Introduction: In 2021, Changan Automobile ended three consecutive years of losses of more than 3 billion yuan to achieve profitability. Among them, Changan Ford (especially Lincoln) generated more than 60% of the profits for Changan Automobile.
(Text/Pan Yuchen Editor/Lou Bing) 2021 in the post-epidemic era is a year of succession, although still facing the complex situation of the continuous evolution of the global epidemic and the shortage of automotive chip supply, China's auto industry has ended the situation of the industry's three consecutive years of decline since 2018 and is back on the right track of growth. Among them, the rapid growth of new energy vehicles has driven a significant increase in the share of Chinese brand passenger cars, becoming the main theme of the head of its own brand in the past year.
On April 28-29, Changan Automobile's 2021 financial report was delayed along with the first quarter report of 2022. In the past 2021, Changan Automobile's revenue reached 105.142 billion yuan, an increase of 24.33% year-on-year; net profit attributable to shareholders was 3.552 billion yuan, an increase of 6.87% year-on-year. Net profit after deducting non-recurring gains and losses was 1.653 billion yuan, an increase of 150.85% year-on-year. In addition, the company's net cash inflow increased significantly year-on-year, with a net operating cash flow of 22.972 billion yuan, an increase of 115.17% over the same period last year.
In the first quarter of this year, Changan Automobile's revenue reached 34.576 billion yuan, an increase of 7.96% year-on-year, and the net profit attributable to shareholders reached 4.536 billion yuan, an increase of 431.45% year-on-year.
Profitability is mainly based on Ford
If you look at sales alone, Changan's own brand cars do have a good momentum.
In 2021, Changan Automobile's total sales exceeded 2.3 million units, an increase of 14.82% year-on-year, and its market share increased by 0.8 percentage points year-on-year. Among them, Changan's Chinese brand cars sold 1.755 million units, an increase of 16.7% year-on-year, ranking second in the industry, and the gap with the industry first was also reduced by 63.7% compared with 2020.
However, if we compare the financial performance of head rivals such as Geely and Great Wall, Changan Automobile, especially its own brands, still has a large distance from it.
In 2018, China's auto market began a three-year downturn. During this period, the average annual net profit of Geely and Great Wall's two major independent brands can still be maintained at more than 5 billion yuan, but Changan Automobile's net profit will not exceed 3 billion yuan until 2020.
In addition, Changan Automobile's profit and loss over the years also includes non-recurring profit and loss led by government subsidies. In 2021, Changan Automobile received a total of 1.336 billion yuan in government subsidies. If these non-recurring gains and losses are deducted, then from 2018 to 2020, Changan Automobile will lose more than 3 billion yuan per year, while Geely and Great Wall will remain profitable after deducting non-recurring profits in the same period.
It is worth mentioning that among the three major independent car companies, the profit of Great Wall Motors completely relies on its own brand, most of Geely's profits also come from its own brand, and the Lynk & Co brand, a joint venture with Volvo, last year's profit was 700 million yuan, accounting for about 15% of Geely Automobile's profits.
However, although the strongest growth momentum of Changan's sales at this stage is its own brand, it is the joint venture brand that operates Changan Automobile, which is exactly Changan Ford.
According to the financial report data, Changan Ford sold 305,000 vehicles in 2021, an increase of 20.3% year-on-year, which is the second consecutive year that Changan Ford has achieved positive year-on-year growth. In that year, Changan Ford's operating income was 61.765 billion yuan and net profit was 2.284 billion yuan, far ahead of the rest of the vehicle production and sales enterprises. Although Changan Ford's sales account for only 13% of Changan Automobile's total sales, it accounts for more than 64% of the profit, which is a well-deserved profit cow.
Last year, Changan Ford's performance was far from its peak.
In Changan Automobile's financial reports over the years, Changan Ford has always been regarded as an important joint venture of the Group, which has a significant impact on the attributable profit and loss of the joint venture and the associated enterprise.
Since 2015, Changan Ford has reached the peak of sales in China. Its net profit in 2015, 2016 and 2017 reached 17.469 billion yuan, 18.165 billion yuan and 12.171 billion yuan respectively, accounting for 175.51%, 176.62% and 170.53% of Changan Automobile's net profit, respectively. In other words, at that time, Changan Automobile Group completely relied on Changan Ford's profit transfusion to fill the holes in other loss-making sectors.
Subsequently, Changan Ford did not innovate its products for many years, coupled with the overall decline in the automobile market and the intensification of market competition, resulting in a sharp decline in sales. From 2018 to 2020, Changan Ford's net profit was -792 million yuan, -3.851 billion yuan and 0.16 billion yuan, respectively, and the overall profitability of the group also deteriorated.
In the past two years, the main reason for the rapid growth of Changan Ford's profits is the localization of the luxury brand Lincoln. Changan Automobile mentioned in its earnings report that last year, Changan Ford SUV models and high-end cars contributed more than 70% of sales, of which the Lincoln brand sold 89,000 units, an increase of 109.1% year-on-year.
As of 2021, the Lincoln brand has achieved the listing layout of three SUV models of Adventurer, Navigator and Aviator, and in the first quarter of this year, Changan Lincoln further listed the first car Lincoln Z, covering market segments in different price ranges. The Ford brand also has models such as the Light Chaser and the new generation of Mondeo.
In addition, another joint venture, Changan Mazda, benefited from last year's "two-horse merger", and sales also achieved a certain increase. In 2021, Changan Mazda's revenue reached 17.46 billion yuan and net profit reached 860 million yuan.
The profit of the joint venture brand remained high, reflecting the weakness of the profitability of Changan's own brand.
Compared with major competitors such as Geely and Great Wall, Changan Automobile has always lacked high-premium independent brand products, and the main sales of CS75, Yidong and other models occupy the market with cost-effective advantages.
In recent years, Changan Automobile has been promoting the independence of its UNI sequence brand in order to compete with mid-to-high-end models such as Geely Lynk & Co and Great Wall Wei brand/tank. However, at present, the average price of the three models of the UNI sequence is still within 150,000 yuan, and the sales performance is also quite different from that of Lynk & Co, and it has not yet reached the moment of real strength.
Changan Automobile was able to turn a profit last year, relying on more than just the automobile sales business.
During the period when the Changan Ford family was supporting Changan Automobile, Changan Automobile also operated Changan Suzuki, Changan Peugeot Citroen and other loss-making enterprises for many years. In the past three years, in addition to changing these burdens one after another, Changan Automobile has also shut down and transferred the backward production capacity of 960,000 vehicles and 870,000 engines. By 2021, Changan Automobile will have a design capacity of 2.05 million units, with a capacity utilization rate of 67%, offsetting many losses caused by serious overcapacity.
In addition, in terms of non-main business, Changan Automobile's investment income reached 1.014 billion yuan last year, an increase of 26.53% year-on-year.
Profit: Most of them are invested in electric vehicles
As Changan Automobile turns a profit from non-profits, the answer to another question gradually surfaces: Changan Automobile, which relies on Changan Ford's profits, where do these profits eventually flow?
At a time when there is no major change in a hundred years, Changan Automobile's research and development focus in recent years is electrification and intelligence, which is no longer news. Moreover, as one of the largest independent brand car companies in China, electrification has always been the short board of Changan Automobile.
As early as 2017, Changan Automobile announced its first new energy development strategy, the Shangri-La Plan: to completely stop selling fuel vehicles in the traditional sense in 2025 and realize the electrification of full-spectrum products. However, after the disclosure of the plan, Changan Automobile's progress in the field of new energy has not achieved significant results, and its market share is not prominent compared with traditional rivals such as BYD, Geely and Great Wall.
Until 2021, Changan's new energy vehicle sales finally exceeded 100,000 for the first time, an increase of more than 200% year-on-year. However, according to the data of the Association of Automobile Associations, 99% of Changan New Energy's sales belong to the Ben E-Star car.
With the high sales of micro-small scooters, Changan Automobile does not have to worry about the double integration goal for the time being, but such a product structure does not help Changan New Energy to make profits, let alone help Changan New Energy's brand value improvement. This has also become the main reason why Changan Automobile has continued to increase investment in electrification, intelligent production and research and development in recent years.
As mentioned above, in the past three years, in order to comprehensively improve the production capacity structure, Changan Automobile has built 1.07 million intelligent network and new energy vehicle production capacity, 600,000 high-efficiency engine production capacity, and 100,000 sets of new energy battery production capacity in addition to shutting down excess old production capacity, laying a production foundation for promoting the development of new energy vehicles.
In terms of R&D investment, Changan Automobile's R&D expenses increased by 21.67% to 3.515 billion yuan last year, and the proportion of R&D in revenue was about 4.6%, basically the same as that of the previous year; the number of R&D personnel rose from 6636 in the previous year to 7269, accounting for more than 17% of the total number of employees. The main research and development directions include PLUS/UNI series passenger cars, iDD series plug-in hybrid models, new electric vehicles, autonomous driving, a new generation of pure electric intelligent vehicle platform and intelligent electric digitalization.
Although Changan Automobile has invested heavily in electrification transformation in recent years, its willingness cannot be described as resolute. However, under the background that BYD and Tesla have repeatedly set new highs, and even traditional opponents such as Geely and Great Wall are constantly exerting their strength, Changan's layout in the field of high-end and mainstream electric vehicles still lacks bright spots.
More importantly, for new energy vehicles, due to the continuous high cost of materials and continuous investment in research and development, it is difficult for the vast majority of brands to achieve profitability at present. According to the financial report data, Changan New Energy Company's revenue last year was 5.632 billion yuan, and the loss was as high as 2.772 billion yuan, which was the only loss-making enterprise among the vehicle manufacturers held by Changan Automobile.
It is worth mentioning that the total loss of Changan New Energy last year was nearly 500 million yuan more than the net profit of Changan Ford. From another point of view, the profits generated by Changan Ford (especially Lincoln) for Changan Automobile last year were almost all filled in to the new energy vehicle business.
Like fuel vehicles, the brand upward has always been the focus and difficulty of the development of independent new energy vehicles, if Changan Automobile can not highlight the brand value and persuade emerging consumers to buy, it will lose the opportunity to overtake in the curve like fuel vehicles.
In fact, Changan has been planning to make the brand high-end since the release of the Shangri-La plan. In May 2021, the joint venture between Changan and NIO was officially renamed "Avita Technology", and the first model, Avita 11, was also released. The model is equipped with driving sensors including Huawei's lidar and is scheduled to be launched in the second quarter of this year.
However, Avita, which represents high-end, is only one of the means for Changan Automobile to enhance its brand value. The mainstream electric vehicle between 100,000 and 300,000 yuan is the main force for Changan Automobile to stabilize the basic market in the future. Due to consecutive years of losses, at the end of January this year, Changan New Energy received nearly 5 billion yuan of B round financing for blood transfusions, and plans to launch three pure electric vehicles based on the new electric platform, namely C385, C673 and the upcoming LUMIN mini car.
On April 13, Changan Automobile officially named the new electric brand "Changan Deep Blue" at the Global Partner Conference, and announced the latest sales target: by 2025, Changan Automobile's total sales will reach 4 million vehicles, of which new energy sales will reach 1.05 million, accounting for 35%. At the same time, the existing brands such as Chang'an, Auchan and Kaicheng will also transform to electrification.
Take a look:
A helpless reality is that independent blood supply is still very far away for most new energy vehicle companies.
This year, the outbreak of the epidemic in many places led by Shanghai and Jilin, as well as a series of uncertainties such as the rising raw materials of batteries and the shortage of chip supply, Changan New Energy, which is still losing money, has brought pressure. At present, like other new energy vehicle brands, Changan Automobile's best-selling Ben E-Star National Edition has announced an official price increase.
The advent of a series of black swan events further tested Changan Automobile's ability to cope with and resist pressure with competitors. This also means that before the time is really ripe, Changan Automobile still needs to rely on more profitable joint venture fuel models to cover its bottom.
Fortunately, for Changan Automobile, which has a long history and a large family, more room for maneuver and opportunities for trial and error are still its biggest advantage over its opponents. Considering that Chinese automobiles are still in a period of rapid development, if Changan Automobile can seize the core opportunities, then there will still be a place on the main track of new energy vehicles in the future.
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