Author l Dazhao
Great Wall Motors, there have been some anxieties lately.
First of all, the chip used in Euler's good cat car did not match the actual complaints from consumers, and then it was announced that Euler's black cat and good cat stopped taking orders, and the latest company's sales in February fell by more than 20% year-on-year.
In the international market, Great Wall Motors is the only Chinese car company with the largest investment, the largest sales volume and a factory in the Russian market. In 2021, Russian sales accounted for 27% of Great Wall Motor's entire overseas sales, but given the uncertainty caused by the Russo-Ukrainian war, this sales data may fluctuate sharply in the future.
In terms of financial processing, the rubles earned by Great Wall Motors from Russia have always been directly converted into renminbi and included in the company's income statement. As the ruble continues to depreciate, the revenue of Great Wall companies is also worrying.
In the capital market, the stock price of Great Wall Motors has also "fallen and fallen". Since entering 2022, the company's stock price has been cut in less than three months.
Helpless "open door black"
On March 8, 2022, Great Wall Motor announced its February production and sales report:
Achieved sales of 70,792 units, down 20.5% year-on-year;
Production was 70,631 units, down 16.9% year-on-year.
From January to February 2022, the cumulative sales volume was 182,570 units, a year-on-year decrease of 19.95%;
The cumulative production volume 181949 units, a decrease of 18.42% year-on-year.
Source: Tianfeng Securities
In fact, the "open door black" in January and February is only a continuation of the decline of Great Wall Motors.
According to the financial report data of Great Wall Motor, the net profit of Great Wall Motor in Q4 2021 was 1.837 billion yuan, down 33.8% year-on-year. The profit of bicycles was only 4600 yuan, down 13.1% month-on-month.
Great Wall Motor's large profit decline in the fourth quarter, some institutions also gave an analysis.
CICC said in its research report that multi-factor expenses have increased significantly in diluted profits. CICC believes in the research report that three factors have caused great wall motor's Q4 profit decline: one-time expenses are mainly related to the compensation of good cat charging rights and interests, which is expected to be 400-500 million yuan; equity incentive expenses are expected to be about 500 million yuan; in order to better support the rapid growth of sales in the next few years and medium- and long-term development, the number of R&D and production employees has increased, driving the increase in employee salaries and the increase in year-end bonuses.
As the research report said, at the end of 2021, because some car owners found that Euler Good Cat was not equipped with the publicized Qualcomm octa-core chip, Euler's "chip door" caused an uproar in public opinion.
In order to calm the anger and dissatisfaction of the owners, Euler Good Cat issued three statements before and after, proposing a compensation plan of "7200 yuan equity package and 10000 yuan charging equity".
The data shows that from January to November 2021, the cumulative sales of Euler Good Cat were 40,246 vehicles, and the compensation plan of 400 million yuan was not recognized by the owners, but it affected the overall profit of Great Wall Motors.
On the other hand, the decline in production caused by espion deficiency also affects the revenue of Great Wall Motors to a certain extent. According to the company's February Production and Sales Bulletin, the main reason for the decline in production and sales in February was due to insufficient supply of ESP for body electronic stability systems produced by Bosch Automotive Components (Suzhou) Co., Ltd.
According to the data, Bosch is the exclusive supplier of ESP configuration for Great Wall Motors' main model. At present, the company is actively promoting the development of production increase plans with the Headquarters of the Bosch Group and Bosch chip suppliers, hoping to quickly solve the ESP supply problem. However, in the context of the global chip supply shortage, this production improvement plan does not know whether it can really be implemented, if this situation cannot be reversed as soon as possible, the days when Great Wall Motors are "stuck in the neck" may continue for a while.
In view of concerns about the future of Great Wall Motors, some securities companies have recently lowered their stock price expectations for the company.
In March, Bank of America Securities reiterated Great Wall Motor's "buy" rating, but lowered its price target to HK$24.
Guotai Junan (Hong Kong) directly lowered the target price to HK$18.02.
The "two legs" were frustrated
From the perspective of Great Wall Motors and its brands, it can be roughly divided into two categories, one is traditional fuel vehicles, and the other is new energy vehicles. Among them, the main brands have Beenl, Great Wall Pickup Truck, WEY, Tank, etc. are mainly fuel vehicles, while Euler is an electric new energy vehicle. (Note: WEY has some hybrid models)
Previously, the layout of Great Wall Motors's "two-legged" walking made many investors unanimously optimistic, coupled with the full model coverage from pickup trucks to SUVs to off-road vehicles to cars, making Great Wall Motors a capital darling for a long time. Even under the haze of the epidemic, Great Wall Motor's stock price has been bullish all the way, rising nearly ten times from the highest point in 2020 to 2021.
Figure note: Great Wall Motor's stock price trend in 2022
By the end of 2021, the heat of individual models is no longer there, the capital market returns to rationality, and the stock price of the Great Wall falls sharply at a higher point.
On November 22, 2021, Great Wall Motor's stock price closed at HK$36.7, while on March 22 this year, it closed with only HK$12.86, suffering a four-month cut. If you count from the first trading day of 2022, Great Wall Motor's stock price has also fallen by 52%.
The main reason is that the company's current "two legs" are in difficulties to varying degrees.
In terms of fuel vehicles, sales of major models declined year-on-year, but the WEY brand and tank brand performed well.
Haval brand sales in February were 41,994 units, down 31.23% year-on-year;
Great Wall pickup truck sales were 11,637 units, down 23.07% year-on-year;
Monthly sales of weY brand were 4432 units, an increase of 103.12% year-on-year;
The monthly sales of tank brands reached 6468 units, an increase of 96% year-on-year.
Although there are many brands, Haval is still the "top pillar" of Great Wall Motors.
According to the data, Haval's sales accounted for 87.3% of the total sales of the Great Wall in 2016. By February this year, although Haval's share had declined, it still contributed nearly 60% of the company's sales.
It can be said that the Great Wall is "a hav, a defeat hav".
However, Haval's traditional advantage in the SUV market is increasingly rival. Geely, Changan, BAIC, GAC, etc. all have SUV models on sale that cost about 100,000-150,000 yuan, allowing consumers to have more options.
On the other hand, Great Wall Motor's new energy models are not optimistic, and the Sales of the Euler brand in February was only 6261 units, a year-on-year decrease of 15.09%.
On February 15 this year, the two best-selling models of Great Wall Motor's brand Euler, black cat and white cat, stopped accepting orders, and officials said that because of chip shortages, spare parts supply, new energy subsidies and other issues, the two models were forced to stop production.
A few days later, Euler brand CEO Dong Yudong issued a statement saying:
From the cost structure point of view, (black and white cat) only battery cost has accounted for 30% + price, if from the perspective of the three-electric system, the cost accounts for about 50-60% of the price, the body accounts for 10%, the electronic and electrical system accounts for 13-15%, the interior and exterior decoration accounts for 7%, and other parts and components cost. Although the Great Wall has compressed costs to a minimum, there are still losses.
According to a source close to Great Wall Motors, taking black cat as an example, after the rise in raw material prices in 2022, black cats lost more than 10,000 yuan.
In the long run, Great Wall Motor's multi-brand strategy of "not putting eggs in the same basket" has met the needs of different consumers and has a good ability to resist risks, but a negative result of the multi-brand front is that it may disperse many of the group's resources.
In fact, looking back at the development history of auto giants such as Ford and Volkswagen, it can also be found that they have experienced the rapid expansion stage of the brand, but later facts have proved that too many fronts are not conducive to the growth of the overall business.
Taking Volkswagen as an example, at first it had a number of brand lines such as Golf, Polo, and Phaeton, but too many names reduced corporate recognition. Later, Volkswagen began to shrink its product line to further improve product efficiency. It was not until the launch of the MQB platform that a new balance was found in the design, power, performance, safety, configuration, etc., and according to the platform to the route of intensive growth, it was able to reverse the decline.
The so-called past does not forget the teacher of the future, the fist product of Great Wall Motors, Haval, has been blocked, and the new energy vehicle Euler has stopped taking orders, relying on "two lame legs" may be difficult to go far.
Great Wall Motors' anxiety
In addition to the problems mentioned above, Great Wall Motors is currently facing a huge challenge - transformation pressure.
As we all know, new energy vehicles have become a global trend, taking advantage of this trend, whether it is a giant such as Mercedes-Benz, BMW, Volkswagen, Toyota, or Tesla, Weilai, Ideal and other new car companies, are actively developing new energy models.
But in this area, Great Wall Motors' progress has been slow.
In 2021, Great Wall Motor sold 1.28 million units, of which only 137,000 were new energy vehicles, accounting for just over 10%. In contrast, BYD's sales of new energy models accounted for 81.3% in the same period, and SAIC-GM-Wuling accounted for about 30%.
Perhaps aware of its shortcomings in the field of new energy, on June 28, 2021, Great Wall Motors officially released its 2025 strategy.
It plans to achieve global annual sales of 4 million vehicles by 2025, of which 80% are new energy vehicles;
Operating income of more than 600 billion yuan;
In the next five years, the cumulative investment in research and development will reach 100 billion yuan.
This means that Great Wall Motors needs to achieve a jump in sales of new energy vehicles from 100,000 to 3 million in 4 years. In the eyes of industry insiders, if you want to make such a big step, investing 100 billion yuan may not be enough.
Although the slogan of "100 billion yuan" is easy to shout, it is still not easy for Great Wall Motors, which had only 19.43 billion yuan in cash and cash equivalents on its books at the end of the third quarter of last year.
Picture note: Coffee smart conference
As far as the existing technology of the Great Wall is concerned, its layout is still quite comprehensive.
At the end of June 2021, Great Wall Motor Coffee Smart 2.0 was officially upgraded, launching a new electrical and electronic architecture, a smart wire control chassis, a third-generation automatic driving computing platform ICU3.0, and the first intelligent cockpit GC-OS, which will be applied to the coffee intelligent driving autonomous driving products launched in 2022.
In addition, Great Wall Motors has three major technology brands of lemon, tank and coffee intelligence, with the three major technology brands as the cornerstone, Great Wall Motors has launched a number of models including the third generation of Haval H6, Euler Good Cat, Haval First Love, Haval Big Dog, Haval Red Rabbit, Tank 300, WEY Mocha and so on.
However, it should be pointed out that the transformation of traditional automobile manufacturers into new energy is not only to put models on the line, but also to pay attention to experience and safety, not only to change products, but also to change thinking.
Resources:
"Automotive Industry: Great Wall Motor Euler Brand Stops Receiving Orders", Hongta Securities
"Great Wall Motors: January sales are disturbed by multiple factors, the second quarter or usher in a turnaround", China Merchants Securities International
"Great Wall Motor: Production and sales are affected by ESP supply, and it is expected to achieve positive year-on-year growth in March", Tianfeng Securities
"Great Wall Motor: Performance in line with the forecast, intelligent transformation and overseas improvement of the company's development expectations", Tianfeng Securities
Disclaimer: This article is for knowledge sharing only, just to pass on more information! This article does not constitute any investment advice, and any person making investment decisions accordingly is at your own risk.