On January 20, Zotye Automobile issued 2019 annual performance forecast, announcing that it expects to lose about 6-9 billion yuan (~US$0.89 – 1.3 billion) in 2019, which is a decrease of 850% -1225% compared with a profit of 800 million yuan in the same period last year.
According to Zotye, the main reason for the loss is due to the impact of China’s macroeconomic situation, the overall prosperity of the automotive industry is not high, and car sales have fallen sharply, failing to meet expectations. According to the principle of caution, a large amount of goodwill impairment is proposed preparation, it is estimated that the provision for impairment of goodwill is about 6 billion yuan, and the specific amount will be determined after evaluation by relevant institutions.
Due to the sharp drop in sales throughout the year 2019, Zotye Automobile’s operating income has dropped significantly, and its operating costs have risen relatively, resulting in large operating losses. According to the previous public information on the Internet, Zotye ’s sales in January-November 2019 were about 100,000 units, and its monthly sales decreased by up to 80% year-on-year.
In the fierce price war in Chinese auto market, the prices of luxury and joint venture brands have continued to drop, causing serious polarization of independent brands, while brands such as Haima and Zotye encountered sales of Waterloo and their performance also turned from profit to loss.