestions from the internal control consultant[120]. - The internal audit department plays a crucial role in monitoring the company's internal governance and conducts regular audits of all branches and subsidiaries[122]. - The company has established a three-tier risk control structure to implement its internal control and risk management policies[122]. - The company has no significant management contracts in place for the year ending December 31, 2021, indicating a focus on internal management[188]. Shareholder Relations - Shareholders holding at least 10% of the company's paid-up capital have the right to request a special general meeting within two months of submitting a written request[127]. - Shareholders are encouraged to submit written inquiries to the board, as the company typically does not handle verbal or anonymous inquiries[130]. - The company emphasizes the importance of effective communication with shareholders to enhance investor relations and understanding of business performance and strategy[132]. - The annual general meeting will be held with the presence of the board chairman and committee chairs to address shareholder inquiries[132]. - The company has adopted a dividend policy but does not have a preset dividend rate, allowing the board to propose dividends based on financial conditions[132]. Supplier Relationships - The company maintains long-term stable relationships with major automotive suppliers such as BMW, Maserati, Lexus, Land Rover, and Ferrari, ensuring stable development in automotive sales[177]. - The company collaborates with 31 domestic non-original automotive equipment and parts suppliers, emphasizing a fair and transparent selection process for suppliers[177]. - The company regularly reviews supplier performance to ensure high standards and to eliminate underperforming suppliers[177]. - The company's procurement from the top five suppliers accounted for approximately 88.1% of total procurement, with the largest supplier contributing 50.3%[174]. New Energy Vehicle Initiatives - The company has been actively involved in the development of new energy electric vehicles, utilizing funds raised from share placements for manufacturing[157]. - The company plans to allocate about 35% of the proceeds from a previous placement to invest in opportunities within the new energy vehicle sector[159]. - The company is closely monitoring macroeconomic conditions and industry policies that may impact the automotive sector[167][169].

Sales Performance - China Harmony Auto achieved new car sales of 22,447 units in the first half of 2021, representing a 53.6% increase year-on-year[11]. - BMW brand sales accounted for approximately 76.3% of total sales, with 17,116 units sold, a 51.2% increase compared to the same period last year[11]. - The luxury car market grew by 39.7% year-on-year, with sales reaching 1,471,689 units in the first half of 2021[9]. - Electric vehicle retail sales surged by 220.9% year-on-year, totaling 1,007,129 units sold in the first half of 2021[9]. - The sales momentum for luxury brands such as Lexus, Volvo, and Lincoln saw significant increases, with year-on-year growth rates of 28.8%, 46.6%, and 243.4% respectively[11]. Financial Performance - The company's revenue for the first half of 2021 was RMB 9,373.9 million, a 62.9% increase from RMB 5,754.7 million in the same period last year[16]. - New car sales revenue rose from RMB 5,021.4 million to RMB 8,251.3 million, accounting for 88.0% of total revenue in the first half of 2021[16]. - The gross profit increased by 65.3% to RMB 859.2 million, with a gross margin of 9.2%, slightly up from 9.0% in 2020[19]. - Operating profit for the first half of 2021 was RMB 564.9 million, representing a 54.2% growth compared to RMB 366.4 million in 2020[23]. - The company recorded a significant increase in net profit attributable to shareholders of RMB 390.8 million, up 66.5% from the previous year[26]. Inventory and Cash Management - The average inventory level for dealers was maintained at about 1.5 months, indicating a healthy inventory level[8]. - The company reduced its inventory days from 32 days last year to 23.7 days in the first half of 2021[11]. - Cash and deposits totaled RMB 1,926.6 million as of June 30, 2021, with net cash generated from operating activities amounting to RMB 462.5 million[27]. - Inventory slightly increased to RMB 1,117.8 million, with an average turnover period reduced by 16.2 days to 23.7 days[31]. Expansion and Growth Strategy - The company added four new authorized dealer outlets in the first half of 2021, including two for Ferrari and one each for Lamborghini and Lexus[11]. - The company is focusing on the used car and electric vehicle markets to drive future growth[12]. - The company anticipates strong performance in the second half of 2021, driven by robust demand for luxury and electric vehicles despite ongoing chip shortages[15]. - The company plans to open 4 new 4S stores, contributing to a capital expenditure of RMB 170.1 million in the first half of 2021[29]. - The company plans to continue expanding its market presence and investing in new technologies to drive future growth[94]. Employee and Governance - As of June 30, 2021, the group had a total of 4,398 employees, an increase from 4,206 employees as of December 31, 2020, reflecting a growth of approximately 4.6%[38]. - The group has not engaged in any significant acquisitions or disposals during the six months ending June 30, 2021, apart from those disclosed in the interim report[39]. - The group has not granted any share awards under the share option scheme from January to June 2021 to protect the interests of all shareholders[38]. - The company has complied with the Corporate Governance Code during the reporting period[76]. - The company’s board will continue to review and monitor its corporate governance practices to maintain high standards[76]. Share Options and Financial Instruments - The group has 43,891,000 unexercised share options under the share option scheme, representing about 2.8% of the total issued shares as of June 30, 2021[38]. - The group’s share option plan aims to attract and retain capable employees, with a total of 70,000,000 new options granted in May 2017[53]. - The company repurchased a total of 6,287,000 shares at an average price of HKD 3.30, with a total cost of approximately HKD 20.93 million during the reporting period[73]. - The company has not utilized any financial derivatives to hedge against interest rate risks, which may arise from fluctuations in borrowing costs[37]. - The company recognized a foreign exchange loss of RMB 25.8 million during the six months ended June 30, 2021, compared to a loss of RMB 23.7 million in the same period last year, indicating increased volatility in foreign exchange rates[96].