Compared with eye-catching data indicators, Great Wall Motors may be more willing to express its determination to transform through financial reports.
Recently, Great Wall Motor released its 2021 annual financial report, and the operating indicators such as revenue, profit, production and sales scale, and bicycle price continued to improve. In particular, the revenue of 136.405 billion yuan hit a record high, and the year-on-year increase of 32.04% was also among the forefront of traditional car companies; in addition, the net profit of Great Wall Motors also increased by 25.43% year-on-year to 6.726 billion yuan, which made many independent car companies ashamed.
From the above data dimensions, great wall motor's financial performance is better than geely, BYD, GAC and so on. However, a traditional car company that has made every effort to promote transformation cannot be perfect everywhere.
The pain of a big shift
In 2021, Great Wall Motors will accelerate its transformation in an all-round way, with WEY and tanks as the core of the brand high-end, with Euler as the core of the electrification are frequent actions, globalization is also leveraging the production of Rayong factory to quickly occupy the Southeast Asian market. However, at the same time that Great Wall Motors is striding forward, the financial report also exposes some problems worth paying attention to.
First, domestic new car sales are under pressure. In 2021, Great Wall Motor's inherent strength pickup trucks sold 190,740 units in China, down 9.11% year-on-year, and the overall sales volume increased by 4.32% year-on-year driven by exports. Most importantly, the growth rate of domestic sales of SUV products in Great Wall's core business slowed down to 4.32%; the growth rate of the Haval brand was as low as 2.6%, and the Haval H6 also lost the "single-month sales crown iron throne" last year. Due to the slow sales of some SUV products such as Chitu and Macchiato HEV, the capacity utilization rate of the Pinghu plant is less than 32%, and the Rizhao factory is as low as 5.5%.
Second, the overseas strategy is facing challenges. In Great Wall Motor's earnings report, Russia and India were avoided as much as possible for some reasons. In fact, the situation is not as bad as it seems. According to the data, the capacity utilization rate of Russian factories in 2021 exceeded 49%, and contributed nearly 5 billion yuan of revenue to the Great Wall; at the same time, the revenue of overseas markets such as Australia and South Africa soared to 2.61 billion yuan and 2.32 billion yuan respectively, and the overall gross profit margin also reached 12.65%. As for India, the Great Wall has not invested additionally in 2021, and uncertainties have interfered with the globalization of the Great Wall.
Third, the gross profit margin of vehicle sales fell slightly. According to the financial report data, the sales revenue of Great Wall Motor exceeded 121.307 billion yuan last year, but the operating cost also rose sharply to exceed 100 billion yuan, resulting in a decline of 0.73 percentage points to 14.89% in gross profit.
From the perspective of external factors, the lack of cores has brought great challenges to the cost control of domestic car companies' supply chains. Outside the Great Wall, the gross profit margin of BYD's auto business also fell by 1.47 percentage points. From the perspective of internal factors, Great Wall Motor's sales expenses affect the gross profit margin to a certain extent. The data shows that in 2021, Great Wall Motors sold 1280951 new cars, with sales expenses of 5192175874.72 yuan, and the average sales of new cars cost 4053.38 yuan, compared with 3677.29 yuan last year.
Over-invested ambitions
Although the transformation of traditional car companies is not easy, Great Wall Motors is still accelerating its transformation.
In 2021, Great Wall Motors will expand its R&D investment again. According to the official, last year, its capitalized R&D investment and expense-based R&D investment reached 9.07 billion yuan, and the proportion of R&D investment in revenue was 6.65%, ranking among the best among traditional automobile companies. In contrast, Geely's R&D investment accounted for 5.4% of revenue, BYD's overall R&D investment (including batteries, mobile phones and automobiles) accounted for 4.92% of revenue, and the R&D investment of some domestic state-owned enterprises and central enterprises accounted for only about 2% of revenue.
Great Wall Motors said that the increase in its research and development expenses was mainly due to the increase in investment in research and development of intelligent, electrified and new model projects in the reporting period. According to the plan, Great Wall Motor expects to reach 30,000 global R&D personnel in 2023. At present, the number of R&D personnel of Great Wall Motor is 21,137 (16,000 people with bachelor's degree or above), accounting for 27.12% of the total number of the company. This means that Great Wall Motor's R&D expenditure will continue to climb in the next few years.
Judging from the market performance of high-end and electrified products, the Great Wall also needs to further increase R&D investment.
At the high-end level, the Great Wall also needs more "tank 300". From the perspective of automobile sales revenue and sales volume, its average single-vehicle transaction price is also steadily increasing. Last year, Great Wall Motor won 121.307 billion yuan in vehicle sales revenue of 121.307 billion yuan with sales of 1.28 million units, and the average single vehicle transaction price reached 94,700 yuan, an increase of nearly 12,000 yuan compared with 2020. According to the official introduction of Great Wall Motor, its overall average bicycle price exceeded 106,000 yuan, an increase of 15.02% year-on-year; from January to February this year, the proportion of great wall motor's sales of models with more than 150,000 yuan increased to 15.5%. With the release of the market potential of the Tank 500, this proportion will increase again.
At the level of electrification, the Great Wall also urgently needs to get rid of the low-end label. In 2021, Great Wall sold 139079 new energy vehicles, and the revenue scale after subsidies reached 11.098 billion yuan, and the average transaction price of bicycles was less than 80,000 yuan. Excluding new energy vehicle products, the average single vehicle transaction price of Great Wall Motors can even be increased to 96,500 yuan. Obviously, low-end products are still the main sales models of Great Wall New Energy. In contrast, BYD sold 554,980 new energy passenger cars last year, with a revenue scale of 79.418 billion yuan and an average transaction price of 143,000 yuan, almost twice that of Great Wall Motors. Under the industry trend of low unit price of double integral and high cost of power batteries and chips, low-end new energy products are destined to be difficult to make profits, which can also be seen from the discontinuation of black cats.
The B side of the decline in gross profit and the surge in research and development
The fluctuation of domestic sales of some products, the occasional interference of overseas markets, these are just the episodes of the Great Wall in the process of transformation, compared to these problems, whether the fluctuation of gross profit margin and research and development expenses are all included in the cost, these "small actions" are more worthy of the Great Wall and even the entire traditional automotive industry to re-study and weigh.
As mentioned above, the decline in the gross profit margin of Great Wall Motors and the increase in sales expenses have a lot to do with each other, and in the past many years, traditional car companies have strictly guarded against sales expenses and expect to achieve the improvement of production and sales scale with the highest efficiency.
For the gross profit of vehicle sales, perhaps Weilai's approach has certain reference value. In 2021, the average transaction price of Weilai bicycles exceeded 360,000 yuan, and the gross profit margin of the whole vehicle was also controlled above 20%. Its annual sales expenses are close to 6.9 billion yuan, which means that NIO needs to pay a cost of 75,200 yuan for each car sold, which is also an important reason why NIO can achieve the ultimate in user service. However, WEILAI does not disregard the scale of gross profit to do services, in Weilai's business model, its sales service expenditure and gross profit are basically the same. Weilai spends all the gross profit of vehicle sales on service, which is also a clear indication that traditional car companies cannot do good service without spending money.
In contrast, Great Wall Motors, although its sales expenses have increased, but 2021 is a year of concentrated efforts for WEY, tanks, and Euler, and the limited sales cost growth is not enough to support the two major actions of "impacting high-end + new energy". You know, Geely spent 4761.30 yuan on each car sold last year, an increase of 147.6% year-on-year, and BYD was as high as 7800 (estimated result). The low sales cost of the Great Wall shows that its sales system is efficient, and to a certain extent, it also reflects the great wall's lack of investment and attempts in the innovation of sales and service links.
At present, there is not much time left for Great Wall Motors, or for traditional car companies. In 2021, NIO's sales stores in China will reach 387, covering 102 cities, and the charging and replacing system will also cover nearly 171 cities and is accelerating its expansion. In addition, Xiaopeng Automobile's service outlets and charging and replacement facilities cover even more than Weilai. Next, the influence of the new car business model on automobile consumption must grow exponentially with the expansion of production and sales scale. In November last year, the first direct store of the tank brand jointly established by Great Wall and the dealer group was put into use.
What distinguishes traditional car companies from new cars is the statistical caliber of research and development costs. In the consolidated income statement of Great Wall Motor's financial report, its cost-included R&D expenses were 4.49 billion yuan, which was far from the official R&D investment of 9.07 billion yuan. Among the 9 billion yuan of R&D investment, the Great Wall introduced that the cost-based R&D investment was 3.269 billion yuan, and the capitalized R&D investment was 5.798 billion yuan. If the latter is included in the cost, then Great Wall Motors' profits will be left.
Such statistics also include traditional car companies such as BYD and Geely. In 2021, BYD's research and development expenses in the consolidated income statement were 7.99 billion yuan. In fact, BYD invested more than 10.6 billion yuan in R&D last year (about 5.2 billion yuan in the automotive business), of which nearly 2.7 billion yuan was invested in capitalized R&D. Last year, BYD's net profit attributable to its mother was less than 3.05 billion yuan, and if capitalized research and development is included in the cost and then deducts nearly 5.87 billion yuan of new energy vehicle subsidies, the figure will inevitably be difficult to accept, which also explains why Wang Chuanfu called for extended subsidies at the 100-person meeting. Similarly, of Geely's nearly 5.52 billion yuan of R&D investment, as much as 4.225 billion yuan was included in capitalized R&D expenses, and Geely's net profit last year was 4.35 billion yuan.
Of course, the allocation and use of sales expenses require careful planning, and the capitalization of research and development expenses also has its rationality. In the industrial environment where many domestic automakers selectively sleep, we expect more dynamic private car companies to be more resolute in their transformation. At least, in the process of transformation, it can be like a new car that is not afraid of losses, and it is not afraid of the profit data in the financial report to "zero".