Annual Report 2007 - Hmdatalink.com hm datalink

Chairman’s Statementthe “Vision” mid-end sedans, and the “GeelyKingkong” family sedans. Significant achievementsby the operating associates in improving customersatisfactions, and product reliability and quality alsocontributed to the improved profitability during thelater part of the year.DividendThe Board recommends the payment of finaldividend of HK1.3 cents (2006: HK1 cent plus HK0.2cent special final dividend) per share for 2007.Business OverviewThe demand for sedans in China market continuedto register strong growth in 2007 despite intensifiedprice pressure. In particular, the economy carsegment experienced amongst the most difficultperiod in recent years with a few major playersadopting aggressive pricing strategy to cut productprices repeatedly, hoping to regain market sharesin China, resulting in heavy price pressure on mosteconomy car manufacturers in China. Moreover,demand for smaller sized economy sedansexperienced a cyclical decline during the year withthe sales volume of economy sedans with enginesize of 1.3L or below falling almost 25% in 2007 fromprevious year.In response, the Group’s operating associatesreduced the retail prices for most of theirmodels by 5-10% during 2007. Despitethe severe challenges and difficulties, andthus a less than exciting sales and earningsperformance in the first half of 2007, the Groupstill managed to achieve respectable results forthe full year period in 2007, helped by the significanteffort by the Group’s operating associates to improvecustomer satisfactions, production quality andreliability and to enhance their brand images during2007 and the tremendous success of two strategicnew product launches in the second half of 2007,including the 2008 version of “Free Cruiser” andthe operating associates’ first mid-end sedan model“Vision”. The significant improvement in product mixtowards higher-priced models had more than offsetthe price cuts by existing models and rising costsdue to higher raw material prices and increasinglystringent environmental and safety requirements inChina. These three higher priced models including“Free Cruiser”, “Geely Kingkong” and “Vision”accounted for 63% of the operating associates’ totalsales volume in 2007, a significant improvementfrom less than 40% in 2006, putting the operatingassociates in a much better position to cushion thepressure from rising costs.During 2007, the Group’s operating associates –Zhejiang Geely, Shanghai Maple, Zhejiang Ruhoo,Hunan Geely and Zhejiang Kingkong – sold 181,517units of Geely and Maple sedans, up 10% over 2006,achieving combined market share of around 4% inChina’s passenger car market in 2007.Performance at the Group’s parts subsidiaryZhejiang Fulin Guorun Automobile Parts andComponents Company Limited (“ZhejiangFulin”) was satisfactory and was in linewith the management expectations in 2007with an 8% increase in revenues during theyear. The dramatic fall in the sales volumeof low-end models by the Company’sGEELY AUTOMOBILE HOLDINGS LIMITED8ANNUAL REPORT 2 0 0 7