作者｜Eastland
Header photo: Movie "X-Men: Apocalypse"
On November 27, 2023, Chongqing Changan Automobile Co., Ltd. (SZ:000625) announced that Huawei plans to establish a new company to focus on automotive intelligent systems and component solutions. Changan Automobile plans to invest in the target company (holding no more than 40% of the shares) and carry out strategic cooperation. The final transaction documents will be signed by May 25, 2024.
At the beginning of 2024, Zhu Huarong, chairman of Changan Automobile, asked three "yes" to Huawei's smart selection model in public - is it in line with the laws of the industry? Does it meet the requirements of industrial policy? Does it protect the fundamental interests of users?
It seems that Changan Automobile does not plan to choose Yu Chengdong's favorite "Huawei Smart Choice" model.
In 2023, Changan Automobile's revenue will be 151.3 billion, a year-on-year increase of 24.8%; deducted non-net profit of 3.78 billion, a year-on-year increase of 16.2%.
In Q1 2024, Changan Automobile's revenue will be 37 billion, a year-on-year increase of 7.1%; The non-net profit was only 110 million, a year-on-year decrease of 91.8%.
Although there is some reluctance, Changan Automobile is still actively promoting cooperation with Huawei.
Once, "there is one in three parts of the world"
Changan Automobile started with the production and sales of mini cars and engines. In 1995, the sales volume reached 66,000 units (with an average price of 36,000 yuan), ranking first in the country.
In 2002, Changan Automobile sold 270,000 vehicles (including minivans, Alto, Antelope and other models). After SAIC, FAW and Dongfeng, it ranked fourth. Among them, the sales volume of mini vans reached 152,000 units, with an average price of 39,000 yuan, and the sales volume of Alto sedans reached 48,800 units, with an average price of 38,000 yuan. Although the grade is not high, the net profit margin is not low, and the net profit of a bicycle is about 3,000 yuan.
In 2003, Changan Automobile sold 410,000 vehicles, still ranking fourth in the country, including:
Changan Suzuki (51% shareholding) mainly produces SC7130 series Antelope sedan and SC7080 series Alto sedan. In 2003, the revenue and net profit were 4.59 billion and 380 million respectively;
Changan Ford (50% shareholding) main products include Carnival and Mondeo series sedans, with revenue of 520 million yuan in 2003;
The main products of Nanjing Changan (63.33%) and Hebei Changan (89.8%) are mini trucks/trucks (including SC1013, SC1010, SC6330, SC1011, SC1016 and other series), with a total sales revenue of about 1.5 billion.
In 2003, Nanjing Chang'an and Hebei Chang'an together accounted for one-third of China's minibus/truck market.
In 2004, Changan Automobile landed on the A-share market, raising about 1.1 billion yuan.
It's not the same company anymore
Changan Automobile's profits come from two sources: one is the production and sales of self-owned brand cars (physical operation); The second is the investment income (investment control) accounted for by the equity method.
There are two types of invested companies: first, joint ventures (with a shareholding ratio greater than or equal to 50%), including Changan Ford and Changan Mazda (Changan Peugeot was liquidated in April 2000); The second is an associate enterprise (less than 50% shareholding).
From Changan Suzuki, Changan Ford, and Changan Mazda, the impact of equity investment gains and losses (equity method) on Changan Automobile's performance is significant, especially Changan Ford (Changan Automobile holds a 50% stake).
- Changan Suzuki
Changan Suzuki is the first joint venture invested by Changan Automobile, with a 50% stake, and mainly produces Alto minicars.
In 1996, Changan Suzuki's investment income generated by the equity method was negative 21.26 million yuan.
In 2009, Changan Suzuki's revenue reached 9.3 billion yuan, but only contributed 40.16 million yuan of investment income;
In 2011, Changan Suzuki's contribution to investment income rose to 94.5 million yuan and then fell, in 2012 it fell to less than 50 million yuan, and in 2013 it was only 918,000 yuan, #奥拓卖不动了#
- Changan Ford
In 2001, Changan Automobile invested in Changan Ford, holding 26% of the shares;
In 2003, Changan Automobile acquired a 24% stake in Changan Ford from Changan Group, holding 50% of the shares.
In 2009, Changan Ford's revenue reached 37 billion yuan, net profit reached 1.69 billion yuan, and contributed 835 million yuan of investment income;
In 2014, Changan Ford's revenue reached 106.4 billion yuan and net profit reached 14.4 billion yuan, bringing 7.15 billion yuan of investment income to Changan Automobile, equivalent to 98.2% of the non-net profit.
In 2016, Changan Ford's net profit reached 18.2 billion yuan, bringing 9.03 billion yuan of investment income to Changan Automobile, equivalent to 95.6% of the non-net profit!
In 2017, Changan Ford's investment income exceeded Changan Automobile's non-net profit!
In 2018, Changan Ford's revenue plummeted, with a net loss of 800 million, bringing an investment loss of 416 million yuan to Changan Automobile;
In 2023, Changan Ford sold 236,000 vehicles, and the investment profit or loss recognized under the equity method was negative 712 million yuan. At the end of the year, the book balance of equity investment was reduced to zero.
However, the cooperation between Changan and Ford has not ended, and the two sides have newly established "Changan Ford New Energy Automobile Technology Co., Ltd.", and the first strategic product CX810 is progressing in an orderly manner.
- Changan Mazda
In 2012, Changan Mazda was newly established as a spin-off; In 2013, it contributed about 50 million yuan in investment income;
In 2014, the investment income recognized by the equity method was 510 million yuan, which increased to 830 million yuan in 2015.
In 2018, Changan Mazda contributed investment income of 1.26 billion yuan, alleviating the impact of Changan Ford's performance plummeting, and the listed company deducted a negative non-net profit of 3.2 billion yuan;
In 2019, Changan Mazda contributed 930 million yuan in investment income, Changan Ford minus 1.93 billion yuan, and Changan Peugeot minus 1.11 billion yuan...... In the end, the listed company Changan Automobile deducted a non-net loss of 4.8 billion;
As of the end of 2023, the book balance of Changan Mazda's equity investment is 880 million;
In that year, one of its joint ventures (Changan Ford) contributed investment income to 90% of net profit. Today's Changan Automobile is not the same company.
The rise of independent brands
1) Sales bottomed out
In 2016, Changan Automobile's sales soared to 3.06 million units, and then began to decline; 2.87 million units in 2017 decreased by 6.2% y/y. In 2018, it fell 27.8% to 2.14 million units. In 2019, it hit rock bottom, with sales of 1.76 million units.
In 2020, Changan Automobile's sales began to slowly recover; In 2022, it sold 2.35 million units.
In 2023, Changan Automobile will sell 2.55 million vehicles, a year-on-year increase of 8.8%, about 83.3% of the peak in 2016.
In Q1 2024, Changan Automobile sold 692,000 vehicles, a year-on-year increase of 13.9%.
After the sales peak, the cliff-like decline is rooted in the joint venture brand; The bottoming out in recent years is due to the rise of independent brands.
2) The rise of independent brands
Changan Automobile has five independent brands: Changan Qiyuan, Changan Gravity, Changan Kaicheng, Deep Blue and AVATAR.
In Q3 of 2021, the sales volume of independent brands was 385,000 units, accounting for 72% of the total sales; Among them, 34,000 new energy vehicles were used, accounting for 8.9% of the sales of independent brands;
In Q3 of 2022, the sales volume of independent brands will be 423,000 units, accounting for 76% of the total sales; Among them, 71,000 new energy vehicles were used, accounting for 16.9% of the sales of independent brands;
In Q3 2023, self-owned brand sales will be 529,000 units, accounting for 81% of total sales; Among them, 131,000 new energy vehicles were used, accounting for 24.7% of the sales of independent brands;
For the full year of 2023, the total sales volume of domestic brands will reach 2.1 million units, accounting for 82.2% of the total sales: of which 474,000 new energy vehicles will be sold, accounting for 22.6% of the sales of domestic brands.
In Q1 2024, the sales volume of independent brands will be 589,000 units, accounting for 85% of the total sales; Among them, 129,000 new energy vehicles were used, accounting for 21.9% of the sales of domestic brands.
The new energy transformation has achieved initial results, but it lags behind the broader market - in April 2024, the wholesale penetration of China's new energy vehicle manufacturers has reached 40%; The penetration rate of own-brand NEVs reached 53.6%.
Cooperation with Huawei
Changan Automobile obviously intends to do a two-pronged approach: on the one hand, it strives to do its own Qiyuan and Deep Blue; At the same time, we will actively promote external cooperation. For example, it has established joint ventures with Huawei and Horizon.
1) AVATR is hard to say successful
In 2017, Changan and NIO reached a strategic cooperation, and in 2018, Changan NIO officially established a joint venture.
No substantial progress was made in the following years, and in 2021, the joint venture was renamed AVATR Technology. CATL was introduced, Huawei was signed, and the "CHN" model (Changan, Huawei, and CATL) was established.
In 2023, AVATR will sell less than 30,000 units, which is far from the sales target of 100,000 units. The annual revenue was 5.64 billion and the net loss was 3.69 billion (net loss of 2.02 billion in 2022). According to the equity method, Changan Automobile recognized an investment loss of 1.58 billion.
In 2023, Changan Automobile will sell 474,000 new energy vehicles, with AVATR accounting for less than 6%.
The sales volume is not ideal, the loss has not narrowed, and AVATR is difficult to say successful. However, in 2023, Changan Automobile will invest an additional 1.23 billion yuan in AVATAR.
At the same time, Changan Automobile spent 1.33 billion yuan to increase its holdings in Deep Blue Automobile, with a share ratio of 51%. From February 1 to the end of the year 2023, Deep Blue Automobile's revenue reached 25.88 billion, about 4.6 times that of AVATAR.
On the one hand, Changan Automobile maintains the sincerity and patience of cooperation with Huawei, and on the other hand, it makes every effort to cultivate its own brand, especially Deep Blue.
2) Mutual accommodation
On January 16, 2024, Huawei invested RMB 1 billion to register and establish Shenzhen Invision Intelligent Technology Co., Ltd. (hereinafter referred to as "Invision Intelligence").
Huawei plans to inject its intelligent vehicle solution business (including core technologies and personnel) into the new company, and at the same time promises to "not engage in business that competes with the business scope of the target company".
Smart cars are not Huawei's "main channel business" and there is no hope for a "closed loop", and divestiture means no longer burning money for it. The new company must be responsible for its own profits and losses, and find its own rice to cook.
On April 24, 2024, Huawei Automotive BU made its debut after becoming independent, unveiling a smart car solution called "Huawei Qiankun".
The most important shareholder and strategic partner of the new company is Changan Automobile. According to the Memorandum of Cooperation signed by the two parties on November 25, 2023, the shareholding of Changan Automobile and its related parties is capped at 40%.
The height reached by Changan Automobile in 2016 is ten times the highest record in the history of JAC and Xiaokang, and even BYD will not be able to break it until 2024.
As the saying goes, "a skinny camel is bigger than a horse", not to mention that Changan Automobile is a state-owned enterprise with strong roots, and Huawei chose Changan Automobile as its main partner to build a joint venture company.
On May 6, 2024, Changan Automobile announced that "the two parties are conducting further negotiations on key terms" and that the final transaction documents are expected to be signed no later than August 31 (three months later than originally planned).
As we all know, Huawei's smart car BU has three cooperation models with car companies: the best policy is the smart car model, and Cialis, JAC, Chery, etc. have in-depth cooperation with Huawei; Zhongce is the HI model, which is only adopted by AVATAR, a subsidiary of Changan Automobile; The next step is the component supplier model.
However, Changan Automobile only accepts the middle policy, that is, the HI model, and Huawei must be accommodating. Because, the establishment of Inwang Intelligence is the winner or loser of Huawei's automotive business, but it is not Chang'an's.
According to Yu Chengdong, Cialis, JAC, BAIC, and Chery have all received invitations to participate in shares, and Dongfeng and FAW are also potential investors. However, the above-mentioned car companies have not yet made clear investment intentions.
*The above analysis is for reference only and does not constitute any investment advice
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