Moody’s cuts Geely Automobile to junk

Moody’s Ratings said it downgraded Geely Automobile Holdings Ltd.’s senior unsecured rating to Ba1 from Baa3, withdrew the Baa3 issuer rating and assigned a Ba1 corporate family rating. The agency also revised the outlook to stable from negative.

"The downgrade reflects Geely's prolonged low-profit margin, which is unlikely to recover to levels we previously expected over the next 12-18 months. The sluggish margin recovery was due primarily to the company's continued investments in product development and operating expenses, including those relating to new energy vehicles (NEVs) and its startup premium electric vehicle business Zeekr, amid intense competition in China's overall automobile and NEV markets," said Gerwin Ho, a Moody's vice president and senior credit officer, in a press release.

"Nonetheless, Geely continues to maintain its competitive market position in China's automobile market and its prudent financial strategy, as demonstrated by its proactive debt reduction, very good liquidity and net cash, all of which underline the stable outlook," Ho added.

Moody's said it forecasts Geely's revenue will climb about 15%-17% over the next 12-18 months compared with 2023, supported by unit sales growth, higher average vehicle selling prices coming from the product mix change and growth in auto parts and other auto-related businesses. The agency also forecasts the company's overall unit sales will grow about 9%-11% over the next 12-18 months as compared with the level in 2023, buoyed by growth in the China auto market and new model launches.

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