KUALA LUMPUR (Feb 24): Sime Darby Bhd (KL:SIME) group chief executive officer Datuk Jeffri Salim Davidson said on Monday that China will remain a "tough" market for the group’s motors division in the financial year ending June 30, 2025 (FY2025), as the group continues its efforts to rationalise loss-making branches in the country.

Jeffri cited fierce competition and overcapacity as major hurdles for Sime Darby's motors division in China, in which the company is the principal car dealer for automotive brands such as Rolls-Royce, BMW and MINI cars.

"As I've always said in the past, it's a situation with too much supply. There's just too many cars being produced, particularly by the Chinese OEMs [original equipment manufacturers]. We’re seeing the export of excess capacity and discounting spill over into other markets, making it tougher overall,” he told reporters at a media briefing on Monday.

"It will remain tough in China and I think it is getting a little bit tougher in some of the other markets frankly," Jeffri added. 

Andrew Basham, the managing director of Sime Darby Motors, revealed that nine branches in China were closed down in the first half of FY2025. "In the coming months, there will be two or three more that will close down," he said.

“For sites that are cash positive, we continue until the lease expires. If we jump out early, we would have to write that amount off, which isn’t particularly useful when we can keep our head above water,” Basham said, adding that some branches would shift their focus towards the used car market to optimise returns.

Sime Darby's motors division in China recorded a loss of RM10 million in 1HFY2025, dragging the overall division's profit before interest and tax (PBIT) to RM308 million, down 22% from RM395 billion in the previous year's corresponding period. 

Sime Darby attributed the loss in its China automotive operations to lower sales and vehicle margins.

Moving forward, Sime Darby sees the renewed auto trade-in policy, lower borrowing costs, and more affordable electric vehicle models to catalyse growth in its motors division in China for the rest of FY2025.

However, ongoing challenges, including fierce competition, heavy discounting and weak domestic demand could weigh on the automotive market.  

Shares of Sime Darby closed up six sen or 2.7% at RM2.28 on Monday, for a market capitalisation of RM15.54 billion.

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