The author | Su Li
Editor | Zhu Zhang
If there is any car that can enter the history of China's automobile development, the Haval H6 must be well-deserved.
China's first model with sales exceeding 3 million, the title of SUV sales champion awarded by the China Association of Automobile Manufacturers for 10 consecutive years, topped by these glittering glory titles, over the past decade, Haval H6 is the rise of Great Wall Motors and even the rise of China's own brand cars.
However, the end of the Haval H6 sales crown road is not the domestic independent brands Geely, Changan and BYD that have been fighting with Great Wall Motors for many years, nor the joint venture brands Honda, Toyota, or even a fuel car.
In September 2021, tesla Model Y sold 33,033 units per month, far surpassing the 23,341 units of the second-place Haval H6. The following November and December Tesla Model Y is still tightly tied to Haval H6 sales.
Great Wall Motors knows better than anyone that it is only a matter of time before the war of new energy vehicles burns into the base camp.
Therefore, the Great Wall put forward a well-known goal: by 2025, it will achieve annual sales of 4 million vehicles, new energy vehicles account for 80%, and operating income of more than 600 billion yuan.
What is this level?
Global sales of new energy vehicles will be close to 6.5 million units in 2021. According to EV Volumes' forecast, global new energy vehicle sales are expected to reach 20 million by 2025.
That is to say, in terms of sales volume, the market share of new energy vehicles in the Great Wall will reach 16% in 2025, which is more than 1 percentage point higher than Tesla's market share of global new energy vehicles in 2021.
When a company in transition sets goals that are too ambitious, it is often questioned by the outside world that its ambitions are over-inflated, and now the Great Wall is facing this kind of scrutiny, that is, whether the deviation between its grand goals and reality can be filled in in three years.
01 Get up early in the morning and catch up late, and rub shoulders with new energy
The past is a mirror of the present, before analyzing the new energy vehicle business of Great Wall Motors, let's first briefly review how the Great Wall is doing.
Few people know that Great Wall Motors first made agricultural vehicles, but the profits of agricultural vehicles are meager and it is difficult to establish a brand, and Great Wall has entered the car market instead.
In 1995, Wei Jianjun saw the potential of pickup truck models when he inspected abroad, and then put the strategic focus on pickup trucks, and after 2000, Wei Jianjun accurately captured the blank of models below 100,000 yuan in the domestic SUV market, and the strategic focus of the Great Wall increased the SUV.
These key twists allowed Great Wall Motors to successfully break through, and in 2003, Great Wall became the double champion of the domestic pickup truck and SUV market, occupying 35% and 25% of the market share respectively, and in the same year, Great Wall went public in Hong Kong.
What really determines the fate of the Great Wall is the SUV, which can even be said to be the explosive model Haval H6. From 2013 to 2021, SUV sales accounted for 77% of Great Wall Motor's average total sales; of which the H6 accounted for an average of 52% of total SUV sales.
According to the past growth experience, we can easily get such a conclusion: the rise of the Great Wall, first Wei Jianjun with market insight to choose a good track, and later with the explosive model to eat the biggest market dividend.
However, Wei Jianjun is not always correct, and the Great Wall is not playable in every segment.
For example, in 2002, Great Wall Motors had laid out the bus market, and the result did not successfully open up new business lines for the Great Wall, and in 2007, the Great Wall wanted to cut into the field of cars, Wei Jianjun ignored the strong opposition of Wang Fengying, the president in charge of marketing, and launched a "genie" with a price higher than other compact cars, which also ended in failure.
To this day, these two failures are also engraved on the stone stele of "Lessons from the Past" in front of the headquarters building, which was erected in 2010 and is called the "Shame Monument" by the Great Wall people.
Another example is the new energy vehicle track, the transformation of the Great Wall has not shown the rapid response ability of the past many years.
It is not that Wei Jianjun did not have insight into the opportunities of this track, on the contrary, Great Wall Motors' attempts at electric vehicles can be traced back to 2008, almost at the same time as BYD and Tesla.
From 2008 to 2010, Great Wall Motors exhibited the plug-in hybrid four-wheel drive model platform several times, and this technology was well received by the industry at that time, and the year before, BYD had just mass-produced the world's first plug-in hybrid model BYD F3 DM.
Even at the 2008 Beijing Auto Show, Great Wall Motors also exhibited a pure electric concept car Euler, it should be noted that Tesla's first electric vehicle product Roadster1 also came out this year.
Unfortunately, although Great Wall Motors has long had the technical reserves of new energy vehicles, it has not upgraded this track to a more important strategy, and the gap between it and its opponents is getting bigger and bigger.
02 Path dependence + strategic miscalculation
Regardless of Tesla, just looking at the gap between Great Wall Motors and BYD in the new energy vehicle business, it is enough to be dramatic.
In 2018, BYD's sales of new energy vehicles reached 247,800 units, ranking first with a market share of 19.4%, and Great Wall's electric vehicle brand "Euler" was late.
The most puzzling question behind this is nothing more than one: the Great Wall can obviously cut into the track of new energy vehicles earlier, why not do it?
The first level, for a long time after 2009, SUVs were the absolute center of gravity of the Great Wall.
That year, Great Wall Motors made a repositioning, established a strategy of focusing on SUV categories, and changed the order of business priorities from cars, SUVs, and pickups to SUVs, pickups, and cars.
After the business priority adjustment, the Great Wall began to do subtraction, and more resources began to give way to SUVs. In the transformation pain of stopping products that are inconsistent with the focus strategy and suspending the research and development of some car products, the layout on new energy vehicles has also been stranded.
The second level, after 2008, the SUV market in China's automotive industry has expanded rapidly, and the Great Wall has become the biggest beneficiary, but it has also fallen into path dependence.
From 2008 to 2019, the proportion of Chinese SUV models in passenger cars jumped from less than 10% to 43.7%. As we mentioned above, from the perspective of Great Wall Motor's product structure, SUVs have become its most important product type.
After the SUV dividend disappeared, the company entered a three-year adjustment period.
At the third level, Wei Jianjun's development of the new energy vehicle market is likely to have a strategic misjudgment.
At the 2016 shareholders' meeting, Wei Jianjun said that whether electric vehicles can save energy and reduce emissions has yet to be verified, coupled with the serious problem of industry fraud at that time, so he believes that it was not a good time to go on electric vehicle projects.
At that time, Wei Jianjun set the tone, saying, "The Great Wall only serves as a follower of the new energy industry." ”
03 SUV receding tide, Euler is difficult to support the ambition of the Great Wall
The pressure on Great Wall Motors began to stand out after 2017.
From 2017 to 2020, Great Wall Motor's sales and revenue basically did not grow, operating income remained at about 100 billion, and gross and net profit margins were also maintained at about 17% and 5%.
It should be known that from 2002 to 2016, the average net profit margin of Great Wall Motors was 12%, of which the net profit margin in 2013 was as high as 14.5%. Even because of its high profitability, the Great Wall was once compared to Ferrari's profitability.
There are three reasons for this:
First, the overall automobile market began to usher in structural adjustments, traditional fuel vehicles entered the cold winter, and new energy was in the ascendant.
According to data released by the Association in mid-January, the retail sales of new energy passenger vehicles reached 2.989 million units in 2021, an increase of 169.1% year-on-year, while the sales volume of traditional fuel vehicles was 17.16 million units, down 6% year-on-year.
Looking at the past March, due to the new crown pneumonia epidemic, chip supply shortage and other factors, mainland automobile production and sales fell by 9.1% and 11.7% year-on-year, respectively. Sales of new energy vehicles continued to grow at a high speed, with a market penetration rate of 21.7%.
Second, the traditional SUV market has entered the stock competition, and Great Wall Motor's SUV sales are still leading, but the advantages are being flattened.
As shown in the chart above, from 2015 to 2020, Great Wall Motor's leading edge in the SUV segment has declined year after year.
Third, more and more new energy vehicle companies have joined the SUV market.
For example, the "Weili" NIO ES8 and the ideal ONE cut into the medium and large SUV market, the NIO ES6 cut into the medium-sized SUV market, and the Xiaopeng G3 cut into the compact SUV market.
Under this situation of "internal and external difficulties", the Great Wall has made many attempts, one of which is to further clarify its brand matrix:
Haval – continue to focus on the SUV channel;
WEY – focusing on the luxury SUV market;
Tank - brand positioning as a smart off-road SUV, the main hardcore style;
The car - Euler, is now the main breakthrough of the Great Wall in the field of new energy vehicles;
Pickup truck - the launch of the Great Wall Gun in 2019, the launch of the Great Wall Gun off-road version of the diesel 8AT model in 2020;
Sharon - positioning the luxury new energy vehicle market, the future may be SUVs, cars are done, its CEO Wang Fei said that the goal is to take 95% of the market share in 5% of the market.
Focusing on new energy models, Great Wall's current new energy models are mainly divided into three types: one is a pure electric car brand, that is, Euler; the other is a plug-in hybrid SUV, which represents only two models, one is Mocha DHT-PHEV, one is Macchiato DHT-PHEV; and the last is a salon brand created for a few people.
Now for the Great Wall to bring sales of new energy vehicles, only Euler brand. In 2021, Euler's cumulative sales volume is 135,000 units, while the cumulative sales of Great Wall new energy vehicles are 137,000 units. That is to say, the Great Wall's other new energy models other than Euler will only sell a total of 2,000 in 2021.
In terms of the whole industry, Euler's sales are not bad. According to the data of the Association, in 2020, the Euler R1 ranked third in the annual sales volume of new energy vehicles with a sales volume of 47,000 units, and the sales volume of New Energy Vehicles of the Great Wall in 2021 also ranked fourth in the retail sales list of new energy manufacturers.
But the problem is that this model is mainly aimed at the female market, and the differentiated crowd positioning may become its biggest advantage, but it may also become its biggest ceiling.
Just in mid-February this year, due to external factors such as rising raw material prices, chip shortages, and tight power battery supply, Euler's black cat and white cat models also announced that they would stop taking orders.
Judging from the data of the first quarter, the monthly sales of the Euler brand were 13229 vehicles, 6261 vehicles and 14264 vehicles, totaling 33754 vehicles, an increase of 10% over the same period last year.
There is no problem with looking at the data alone, after all, it has achieved growth, but considering the Great Wall's target of 3.2 million new energy vehicle sales in 2025, such a growth rate is obviously difficult to support the ambition of the Great Wall.
04 The Great Wall's Problem
Now, several more realistic problems are in front of the Great Wall, which are more difficult.
First, the Great Wall should be vigilant against the risk of low sales growth, no growth or even negative growth, and the resulting idle production capacity.
Great Wall Motor's total sales have stopped growing rapidly from 2016 to 2020, growing from only 1.07 million units to 1.11 million units, while the capacity utilization rate has dropped from 104.2% in 2016 to 83.9% in 2020.
In the first quarter of this year, its sales volume was 283,500 units, down 16.3% year-on-year and 28.58% sequentially.
Great Wall Motor's 2020 annual report shows that its total design capacity is 1.34 million units. In order to complete the KPI of production capacity, Great Wall Motor has opened a buy-buy-buy model in the past two years, acquiring cheetah automobile production base, Hanteng Automobile Shangrao plant, Zotye Automobile Linyi production base and so on.
The market value list is based on the statistics of Great Wall Motor's annual report, official website and public network reports, and now the total production capacity of Great Wall is about 3.25 million vehicles per year, which is not far from 4 million.
However, if the production and marketing do not match, it will cause idle production capacity, after the purchase of fixed assets, it will begin to increase depreciation next month, and huge depreciation to reduce the profit of the current period is the most common problem faced by heavy asset manufacturing companies.
Second, is there enough money? The Great Wall faces the financial risk of expanding against the trend.
Great Wall Motor's asset-liability ratio is gradually climbing, from 51.9% in 2019 to 64.58% in 2021.
In the face of the Annual Sales Target of the Great Wall of 4 million vehicles, there will be more and more places to spend money, for example, the strategic plan for 2025 also mentions that the Great Wall will invest a total of 100 billion yuan in research and development in the next five years, with an average annual investment of 20 billion yuan. In contrast, its R&D investment in the whole of 2020 was only 5.15 billion yuan.
Third, whether the path of globalization can be smoothly advanced.
When Great Wall Motor's Tula plant in Russia was completed in 2019, Wei Jianjun once said such a sentence: "Independent brands do not go out only a dead end." On other occasions, he has said that globalization is the most important, if not the only, path to development in the automotive industry.
Great Wall Motors has indeed been vigorously promoting globalization in the past many years, and in 2021, Great Wall Motors' overseas sales volume was 139,900 units, an increase of 102.98% year-on-year. Overseas revenue was 15.919 billion yuan, an increase of 120.04% year-on-year, accounting for 11.9% of the total revenue for the whole year.
Russia is now its most important overseas market, contributing 27% of its sales in 2021 and generating 4.97 billion yuan in revenue.
The Russian-Ukrainian conflict has become the biggest black swan, and "Finance Eleven" previously pointed out in a report that great wall motors' factories in Russia are still in normal production, but due to exchange rate fluctuations, new cars have been stopped to dealers, and the Russian market currently only sells stock cars.
Fourth, can high-end be further.
In the first quarter of this year, Great Wall Motor achieved a revenue growth of 8.04% year-on-year on the basis of a 16.32% decline in sales.
Great Wall attributes this to the continuous optimization of the product structure, that is, the increase in the proportion of sales of high-profit models such as tank 300, Haval Divine Beast, and Great Wall Gun, which has led to an increase in the unit price of the vehicle by 29.12%. However, it should be noted that some of the high-end brands under the Great Wall, such as Weipai, have shown a downward trend in sales.
If you extend the time, if you calculate from the launch of the Haval H8 on the Great Wall in 2013 and officially cross the threshold of 180,000 yuan, the high-end of the Great Wall has actually gone for nearly 10 years.
The high-end of the qualitative change has not been achieved in the past decade, and it will not be easy to achieve it in the next five years.
Fifth, the current market competition faced by the Great Wall is more tragic than when it was doing pickup trucks and SUVs in the early years.
In the past period of time, based on the judgment of the industry's high prosperity and high growth, many players in the industry have given a more aggressive sales plan for 2025, but few are as radical as the Great Wall.
For example, BYD is 3 million, ideal cars are 1.6 million, Volkswagen is 1.5 million in the Chinese market, zero-run is 800,000, and Xiaomi has news that it will sell 900,000 vehicles from 2024 to 2027. Even Evergrande Automobile said that it will achieve the grand goal of producing and selling 1 million vehicles in 2025 and 5 million vehicles in 2035.
The key is that the Great Wall's performance in the current new energy market is not outstanding. Taking BYD and the Great Wall, which are closer to the sales target, BYD's sales of new energy vehicles in 2021 have reached 81%, and the Great Wall is only 10.7%; BYD announced the planning of discontinuing fuel vehicles some time ago, and the Great Wall has not yet made related major moves.
05 Conclusion
Still in 2014, Wang Fengying also mentioned at the summit: "Enterprises do not do what you want to do, the key is to see what your opponents allow you to do." According to this concept, even if the sedan is the most mainstream market, due to fierce competition, we can only start from the SUV category with relatively weak competition but great growth potential. ”
In a sense, this can be used to explain why the Great Wall positioned Euler as a female market, and in the car-making route, it also chose to be different from mainstream car manufacturers.
To say that the good point is to find differentiation, and the bad point is to deliberately avoid competition.
Just running away may be useful, but it won't always be useful. With the target of 3.2 million units there, Great Wall Motors needs to show the ability to fight a hard battle.