The rapid growth of new energy vehicles has intensified industry differentiation: supply chains test Chinese car companies

Mainland new energy vehicles have entered a new stage of explosive growth, shifting from policy-driven to market-driven in the past. The development level of new energy vehicles has also had an important impact on the operating indicators of a car company.

According to the statistics of the 21st Century Business Herald reporter, as of April 29, 24 of the 29 Chinese car companies (including 20 passenger car companies and 8 commercial vehicle companies) listed on A-share, Hong Kong and US stocks have released 2021 financial reports.

Among them, the operating income of 16 car companies in 2021 increased year-on-year, and the net profit of 14 companies increased. Eight car companies, including "Wei Xiaoli", incurred losses, of which beiqi Blue Valley had a net loss of 5.244 billion yuan.

With the outbreak of new energy vehicles in the private car consumption market, the electric vehicle business further affects the profitability of a car company. In 2021, BYD's revenue exceeded 100 billion yuan for the first time, and although the three car companies of "Wei Xiaoli" are still losing money, the gross profit margin of sales continues to improve. Beiqi Blue Valley, which has previously won the domestic new energy vehicle sales champion for 7 consecutive years, is facing huge pressure on product transformation, and has lost more than 5 billion yuan for two consecutive years.

In addition, new energy vehicles have driven strong demand for power batteries. In addition to BYD, there are 4 A-share listed companies. Among them, the Ningde era, which has released the 2021 financial report, has more than doubled the revenue growth rate of Yiwei lithium energy, and Guoxuan Hi-Tech has also achieved a revenue growth of 54%. Chinese enterprises have shown strong competitiveness in the core components of new energy vehicles, which is a strong guarantee for the sustainable and healthy development of the new energy automobile industry in the mainland.

However, since the beginning of this year, the price of raw materials for power batteries has continued to rise, car companies have raised car prices, and the impact of the recent epidemic on the national automobile supply chain, coupled with the shortage of chips and changes in the international situation, the Chinese car market is facing many challenges in 2022, and the performance of car companies is under pressure.

The performance of car companies is obviously differentiated

With the adjustment of consumption trends in China's auto market and the deepening of automotive electrification and intelligent transformation, the intensification of industry competition has further differentiated the performance of car companies. In the field of passenger cars, the profitability of head enterprises is strong, and the growth of new forces of head Internet car manufacturing is strong, but the living environment of marginal car companies such as Zotye, Haima and Lifan is becoming more and more difficult.

In 2021, affected by the shortage of chips, many best-selling models of luxury brands and mainstream joint venture brands have been in short supply for a long time in the terminal, and the transaction price of new cars has also increased. Overall, the trend of upgrading automobile consumption in mainland China is still relatively obvious. Several state-owned automobile groups, whose profits mainly come from joint venture brands, have achieved good operating performance. Among them, SAIC Motor, GAC Group and Changan Automobile have achieved double growth in revenue and net profit in 2021.

China's two largest car companies, SAIC Motor and FAW, both experienced a slight decline in sales in 2021, but both achieved positive revenue growth.

After two consecutive years of decline in net revenue, SAIC Motor is expected to stop falling and recover in 2021. The company's revenue in the first three quarters increased by 10.84% to 552.7 billion yuan, and net profit reached 20.35 billion yuan, an increase of 22.24%. FAW Group's total operating income for the whole year was 707 billion yuan, an increase of 1.4% year-on-year. Among them, FAW Jiefang, an A-share listed company under FAW, declined sales and revenue due to the downturn in the truck market, but the company's net profit increased by 46%.

Although GAC Group's sales volume increased by only 4.92% in 2021, the company's revenue and net profit increased by 20% and 23%, respectively. In addition to the strong profitability of GAC Toyota and GAC Honda, GAC Trumpchi and GAC E-An in the autonomous sector have both achieved some growth.

The profit structure of BAIC Group is relatively single, mainly relying on Beijing Benz. In 2021, BAIC Motor Co., Ltd. achieved operating income of 175.916 billion yuan and net profit of 3.858 billion yuan, an increase of 90.2% year-on-year. Among them, Beijing Benz's revenue was 167.966 billion yuan, operating profit was 15.151 billion yuan, and Beijing Hyundai and Beijing brands were both loss-making. In addition, Foton Motor and Beiqi Blue Valley will lose as much as 5 billion yuan in 2021.

Changan Automobile's good performance mainly depends on its autonomous sector business. In 2021, Changan Automobile's total operating income was 105.141 billion yuan, an increase of 24.33% year-on-year, a new high in the past five years, and net profit was 3.552 billion yuan, an increase of 6.87% year-on-year. Changan Automobile said that the improvement in the company's net profit during the reporting period was due to the increase in sales in the autonomous sector, which made the profit increase significantly year-on-year.

Geely, Great Wall and BYD, three private independent leading car companies, have also carried the cyclical fluctuations of the market and maintained the resilience of positive growth.

Thanks to the growth of new car sales and the adjustment of product structure, in 2021, the auto business of geely automobile, Great Wall Motor and BYD achieved revenue of more than 100 billion yuan, achieving positive year-on-year growth of 10.3%, 32.04% and 33.93% respectively.

However, net profit has not kept pace with revenue growth. Among the three companies, only Great Wall Motors achieved positive net profit growth, but the growth rate was not as fast as revenue; bydir and Geely Automobile's net profit fell by 28.08% and 21.9% respectively.

Among the three car companies, in 2021, Geely Automobile has the highest sales, but the overall average bicycle revenue is only 87,700 yuan, and the overall average bicycle price of Great Wall Motors is more than 106,000 yuan, and because the current price of new energy vehicles is higher than that of traditional fuel vehicles, according to Wilson data, the average bicycle price of BYD passenger cars has exceeded 150,000 yuan.

As the first wave of new forces of Internet car manufacturing, Weilai, Xiaopeng and Ideal have crossed the life-and-death line in 2021, and the annual delivery volume of the three companies has exceeded 90,000 vehicles, entering a period of rapid growth.

From the perspective of various financial indicators, although the revenue, delivery, and gross profit margin of the three companies have achieved substantial growth compared with the previous year, it is still difficult to escape the fate of loss. WEILAI has the highest revenue and narrowed losses year-on-year; Xiaopeng has the best sales but expands losses; ideally, because of effective cost control, it loses the least.

There is still a big gap between the three companies and Tesla, and it will still take a while to achieve profitability. Li Bin, chairman of WEIO, judged that WEIO expects to achieve the breakeven of the current quarter in the fourth quarter of 2023 and hopes to achieve breakeven in the whole year of 2024.

CITIC Securities pointed out that the three new forces are in the acceleration period of profitability improvement, and large R&D investment has led to its short-term strategic losses, but its rising gross profit of bicycles has shown its ability to approach the break-even point in the future, and is expected to rapidly approach the break-even point in the next year.

Behind the explosive growth of new energy vehicles

New energy vehicles have entered the marketization stage, so that all car companies have begun to adjust the business structure of enterprises, which is especially obvious in 2021.

The joint venture share ratio of Continental Automobile will be fully liberalized in 2022, after large state-owned enterprises that previously relied on joint venture car companies to make profits hoped to find lost ground in the new energy vehicle sector. In 2021, new brands such as BAIC Jihu, Dongfeng Lantu, SAIC Zhiji, and Changan Avita have been launched. State-owned car companies hope to make up for the shortcomings in intelligence through cooperation with Internet technology companies such as Huawei, Baidu, and Alibaba.

It is worth mentioning that the new energy business will be an important carrier for the mixed ownership reform of state-owned enterprises. GAC E-An is actively promoting mixed reform and plans to enter the capital market in 2022; Changan New Energy has introduced external capital such as Ningde Times.

"Considering the complexity and risks of large state-owned enterprises fully implementing the deep mixed ownership reform, we can start with the electric intelligent vehicle business, set up a new business unit, with the principle of shareholder quality and share ratio rationalization, one is to introduce financial capital with operational experience and appeal in the capital market, the other is to introduce industrial capital such as ICT that contributes constructively to the industrial ecology, and at the same time set up an employee shareholding platform to scientifically design employee stock ownership plans." Zuo Yan'an, the former chairman of Jianghuai Automobile, said in an exclusive interview with a reporter from the 21st Century Business Herald.

He believes that the formation of a scientific property rights structure in which state-owned capital is not absolutely controlled, and derives a modern enterprise governance system and a globally competitive employment distribution mechanism, and realizes the internationalization and cross-borderization of talents, which will enhance the research and development capabilities of automotive software and enhance the competitiveness of enterprises to participate in the new track of electric intelligent vehicles.

Under the wave of industrial change, Geely, Great Wall and BYD are also adjusting their own playing style.

BYD released the DM-i hybrid platform in 2021, and the advantages of low cost and low fuel consumption have promoted the parity between plug-in hybrid models and fuel vehicles to a certain extent, and there is still a large cost gap between pure electric vehicles and fuel vehicles at this stage.

The hot sales of plug-in and hybrid models have greatly increased by BYD's sales of new energy passenger cars, and by December 2021, more than 90% of byBYD's sales of passenger cars are pure electric or plug-in hybrid models. On April 3 this year, BYD officially announced that it would stop the production of conventional fuel vehicles from March 2022, becoming the first car company in the world to officially announce the suspension of production of fuel vehicles.

On April 3, BYD officially announced that it will stop the production of fuel vehicles from March 2022 in accordance with the company's strategic development needs. In the future, the company will focus on pure electric and plug-in hybrid vehicles in the automotive segment.

Geely Automobile is accelerating the pace of technological transformation, and in 2021, it has successively released a new blue Geely action plan and a "smart Geely 2025" strategy. In January 2021, Geely Automobile established a joint venture with Baidu and Foxconn and opened up the Haohan architecture; in March of the same year, Geely launched a new high-end intelligent pure electric car brand Extreme Kr and opened batch delivery; in September of the same year, in the face of Huawei, Xiaomi and other mobile phone manufacturers to go to the underground to build cars, Geely reversed the cross-border and announced its official entry into the mobile phone field.

Weilai, Xiaopeng and Ideal will begin to release a clearer long-term strategic layout in 2021, tearing off the label of Tesla's "Chinese replicator" and looking for the angle of differentiated competition. Weilai positions high-end pure electricity and creates full-scene user services; Xiaopeng focuses on technology and intelligence, adheres to full-stack self-research, and impacts high-end areas; ideally, it insists on achieving increased range and pure electric two-legged walking, focusing on the pain points of family cars.

Behind the explosive growth of new energy vehicles, all car companies are adjusting their survival strategies, and the business logic of the automobile industry is also changing.

Supply chains continue to be affected, putting pressure on corporate performance

According to the statistics of the 21st Century Business Herald reporter, 14 A-share listed car companies have announced the first quarter report of 2022. Among them, the revenue of 10 car companies was higher than that of the same period last year, 7 companies achieved a year-on-year increase in net profit, and 7 car companies lost money in the first quarter.

According to the China Automobile Association, in the first quarter of this year, the cumulative sales of automobiles were 6.509 million units, an increase of only 0.2% year-on-year. However, the new energy vehicle market continued to grow. In March, sales of new energy vehicles were 484,000 units, up 1.1 times year-on-year. In the first quarter, the cumulative sales of new energy vehicles were 1.257 million units, an increase of 1.4 times year-on-year, and the market share reached 19.3%.

It should be pointed out that the automotive industry is currently facing dual pressures on the supply side and the demand side.

On the supply side, the shortage of automotive chips has not been significantly alleviated, and the price of raw materials for power batteries has continued to rise rapidly since this year, and even if the company adjusts the price of the vehicle, profits will be affected to a certain extent. In the first quarter of this year, CATL achieved operating income of 48.678 billion yuan in the first quarter, an increase of 153.97% year-on-year, but the net profit fell by 23.62% to 1.493 billion yuan. Although the operating income of Ewell Lithium Energy and Guoxuan Hi-Tech increased by 127.69% and 203.14% respectively, the net profit fell by 19.43% and 32.79% respectively.

In January this year, the national new energy vehicle subsidy standard as planned to decline, most companies strive to through their own internal balance operation and some cost reduction in the early stage to resolve the impact of subsidy decline, however, due to the price increase of raw materials such as lithium and nickel caused by the price increase in the speed of power battery prices is greatly beyond the industry's expectations, so the pressure on car companies after the price increase of power batteries is very large, and the cost pressure can only be alleviated by price increases.

Since March, a number of car companies have adjusted prices. According to incomplete statistics, in the past Three months, a total of more than 20 domestic new energy vehicle companies announced price increases, with the highest increase of more than 30,000 yuan. At present, due to the decline in subsidies and the rise in raw material prices, the impact on the scale of production and sales of new energy vehicles is not obvious for the time being.

However, due to the fact that most new energy vehicle companies use the order sales system, the current sales volume mainly comes from previous orders. Whether the rise in the price of new energy vehicles will affect the number of new orders remains to be seen.

The epidemic in Shanghai, Suzhou, Jilin and other places has caused a serious impact on the normal production and operation of local vehicle and parts enterprises, due to the long automotive industry chain, it has also affected the production rhythm of automakers in other regions, and many enterprises have stopped production and limited production, which has caused a greater impact on automobile production and sales.

"FAW has generally resumed work and is climbing production, SAIC has gradually carried out resumption tests, and parts companies have also begun to gradually resume work and production, but the speed will not be fast, there is still uncertainty about the full release of supply chain capacity, and the task of ensuring the integrity and effective guarantee of the supply chain is still very arduous." In addition, due to the increase in manufacturing costs and logistics expenses, the profitability of the automotive industry will be further reduced. On April 24, Chen Shihua, deputy secretary-general of the China Association of Automobile Manufacturers, told the 21st Century Business Herald reporter.

On the automobile consumption side, according to the observation of the China Automobile Association, since November last year, the terminal market has begun to show signs of weakness, and after the Spring Festival this year, due to the direct impact and indirect impact of the epidemic, the terminal market has experienced a sharp decline. At present, most companies reflect that new orders are declining, and the terminal market for new energy vehicles is performing better, but the traditional fuel vehicle market has declined sharply.

"Compared with the inability of automobile production to keep up, the weakening of terminal demand is more difficult to reverse in the short term, so we expect that without significantly increased policy measures to promote the growth of the automobile industry, it will be difficult to achieve the growth targets expected at the beginning of the year this year." Chen Shihua said.