Behind the steady growth of Guanghui Automobile: strengthening the brand and increasing the weight of new energy, the blade inward to promote cost reduction and efficiency increase

Source of this article: Times Finance Author: Guo Shaozhen

As a leading passenger car dealership and service group in China, in the face of the complex internal and external economic environment, Guanghui Automobile (600297.SH) has achieved steady growth in the past 2023, achieving operating income of 137.998 billion yuan, an increase of 3.34% over the same period of the previous year, and a net profit of 392 million yuan, turning losses into profits.

Behind the steady business results, the company adheres to the market-oriented, continuously optimizes the business strategy, steadily promotes the optimization of the brand structure, and deeply implements the strategic layout of new energy, as well as through a series of measures of "reducing debt, controlling costs and preventing risks", to ensure that the company achieves steady development in the fierce market competition.

Strengthen brand management and improve the quality of operation

In the past year, the external economic environment has been complex and changeable, but China's economy has shown strong resilience and vitality, showing a steady and positive development trend. In this context, the domestic passenger car market has shown a strong growth momentum, the overall production and sales have increased steadily, and the new energy vehicle segment has achieved remarkable results. However, the prosperity of the overall market is also accompanied by fierce market competition. In order to compete for market share, major car companies have launched a price war throughout the year, resulting in a general decline in automobile sales prices, although it has stimulated sales growth in the short term, but it has also caused a certain impact on market order and corporate profits. In particular, auto dealers at the end of the automotive industry chain are forced to bear huge operating pressure.

In this context, as China's leading passenger car dealership and service group, China's largest luxury passenger car dealership and service group, China's leading used car dealership and trading agency service entity group, and the largest financial leasing provider among passenger car dealers, Guanghui Automobile has delivered an annual report card of steady growth in 2023. According to the financial report, during the reporting period, Guanghui Automobile achieved operating income of 137.998 billion yuan, a year-on-year increase of 3.34%, a net profit of 392 million yuan, and a net cash flow of 3.411 billion yuan, showing the strong hematopoietic ability of the main business.

The company's keen control of the market is inseparable from the company's keen control of the market, especially in strengthening brand management and optimizing brand structure.

During the reporting period, the company gave full play to the role of the brand division, with the brand as the main line and the store as the main body, strengthened the overall planning of the brand, and smoothed the internal and external circulation. Based on industry and market changes, combined with the characteristics of the company's network layout, Guanghui Automobile continues to promote the renovation and revitalization of weak brands and inefficient stores, and strives to increase the market share of advantageous brands. In 2023, the company closed 50 stores with lower profitability and completed the brand conversion of 17 stores. As of the end of the Reporting Period, the Company had established a passenger car distribution network covering 28 provinces, autonomous regions and municipalities directly under the Central Government, distributing more than 50 passenger car brands, operating 735 business outlets (including 695 4S stores) and 245 ultra-luxury and luxury brand outlets.

There is no doubt about the role of channels in dealers, and during the reporting period, the company's lean operation and the integration of online and offline dual channels helped them achieve stable operation.

On the one hand, the company continued to promote the refined management and control of sales operations, enhanced the management granularity by city, brand and model, and analyzed the purchase-sales difference and inventory through the insurance data of the automotive industry and the market performance of the company's local stores, and strived to improve the profitability of new vehicles. At the same time, the company gives full play to the scale advantage of the group, conducts joint negotiations with multi-brand manufacturers, strives for favorable business policies, and ensures reasonable inventory turnover. On the other hand, the company has strengthened its online marketing efforts, broadened the channels for obtaining leads, and encouraged its stores to fully invest in the live broadcast business, so as to achieve new sales growth points outside the exhibition hall and reduce the negative impact of market price competition. In 2023, Guanghui Automobile will achieve new car sales of 595,700 units, a year-on-year increase of 1.07%.

Increase the size of new energy vehicles to create new business growth points

The new energy vehicle track is full of gunsmoke, and the sales model is also facing adjustment, and the new car-making forces have begun to focus on broadening sales channels and considering the introduction of dealer cooperation models. Xpeng Motors launched the "Jupiter Plan" in September 2023 to gradually eliminate inefficient directly operated stores and expand the scale of dealer stores, Zeekr also began to recruit dealers and increase the proportion of authorized dealer stores, and Xiaomi decided to adopt the "direct + dealer" model from the beginning.

Keeping up with the development trend of the industry, Guanghui Automobile has promoted the layout of the sales and service network of new energy vehicles in an orderly manner to broaden the new space for business growth. During the reporting period, based on the new energy division, the company actively integrated multiple resources and made every effort to obtain the authorization of new power brands with good development momentum.

By the end of 2023, the company has established close contact and communication mechanisms with more than 20 mainstream new energy brands, such as AITO, AVATAR, VOYAH, Mengshi, Great Wall Ora, Haval New Energy, Xpeng, Chery ICAR, Chery Xingtuxing Era, Chery Fengyun, Geely Galaxy, Changan Deep Blue, Lotus, etc., and the coverage of new energy brands has been further expanded. At present, the company has successfully applied for the authorization of 54 new energy stores, 26 stores have been completed and put into operation, and another 15 are applying.

High-quality after-sales service is also an important part of the core competitiveness of car dealers. During the reporting period, the company built a nationwide after-sales service network based on a mature maintenance service team, and actively explored diversified cooperation opportunities with new energy OEMs in the aftermarket field with the sheet metal spraying center as a breakthrough, so as to create a new energy vehicle aftermarket service system covering the whole value chain.

A series of measures and innovations in the field of new energy vehicles have also achieved remarkable results. In 2023, Guanghui Automobile's new energy vehicle sales will increase by 82.25% year-on-year, showing a strong growth momentum.

Accumulate obvious advantages and focus on after-sales and derivative business

As an important part of the automobile industry chain, with the continuous increase in the number of motor vehicles in mainland China, the scale of the automobile aftermarket is rising, the number of after-sales units and output value are growing, and consumers' demand for high consumption quality is also increasing. Especially in the context of price wars and new car revenue growth without increasing profits, as a business with a high gross profit margin, after-sales and derivative business is becoming more and more important for the sustainable and steady development of dealers.

After years of intensive cultivation, Guanghui Automobile has accumulated obvious advantages in the after-sales business. Based on 16.15 million base customers and a mature service system, the company actively carries out online and offline omni-channel after-sales business promotion activities to increase customer stickiness and increase the proportion of customers returning to the factory.

According to the financial report, the company uses digital tools to conduct in-depth analysis of customers' car habits and maintenance cycles, and regularly communicates with customers to ensure the punctuality and accuracy of customer service and enhance customer stickiness. At the same time, the company uses a variety of communication channels such as self-media, WeChat, Douyin, and live broadcast to publicize after-sales activities, enhance interaction with customers, attract customers to visit stores, and increase customer retention. In addition, by building a customer portrait model based on information data and digging deep into the specific needs of different brand customer groups, the company has introduced new products and new service providers to realize the personalized service promotion of the whole brand and meet the diversified needs of customers. During the reporting period, the company achieved 6.9 million maintenance units, a year-on-year increase of 12.62%, and the unit price of after-sales maintenance customers was 2,004.23 yuan, an increase of 0.9% year-on-year.

With its unique dual characteristics of "financing + financing", the automobile financial leasing business has brought more diversified product choices to the market, provided customers with more flexible car purchase solutions, effectively alleviated the financial pressure, and lowered the threshold for car purchase.

As the largest financial leasing provider among passenger car dealers, Guanghui Auto continues to deepen the exploration of its own store business scenarios, and launches differentiated financial products that are different from banks and auto finance companies through diversified methods such as high-quality financing and value-added financing, so as to meet the personalized needs of different customer groups. While expanding the scope of cooperation with major mainstream OEMs and increasing the number of low-risk leasing products with discounted interest rates, the company actively cooperates with Internet car rental platforms to increase the business proportion of direct leasing and operating leasing products. In addition, in terms of risk management, the company has continuously improved customer portraits and risk control models by upgrading the intelligent decision-making engine and iterating product scorecards, effectively improving risk identification and prevention and control capabilities, and ensuring the steady development of the leasing business.

During the reporting period, the company completed a total of 126,000 leased units, with an additional leasing financing amount of 7.441 billion yuan. As of December 31, 2023, the company's interest-bearing assets were 11.324 billion, and the 30+ overdue rate was only 1.94%.

The blade is inward, driving cost reduction and efficiency increase

If the expansion of scale and revenue is "open source", then controlling expenses and reducing the scale of debt is "throttling", and two-wheel drive can achieve steady and far-reaching development in the fierce market competition.

During the reporting period, the company has always adhered to the optimization of the management system, continued to deepen the organizational reform, and actively promoted the platform transformation of functional departments, the financial management center and the fund management center were put into operation and gradually exerted their overall planning and intensive effects, and the three expenses (management expenses, sales expenses and financial expenses) were effectively controlled, and the strategy of "reducing costs and increasing efficiency" was further implemented. In 2023, the company's three expenses will total 9.6 billion yuan, a year-on-year decrease of 378 million yuan, or 3.79%. Among them, the sales expenses decreased the most, with a decrease of 5.64%, and the administrative expenses decreased by 5.35%.

While effectively controlling the three expenses, the company took the initiative to adjust the debt structure, reduce the scale of debt, and control liquidity risk.

As of the end of 2023, the company's total liabilities were 75.283 billion yuan, a decrease of 6.933 billion yuan from the beginning of the year, and the asset-liability ratio also decreased by 1.13 percentage points from the beginning of the year to 63.97%, the scale of interest-bearing liabilities decreased by 1.261 billion yuan from the beginning of the year, and the interest expense decreased by 1.15% year-on-year. Among them, in terms of offshore bonds, the company took the initiative to redeem US$261 million of perpetual bonds in October last year.

Entering 2024, the company is still further optimizing its debt structure, expanding financing channels, and protecting the company's capital reserves. In January this year, the company redeemed 232 million US dollars of bonds, realizing the full zeroing of overseas bonds, and recently, the company issued an announcement on the public issuance of 2021 public bonds (Phase I) in 2024 principal and interest redemption and delisting, showing that the company completed the repayment of "21 Auto 01" 1 billion corporate bonds ahead of schedule, and delisted the bonds on April 1, 2024. At the same time, Guanghui Automobile makes full use of its leading position and scale effect in the industry to continuously explore and expand diversified financing channels to effectively control the overall financing cost. In 2024, the company received two registration approvals from the National Association of Financial Market Transactions of China for the "directional issuance of debt financing instruments", with a total amount of 3 billion yuan.

Overall, thanks to the business strategy of "reducing costs and increasing efficiency" and "reducing debt and adjusting structure", the company not only ensures the stable operation of corporate funds, but also injects new vitality into sustainable and high-quality development.

Looking forward to 2024, the domestic economy will remain stable and rising, and the long-term positive fundamentals will not change. As a pillar industry of the mainland's national economic development, the automobile industry is still the main force driving GDP growth. This year is also a key year for the company to improve the quality of operation. The company will deeply analyze the market dynamics, firmly grasp the policy opportunities, closely focus on customer needs, and do a good job in store production and operation more "refined, meticulous and accurate", and strive to make new progress in boosting new car sales, optimizing after-sales service, adjusting brand structure, promoting cost reduction and efficiency increase, and making new breakthroughs in promoting new energy, financial leasing and other businesses, and will continue to consolidate market value management and talent echelon construction, so as to help the company strive for excellent performance and open up a new situation of high-quality development.