Mergers and acquisitions of dealer groups are also taking place in the field of automobile circulation.
Text | Coca
On April 4, China Meidong Automobile Holdings Co., Ltd. (1268. HK, hereinafter referred to as Meidong Automobile) announced that the Group completed the acquisition of Chasing Star Automobile Sales Group Co., Ltd. (hereinafter referred to as "Chasing Auto") for a consideration of RMB3.7 billion.
According to the data, Chasing Star Automobile was registered in Hong Kong, China in 2009, operating the car brand Porsche, with 7 4S car dealerships, 4 exhibition centers and 3 service centers in Nanjing, Qingdao, Tianjin, Chongqing, Weifang, Jinan and Zhengzhou, with a total of 14 business points.
As of December 31, 2019, 2020 and 2121, Starchair's passenger car sales were approximately RMB4,633 million, RMB5,182 million and RMB5,910 million, accounting for 91.80%, 92.15% and 92.21% of its continuing operations revenue, respectively, while the total sales of new vehicles were 6,609 units, 7,121 units and 7,534 units, respectively, and after-sales service revenue was 414 million, 441 million and 499 million, respectively.
Gross profit was approximately $459 million, $528 million and $684 million respectively, and the overall gross profit margin was approximately 9.10%, 9.40% and 10.66% respectively. Among them, the gross profit margin of passenger car sales was about 5.93%, 6.28% and 7.65% respectively, and the gross profit margin of after-sales service was about 44.62%, 46.02% and 46.34% respectively.
On December 13, 2021, Meidong Automobile signed a sale and purchase agreement (acquisition agreement) with Wearnes-StarChase Limited, the parent company of Chasing Star Automobile, to acquire all the issued shares of Chasing Automobile for a total consideration of RMB3.7 billion, and the acquisition was limited to the seven Porsche 4S stores owned by Chasing Star Automobile, and other distribution brands were not included in the scope of acquisition.
"As Starchair and Meidong Automobile operate in essentially the same industry in the Chinese mainland, have similar business models and have extensive experience in Porsche brand car dealerships, the acquisition is a timely opportunity for the Group to expand into the more profitable luxury car dealership market through acquisitions." Meidong Automobile said in the announcement that due to the scarcity of distribution licenses, internal growth is difficult or takes time and cost to expand this business. The acquisition will further consolidate Meidong Automobile's position in the luxury car dealership business( in particular Porsche brand cars) and expand the Porsche brand car store network from 9 stores (as of December 31, 2021) to 16 stores, while the addition of 7 stores located in the Group's active expansion areas and other regions will effectively complement the Group's existing distribution and service outlets.
It is worth noting that the regional coverage of the star-chasing automobile business is in line with the expansion strategy of Meidong Automobile in response to the shift to luxury car consumption in lower-tier cities, and has become an effective way for Meidong Automobile to rapidly expand the scale of Porsche distribution business and focus on the overall luxury car distribution business.
Accelerate expansion
According to the data, Meidong Automobile was founded in 2004, the core of the business is Toyota, Hyundai two joint venture brands, focusing on the layout of second-, third- and fourth-tier cities, and there were only 15 4S stores when it was listed on the main board of Hong Kong in 2013.
After 8 years of development, Meidong Automobile has focused on high-growth luxury brands such as Porsche, Lexus and BMW, and its sales network has expanded to 700 (as of December 31, 2021), and the total size of 4S stores has increased by nearly 5 times.
After the acquisition of Starchai Automobile, the number of Porsche 4S stores of Meidong Automobile will increase to 16, becoming one of the three major dealers of Porsche in China, ranking second only to Porsche's wholly-owned/holding company and Yongda Automobile.
It is understood that since 2012, Meidong Automobile has obtained the distribution right of Porsche brand cars. By monitoring, assessing and analysing the current market and business conditions of the auto dealership industry and other major market players (including but not limited to the distribution network and dealers of Porsche brand cars in China), Meidong Automobile believes that the market conditions of Starchair and the market in which the Group operates will remain stable and growing, and it is not expected that there will be any material adverse changes in the short term.
"Following the completion of the acquisition, the Company has begun to adjust and improve the existing business structure and medium- and long-term business capabilities of the Target Group. The collaboration and integration between the Company's business team and the existing teams of the target group is steadily advancing. Meidong Automobile said.
It is worth noting that thanks to the rapid growth of China's luxury car market, in 2021, the total revenue of Meidong Automobile reached RMB23.577 billion, an increase of about 16.7% year-on-year. Among them, the sales revenue of new passenger cars was 20.829 billion yuan, up about 16.0% year-on-year, accounting for about 88.3% of the total revenue; after-sales service revenue was 2.747 billion yuan, up 22.0% year-on-year, accounting for 11.7% of the total revenue.
However, with the increase in new car sales, the cost of sales also increased by 14.5% from RMB18.172 billion in 2020 to RMB20.806 billion. Meidong Automobile said that the increase in sales costs was mainly due to the growth of new passenger car sales and after-sales service business operations. The cost of sales of new passenger cars and the cost of sales of after-sales services increased by about 14.4% and 15.5% respectively.
In terms of profit, the gross profit of Meidong Automobile in 2021 was 2.771 billion yuan, an increase of 36.1% year-on-year; the gross profit margin was 11.8%, an increase of 1.7 percentage points year-on-year. Among them, the gross profit margin of passenger car sales business increased by 1.3 percentage points to 6.8%, and the gross profit margin of after-sales service increased by 28 percentage points to 49.1%. Net profit was 1.213 billion yuan, an increase of 57.4% year-on-year, and the net profit margin was 5.1%, an increase of 1.3 percentage points over the same period in 2021.
Meidong Automobile said that high-end brand cars have become the core sales revenue source of Meidong Automobile, with bmw, Porsche and Lexus new passenger car sales of 8.792 billion yuan, 4.853 billion yuan and 4.270 billion yuan respectively, accounting for 42.2%, 23.3% and 20.5% of the total sales revenue of new passenger cars.
In terms of sales, due to supply shortages, 595 new vehicles were sold in 2021, up 7.7% year-on-year. BMW, Porsche and Rex sold 24,964, 5,708 and 11,699 units, respectively.
"The Group continues to implement its proven high-end brand focus, aligned with the 'single city, single store' strategy to expand its distribution network. In 2021, Meidong Automobile will add 4 new stores and acquire 3 new stores. As of December 31, 2021, there are 70 self-operated stores in Beijing, Hebei, Hubei, Hunan, Jiangxi, Fujian, Guangdong, Gansu and Anhui provinces and cities. On the evening of March 30, Meidong Automobile said in its 2021 financial report.
In the list of the top 100 dealer groups in the past years of the China Automobile Dealers Association, Meidong Automobile has shown an upward trend for many years, and has risen to 23rd place in 2020.
Meidong Automobile said that the chip shortage and geopolitics in 2022 have increased the uncertainty of the supply chain, and will continue to prudently implement the M&A strategy, further expand the scope of business, and maintain sustainable growth.
Battle between the two sides
Behind the acquisition of Star-chasing Automobile by Meidong Automobile, the merger and reorganization of the dealer group is also being staged in the field of automobile circulation.
On the one hand, although the lack of chip supply has led to a shortage of new car inventory, and the gross profit margin of new cars in dealer groups has increased significantly, it is difficult for many small and medium-sized car dealer groups to be optimistic; on the other hand, new car companies represented by Tesla, Weilai, Ideal, and Xiaopeng are accelerating their sinking, and a new situation of coexistence of multiple channels is taking shape.
Behind this, the head dealer group continues to lay out the luxury car track, and the competition to seize the 4S store through self-construction, mergers, acquisitions and other means is intensifying, and the high-quality resources are gradually concentrated to the head dealers.
In October 2021, Zhongsheng Group completed the acquisition of Renfu (China) Co., Ltd. for a final consideration of approximately US$1.314 billion. According to the data, the existing Mercedes-Benz brand stores of Zhongsheng Group before the merger were 75, and with the addition of 25 Mercedes-Benz brand stores acquired, the number of Mercedes-Benz authorized stores reached 100. After the completion of the acquisition, the Group's market share in the Mercedes-Benz brand increased significantly to about 18%, strengthening the market position of the Mercedes-Benz brand's second largest distributor in China, and further consolidating the Group's regional leading position in the South China and West China market segments.
Due to the transformation and upgrading of China's automobile market, luxury brand 4S stores have made good profits in recent years, and Zhongsheng Group has acquired Mercedes-Benz brand 4S stores on a large scale more than once. In July 2020, Zhongsheng Group acquired 8 4S stores of Baolide for 720 million yuan, including 6 Mercedes-Benz 4S stores in Hubei, Fujian, Yunnan, Jiangxi and other places; in January 2019, Zhongsheng Group acquired 7 Mercedes-Benz business 4S stores including Zhejiang Jiuhua for 202 million yuan; in July 2017, Zhongsheng Group acquired 4 Mercedes-Benz business 4S stores in Shandong for 262 million yuan; in January 2017, Zhongsheng Group acquired 5 4S stores in Jiangsu for 675 million yuan, including 3 Mercedes-Benz brand 4S stores.
Also in October 2021, Yongda Automobile announced that it would acquire two BMW 4S stores and two Lexus 4S stores in Jiangsu Province for 833 million yuan. Previously, as a well-known BMW dealer group in China, Yongda has repeatedly acquired BMW 4S stores.
In August and August 2021, Meidong Automobile acquired Nanjing Xiezhong for 420 million yuan, further consolidating its position as the second largest dealer group in the Lexus system.
It is worth mentioning that thanks to the growth of the domestic luxury automobile market, dealer groups such as Zhongsheng, Yongda, Meidong and Harmony Automobile, which are mainly engaged in luxury brand business, have achieved substantial growth in 2021.
"There is a lot of room for potential growth on this track, and in recent years China's car consumption has clearly shifted to second- and third-tier cities, and luxury brands will be highly sought after due to strong economic growth and higher disposable incomes of residents." Harmony Auto pointed out in the financial report that as BMW launches a number of new cars in 2022, which will bring sales increments to the company, sales will reach 46,000 units in 2022, an increase of 11.8% year-on-year, and Harmony Auto will continue to tap the potential of its main business - luxury and ultra-luxury brand dealers.
To this end, Harmony Motors plans to expand its network through acquisitions. In 2022, Harmony Motors plans to add 15% of its stores and has now obtained 4 new authorized stores for ultra-luxury brands, including 2 Ferraris, 1 Bentley and 1 Lamborghini.
However, while expanding the luxury brand business, the head dealer group is also facing the challenge of the direct operation model advocated by new car manufacturers such as Tesla and Weilai. In the new business model, consumers can complete services such as booking cars online, and complete delivery and after-sales service in directly operated offline stores, compared with the traditional car 4S authorization model, the role of dealers is weakened, and interests are also affected.
In addition, under the influence of new car manufacturing forces, traditional vehicle companies are also testing a new sales model. At present, Volvo, SAIC Volkswagen ID. series, SAIC Audi and other brands have tried the agency model.
In the face of menacing new energy vehicles and marketing model changes, major dealer groups have set up new energy vehicle departments, including Zhongsheng, Yongda and other large dealer groups in strengthening cooperation with traditional OEMs electric vehicles, have embraced new car-making forces.
In the first half of 2021, Zhongsheng Group signed a strategic cooperation agreement with Xiaopeng and others to establish different models including 4S dealerships, new car sales centers and delivery centers in high-tier cities, after-sales service centers in second-tier cities and after-sales service stations in third- and fourth-tier cities.
In the face of future competition, Zhongsheng Group said that the Group's network advantages in the national service network, especially in high-tier cities and economically developed areas, the existing customer base of more than 6.5 million people, and the core automotive consumer service capabilities such as industry-leading service and operation capabilities, will provide a solid foundation for the future development of the electric vehicle business.
Similarly, Yongda Automobile has established a new energy vehicle service industry development committee and working group in 2021, formed an independent new energy vehicle service group, independently carried out the new energy vehicle service industry business, and will focus on promoting the rapid development of authorized brand agency, comprehensive after-sales service and other business sectors. In 2021, Yongda Automobile's new energy vehicle sales reached 15,920 units, an increase of 55.0% year-on-year, accounting for 7.4% of the overall sales volume, an increase of 2.3% year-on-year, of which the sales of independent new energy brands reached 2986 units, an increase of 135.5% year-on-year, including the number of new energy factory direct sales vehicle agents 1863 units.
In terms of new authorization, Yongda Automobile has 13 new opened outlets of independent new energy brands and 15 new independent new energy brands, and has obtained the store authorization of head new energy brands such as AITO, Xiaopeng, BYD, Great Wall Euler, and Zero Run.
At the same time, with the transformation and exploration of traditional luxury brands in the new retail model of new energy vehicles, Yongda Automobile has successively completed BMW I-Space, I showrooms; Volvo New Energy City Center store; Volkswagen ID Store; Cadillac New Energy City Showroom, and further carried out the sales and service business of new energy models of BMW, Porsche, Audi, Mercedes-Benz, Volvo, General Motors and other traditional car brands.
Guanghui Automobile has also reached a strategic cooperation with Jihu, and the two sides will actively build a market-competitive new energy vehicle sales and service network. And Guanghui Automobile said that in the future, it will not rule out the cooperation of other new energy brands.
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