The Unprofitable Car Market: Why Geely Can Make Money Standing Up | Renqi

When the cycle declines, only those who can earn money while standing have the right to discuss the next round.

The biggest pain point of the Chinese auto market right now is not that sales are slow, but that they sell yet don't make money.

Price wars have lasted for years, and the industry average profit margin has slid down to around 1.5%. Some models lose money on every car sold. Increasing volume without increasing revenue has become the norm.

The discussion of 'anti-involution' has happened many times, but talk aside, profit margins are still declining continuously. The comparison is no longer just about sales rankings, but about survival regarding 'who can survive to the next era'.

Against this backdrop, Geely Automobile released a counter-intuitive Q3 report: Total sales for the first three quarters reached 2.235 million vehicles, growing against the trend amid a 6% overall industry decline; Total revenue was 272.6 billion yuan, a 13% year-on-year increase; Core net profit attributable to the parent company was 14.9 billion yuan, a significant 41% year-on-year increase. Sales growth 3%, revenue growth 13%, profit growth 41% — the three numbers rose sequentially, forming a healthy, almost luxurious growth curve.

Where the profit comes from: Not from cost-cutting, but from 'plucking' it out

Many people's first reaction is 'cost reduction'. Geely is indeed reducing costs: Administrative expense ratio dropped to 1.6%, sales expense ratio to 5.6%, R&D investment ratio to 5.5%, all three trending downward year-on-year. But more importantly, total R&D investment remained basically flat year-on-year — expense ratios decreased, absolute investment didn't, indicating efficiency improved, not profit gained by cutting R&D. This 'quality improvement and cost reduction' is a manifestation of system capability, not financial trickery.

The real profit engines are in two places: Average Selling Price per vehicle and Profit per vehicle. Average revenue per vehicle for the first three quarters was 112,000 yuan, up 12% year-on-year; core net profit per vehicle was 6,664 yuan, up 37% year-on-year. Profit growth far exceeds price growth, meaning cost control and operational efficiency are working in sync.

You should know that under the CPCA definition, industry average profit per vehicle for the first three quarters is only 1,145 yuan. Geely's number in the current market environment is no longer 'leading', but another species.

Behind the rising prices is a structural transformation. Zeekr's sales share for the first three quarters was 12.9%, but revenue share reached 31.3% — high-value models leveraged less volume to drive more revenue. Overseas exports reached 798,000 vehicles, up 169% year-on-year, with the growth rate ranking first among mainstream automakers, while export model unit prices and gross margins were higher than domestic. The two legs of premiumization and globalization pulled Geely's pricing power out of the quagmire of price wars.

Sales Structure

One Geely: Integration is not the goal, but to get the system running

Profit is the result, operation is the cause. The underlying logic of Geely's improvement in this round is organizational restructuring under the 'One Geely' strategy.

Starting from the 2024 'Taizhou Manifesto', Zeekr merged with Lynk & Co, Geely Automobile merged with Zeekr, reducing links in R&D, supply chain, manufacturing, sales, closing, merging, transferring, eliminating redundancy. In August this year, the Sales General Corporation was established, consolidating marketing resources of all brands together. Management turnover was completed, An Conghui succeeded as Chairman of the Board, and the company shifted from founder-driven to system and team-driven. The effects of the adjustment became visible in the following months: Lynk & Co sales stabilized, Galaxy went up, Zeekr continued to expand volume, China Star steadily improved — in a year without the traditional 'Golden September and Silver October', this is the answer given by system optimization.

The division of labor among the four brands has also become clear:

—— Galaxy expands categories, secures the base; Starship 7 sold over 22,000 units in September; Galaxy TT delivery broke 10,000 within 30 days of launch; Warship 700 booked over 10,000 units in 12 minutes of launch; the mid-range product line was filled;

—— Zeekr attacks the luxury market, 288,000 vehicles in the first three quarters, 96% of the annual 300,000 target achieved; 9X took the sales champion in the 500,000 yuan level market, exports contributed over 40% to that month's sales;

—— Lynk & Co takes the 'expansion' road, insisting on trends, sports, personality, new energy share exceeding 70%;

—— China Star grew against the trend amidst the decline of the fuel oil market overall, fully HEV-ized, using hybrid technology to prolong the life of fuel cars instead of waiting for death.

There is a point here that is easily misread: The industry is contracting, why does Geely still have multiple brands? The answer is R&D, production, and supply must be integrated, but sales and service must be differentiated. User segmentation is reality; brands are interfaces to reach different groups; integration is backend costs, not frontend faces. The saved money must ultimately be reflected in the financial statements — this is the meaning of integration.

Performance of the Four Major Brands

The Second Layer of Going Global: From Selling Cars to Building Systems

The speed of Geely going global exceeded many people's expectations, but what is more worth watching is the method of going global.

Exports reached 798,000 vehicles in the first three quarters, new energy exports 484,000 vehicles, up 531% year-on-year. Beyond the numbers is 'Industrial Symbiosis' going global: Europe cooperated with Ford and Volvo to layout capacity, ASEAN relies on the Malaysia Proton plant as a hub, Latin America binds with Renault, Volvo becomes Lynk & Co's exclusive dealer in Europe, Renault Geely Brazil Company's first local model has rolled off the line. As of the third quarter, 13 overseas factories were put into production, overseas capacity exceeds 840,000 vehicles.

In an environment where tariffs and trade barriers are rising, shipping cars out to sell and landing capacity, channels, R&D locally, are completely different levels of stress resistance. Geely is taking a path from 'Capital Globalization' to 'Industrial Globalization' — exchanging openness for access, sharing for scale, and long-term management for survival space beyond short-term arbitrage. This is not sentimentality, it is calculated rationality.

Renqi Says: Cycles will reward those companies that know how to adjust

The enlightenment given by Geely's Q3 report is not 'learning Geely means making money', but several more fundamental judgments.

First, competition in the stock market shifted its deciding factor from sales volume to pricing power. Average selling price and profit per vehicle are more important than any incremental growth, because they test product structure, brand potential, and cost control — these three things cannot be driven by price wars.

Second, integration capability is survival capability. The industry shifted from incremental to stock, the cost of multiple brands fighting separately is too high. Whoever can faster complete organizational consolidation and resource redistribution will be able to shorten the adjustment period. Geely went from manifesto to merger to sales general corporation, the pace was fast, effects became visible within months. Products and technology will change with cycles, but the mechanism of continuous correction and efficiency improvement will not.

Third, the next stage of globalization is systemization. Product export is the first step, localization of capacity, channels, supply chain, and R&D is the moat. In an era where trade friction is normalized, whoever plants their roots down will have a second growth curve.

The lack of profitability in the Chinese auto market, essentially, is that the dividends of the old model are exhausted, and the tickets for the new model have not yet been received. The significance of Geely's financial report lies not in how much more it earned than others, but in that it proved one thing: in this most competitive market, there are still companies that can exchange premiumization and globalization for unit price and profit, rather than exchanging price cuts for sales volume.

When the cycle goes down, more scarce than 'who can make money' is 'who dares not to cut prices / earn money while standing'. The weight of Geely's financial report does not lie in the numbers themselves, but in that it left a decent sample for this hemorrhaging industry: beyond the price war, there is another way out, and living very well.