Dongfeng Group lost money for the first time in 18 years of listing, and the joint venture led to an 80% drop in profits!
The joint venture went from a profit cow to a drag oil bottle.
On March 28, 2024, Dongfeng Motor Group Co., Ltd. (hereinafter referred to as "Dongfeng Group") announced its 2023 annual results.
According to the results announcement, in 2023, Dongfeng Group will sell a total of 2.088 million new vehicles, a year-on-year decrease of 15.3%, and will not complete the sales target of 3 million units in 2023.
Under the background of declining sales, Dongfeng Group's total revenue increased instead of falling, with a total annual revenue of 99.315 billion yuan, an increase of 7.2% year-on-year, but the net profit collapsed like a cliff, with a net loss of 3.996 billion yuan, turning profit into loss. After 18 years of landing in Hong Kong stocks, Dongfeng Group ushered in its first loss-making performance.
What are the reasons behind Dongfeng Group's losses, and what kind of development pattern does it reflect in China's auto market?
Fangde Automotive Analysis Report.
The joint venture is a comprehensive loss in exchange for volume
At the 2023 annual performance briefing of Dongfeng Group, the relevant person in charge of Dongfeng Group directly gave the answer of turning profits into losses: the decline in sales in the joint venture market led to a decline in net profit of about 80%.
In 2023, the cumulative sales volume of Dongfeng's joint venture brands will be 1,397,400 units, a year-on-year decrease of 15.6%. Among them, Dongfeng Nissan sold 793,700 units, Dongfeng Honda sold 610,000 units (terminal sales), and Dongfeng Citroen Automobile sold 80,300 units. During the year, the annual sales volume of joint venture brands accounted for 66.9% of Dongfeng Group's annual sales volume, which became a key factor in the decline of Dongfeng Group's annual sales volume.
Behind this is the huge pressure on joint venture brands in 2023. Judging from the sales volume alone, the decline of Dongfeng's joint venture brands is not particularly serious, but this is already the result of "trying to recover". In the results announcement, it was emphasized: "Affected by the significant squeeze on the living space of the joint venture non-luxury passenger car market and the continuous decline in market share, the Group's joint venture business has adopted flexible business policies and pricing strategies to respond and actively recover the impact of the continuous decline in the market share of joint ventures." ”
This means that Dongfeng's joint venture brand has actually experienced very large market pressure in 2023, in order to cope with the possible cliff-like decline in sales, Dongfeng Group's joint venture brand chose to exchange price for volume, but the final sales volume has not yet achieved contrarian growth, and the reduction in price has eaten up net profit, resulting in a 15.6% sales decline contributing to 80% of Dongfeng Group's net profit decline.
Compared with the "continuous decline" of the joint venture, Dongfeng Group's independent business will grow into a new "profit cow" in 2023.
Independent sales declined, and profits increased instead of falling
In 2023, Dongfeng Group's independent passenger car sales will be 347,400 units, a year-on-year decrease of 30.2%. The results announcement clearly pointed out: "The decline in sales of independent passenger vehicles is the main reason for the decline in Dongfeng Group's passenger car business revenue in 2023. ”
It can be clearly seen that compared with the joint venture brand, the sales of Dongfeng Group's independent passenger cars have declined more seriously, but Dongfeng's independent passenger car business has achieved a large increase in gross profit.
In 2023, Dongfeng Group's total gross profit will be 9.466 billion yuan, an increase of 7.2% year-on-year, and maintain a gross profit margin of 9.5%. Among them, the independent passenger car business (Fengshen series) and new energy business (VOYAH series) have become the winners and losers to promote the increase in Dongfeng Group's gross profit.
According to the results announcement, the sales structure and revenue level of Dongfeng's independent passenger vehicle business continued to improve, and the gross profit margin increased by 3.1 percentage points. Behind this is the comprehensive transformation of Dongfeng Group's independent passenger car business to new energy - in 2023, Dongfeng Group's new energy vehicle sales will reach 348,000 units, bucking the trend against the background of a 15% decline in cumulative sales.
In 2023, Dongfeng Group's VOYAH brand and Mengshi brand will release new products one after another, and Dongfeng Nano and eπ brands will be released, and the new energy matrix of independent passenger car business will begin to take shape. In 2023, Mengshi's luxury new energy hard-core off-road Mengshi 917 achieved sales of more than 1,000 units, achieving its annual target, and the high-end new energy brand VOYAH completed the iterative update of three products, with annual sales exceeding 50,000 units, a year-on-year increase of 159%. At the beginning of 2024, deliveries of Dongfeng Nano's first model, the Nano 01, will begin in January, and Dongfeng Nano's first model, the Eπ 007, will be mass-produced and launched in March.
Relying on the comprehensive transformation to new energy, Dongfeng's independent passenger car business is developing into a new cornerstone of Dongfeng Group's growth.
The joint venture is still at the table, but there are fewer and fewer cards
The "contradictory" situation between Dongfeng Group's joint ventures and independent brands in 2023 also reflects the "general trend" of China's auto market to a certain extent - the crisis of joint venture car companies in the Chinese market is coming.
On March 27, Wang Chuanfu, chairman of BYD, shouted that he would hit the market share of the joint venture brand to only 10% in the next 3-5 years.
In Dongfeng's view, this trend may not be so fast. In the performance briefing, the relevant person in charge of Dongfeng Group predicted: "Last year, the market share ratio of independent brands and joint venture brands was 55% to 45%, and it is expected that this trend may continue in the next 1-2 years." ”
This shows that Dongfeng Group believes that in the next two years, the joint venture brand will definitely not fall and will remain on the "table", but the cards that the joint venture brand can play are decreasing.
In terms of bidding strategy, the price reduction space of joint venture brands is close to "exhausted". "The joint venture is seeking a balance that aims to respond to market changes through a certain degree of price adjustment, while avoiding deep involvement in price wars," the person in charge noted. ”
From the specific implementation point of view, Dongfeng Group's joint venture brands will launch different terminal promotions and market policies in different regions in the future, and make more refined responses to different market segments and product needs to avoid large-scale resource consumption.
On the product strategy side, turning to new energy has become a choice that joint venture brands have to make, but the effect of Dongfeng Group's joint venture brand transformation to new energy is not obvious. In 2023, the annual sales of new energy vehicles under Dongfeng Group's joint venture brands Dongfeng Nissan, Dongfeng Honda, and Dongfeng Citroen Automobile will be 35,972, 36,427, and 10,979 units, respectively. In addition to Dongfeng Honda, which achieved a year-on-year increase of 37.5%, Dongfeng Nissan and Dongfeng Citroen Automobile both saw a year-on-year decline in new energy vehicle sales.
Facing 2024, Dongfeng Group will provide more new energy strategic "feedback" for joint venture brands, and actively adjust the balance between fuel vehicles and new energy development.
"Dongfeng Motor Company emphasizes continuous investment in product capabilities, including optimizing the competitiveness of fuel vehicles and promoting the development of technologies such as intelligent driving. At the same time, the company is also innovating in the field of new energy vehicles, launching new brands and new models to meet the market's demand for environmental protection and intelligence. ”
In 2023, the development pattern of Dongfeng Group's joint venture brands and independent brands is a microcosm of the trend of China's auto market: the sales volume and profits of joint venture brands are being lost, and the former profit cows have become the oil bottles of benign operation;
Facing the future, in the Chinese market, independent "feeding" joint ventures may become a new situation.