Xin Lang Cai Jing·2025-06-04 09:18Core Viewpoint - S&P Global Ratings has downgraded the outlook for Zhejiang Geely Holding Group and its subsidiary Geely Automobile from stable to negative, while confirming a long-term issuer credit rating of "BBB-" for both companies due to the financial struggles of Geely's major subsidiary, Volvo Cars [1][2]. Group 1: Financial Performance - Geely reported a record revenue exceeding 240 billion yuan in 2024, with nearly 50% of sales coming from new energy vehicles and a net profit surge of 213% to 16.6 billion yuan [2]. - Volvo's Q1 2025 operating profit plummeted by 59.6% to 1.9 billion kronor, with revenue declining by 11.7% to 82.9 billion kronor, leading to a drastic drop in profit margin from 5% to 2.3% [2][6]. - Volvo's sales in China fell to 156,000 units in 2024, an 8% year-on-year decline, marking a six-year low [2]. Group 2: Market Challenges - Volvo's sales in China and Europe dropped by 12% and 8% respectively in Q1, despite implementing a "price for volume" strategy [3]. - The aggressive pricing strategy has eroded brand premium, transforming Volvo from a luxury brand to one focused on cost-effectiveness [4]. - Quality issues, such as unresolved resonance problems in the XC60 and the "fake sound system" incident, have further damaged Volvo's reputation [5]. Group 3: Strategic Implications - Geely's financial health is under pressure, with a debt ratio of 65.83% and accounts payable reaching 91.2 billion yuan, while cash reserves stand at only 35.2 billion yuan [6]. - The anticipated merger between Geely and Volvo has failed to materialize, with both companies maintaining independent structures, leading to a lack of synergy [6]. - The overall automotive industry is facing a downturn, with a significant drop in sales growth to 2.1% in Q1 and a reduced inventory turnover rate [7]. Group 4: Competitive Landscape - The automotive market is becoming increasingly competitive, with companies like BYD slashing prices on high-margin models, further straining the industry's profitability [8]. - S&P has explicitly stated that Volvo's deteriorating performance could negatively impact Geely's credit status, indicating a challenging outlook for Geely moving forward [8].