Changan Automobile's revenue increased and profits fell, and the electrification transformation was worried, and the recovery of joint venture brands was difficult to reverse.
Changan Automobile is a very special existence in the Chinese automobile market.
On the one hand, while many independent automobile companies are highly dependent on joint venture brands, Changan Automobile's joint venture brands have fallen behind one after another; On the other hand, while many independent automobile companies are still exploring the feasible path of electrification, Changan Automobile has launched a number of new energy brands, covering different price points and types of models, and has inadvertently been at the forefront.
Therefore, even if the sales of joint venture models are sluggish, Changan Automobile can still achieve a substantial increase in overall sales, and it has the posture of becoming the "light of domestic production" in the new energy era. According to data released by Changan Automobile, the cumulative sales of Changan Automobile in the first four months of this year exceeded 902,000 units, a year-on-year increase of 14.24%.
However, the financial report data at the beginning of the year poured cold water on Changan Automobile. According to the data released by Changan Automobile in the first quarter of 2024, Changan Automobile's operating income in the first quarter of 2024 was 37.023 billion yuan, a year-on-year increase of 7.14%, but the net profit was only 1.158 billion yuan, a sharp decrease of 83.39% year-on-year. Affected by this, Changan Automobile's stock price finally fell on April 30.
In fact, the hidden dangers of Changan Automobile have appeared last year. In 2023, Deep Blue Automobile will lose about 3 billion yuan, AVATR will lose about 3.7 billion, and at the same time, Changan Automobile's asset-liability ratio will reach 60.73%, which is at the highest point in nearly 8 years, and will remain at a high level of more than 60% in the first quarter of this year. Behind the sharp increase in sales, Changan Automobile is facing the problem of increasing revenue but not increasing profits.
In the first quarter of this year, sales of Changan's two major joint venture brands, Changan Ford and Changan Mazda, both increased year-on-year. Therefore, the ridicule of "a hundred years of joint venture, ruined in Chang'an" is not comprehensive and unfair, and the problems of Changan Automobile cannot be borne by the joint venture brand alone. The boomerang, which may end up hitting Changan's own domestic body.
Regarding Changan Automobile's sales volume, financial report data, new energy vehicle product layout, and consumer complaints, Consumer Reports sent an interview letter to Changan Automobile, but did not receive a reply by press time.
Chang'an wants to be "Chang'an", and it can't do without advertising
Revenue has increased, but net profit has declined, so in order to "roll" to win friends, where is Changan Automobile's money spent?
In the first quarter of 2024, Changan Automobile said that the decline in investment income and cash was mainly affected by the acquisition of Deep Blue Automobile in the same period last year. However, the decline in net profit can also be seen in the increase in spending on other projects.
In the first quarter of 2024, Changan Automobile's sales expenses exceeded 2.05 billion yuan, an increase of more than 440 million yuan or nearly 27.7% year-on-year. In fact, as early as last year, Changan Automobile's sales expenses had begun to show signs of a blowout.
Partial financial data of Changan Automobile in the first quarter of 2024 (Source: Changan Automobile's first quarter report in 2024)
For the whole year of 2023, Changan Automobile's sales expenses exceeded 7.64 billion yuan, an increase of nearly 48.8% year-on-year, and Changan Automobile said that "it was mainly due to the acquisition of Deep Blue Automobile, and its sales expenses were included in the merger". Among the sales expenses, the promotion and advertising expenses exceeded 2.68 billion yuan, accounting for 35% of the sales expenses.
At the same time, although it has a number of new energy vehicle brands, Changan Automobile's R&D expenses have increased significantly less than its sales expenses. In the first quarter of 2024, Changan Automobile's R&D expenses were 1.54 billion yuan, more than 500 million yuan less than the sales expenses in the same period, an increase of 13.3%. For the whole year of 2023, Changan Automobile's R&D expenses will be close to 5.98 billion yuan, an increase of 38.57%, nearly 1.7 billion yuan lower than the sales expenses in the same period, while in 2022, this gap will only be about 800 million yuan.
Under the "bombardment" of advertising, Changan Automobile will achieve sales of 2.553 million units in 2023 and 902,000 units in the first quarter of 2024. However, behind the brilliant sales results, Changan Automobile's net profit in the first quarter of this year fell sharply, which is not unrelated to the sharp increase in its sales expenses.
Changan Automobile executives personally went to the market at this year's Beijing Auto Show (Source: Changan Automobile's official Weibo)
In the face of high sales expenses, Changan Automobile has also begun to try the marketing methods of new car-making forces, such as Li Bin, Li Xiang, He Xiaopeng, Lei Jun and other helmsmen who are at the helm of personal marketing, and Zhu Huarong, chairman of Changan Automobile, also said that he wants to build the "personal IP" of car company executives, and strive to obtain more cost-effective traffic and attention.
However, in the "involution" of the Chinese auto market, advertising and marketing may be the lifeline of whether Changan Automobile can achieve "Changan" for a long time.
It's not appropriate to let the joint venture take the blame
Of course, Changan Automobile's lifeline is far more than the expenditure of sales expenses.
At a time when independent car companies are on the rise, joint venture brands are still the "thighs" of many independent car companies. GAC Toyota, FAW-Volkswagen, SAIC-Volkswagen, Beijing Benz, etc., these joint venture brands still contribute the majority of revenue, and still have strong competitiveness in the era of electrification.
However, Changan is an alternative existence among independent car companies. On the one hand, Changan's joint venture brand sales have lagged behind in the past few years; On the other hand, Changan Automobile's own brands such as Changan, Qiyuan, Deep Blue, and AVATR can bring sales performance that far exceeds that of joint venture brands.
As a result, for a long time, there has been a ridicule in the field of public opinion that "a century-old joint venture will be destroyed in Chang'an" - Changan Suzuki, which has been delisted, and Changan Mazda, whose sales have "dived" in recent years. Chang'an is like a "joint venture nemesis".
Changan Automobile's April 2024 sales data (Source: Changan Automobile's April 2024 Production and Sales Report)
However, when fuel vehicles were in decline, Chang'an, a joint venture brand under the "joint venture nemesis", had a tendency to turn over. Taking Changan Mazda as an example, in the first quarter of 2024, Changan Mazda's cumulative sales volume will be nearly 19,300 units, a statistical increase of more than 38%. By April this year, Changan Mazda's monthly sales increased by 41.75% year-on-year, accounting for more than 11% of Changan Automobile's sales.
It can be seen that Changan's joint venture brands are slowly recovering, and the proportion of sales contributed to Changan Automobile is gradually increasing, and the process of electrification transformation has begun. After experiencing a decline in the past few years, the joint venture brand has gradually begun to make a positive contribution to Changan Automobile. Conversely, during the same period, sales growth of vehicles produced at the Chongqing Changan plant was much lower than that of the joint venture brand.
Changan Mazda's new energy model EZ-6 (Source: Changan Mazda official website)
Changan Automobile's hidden dangers may not only exist in the joint venture brand. The boomerang of the "joint venture nemesis" began to hit the domestic body of Changan Automobile.
Is the end of electrification a price cut?
Changan Automobile, which does not rely on joint venture brands for food, has always been the industry leader in its own brand models.
Changan CS75 PLUS and Changan Yidong have repeatedly created sales miracles in the era of fuel vehicles and become "national models". Entering the era of electrification, Changan Automobile has also been actively transforming, and the Changan brand has launched a variety of diesel-electric hybrid and plug-in hybrid models, and a number of new energy vehicle brands such as Qiyuan, Deep Blue, and AVATR cover different price points and types of electric vehicles. While a large number of car companies are in the throes of new energy transformation, Changan Automobile's sales have repeatedly achieved rapid growth.
However, the transition to new energy cannot tolerate slackness and backwardness.
In fact, Changan's independent brands have their own hidden problems on the road to electrification.
Changan CS75 PLUS plug-in hybrid model (Source: Changan Automobile official website)
Changan's CS75 PLUS, UNI-V and other popular models are all available as plug-in hybrid models, but sales are generally unsatisfactory. Changan Lumin competes for the mini tram market, but its sales performance has always been suppressed by models such as Wuling Hongguang MINIEV.
Changan Qiyuan is the mainstream new energy brand of Changan Automobile, and the two models of Qiyuan A05 and Qiyuan Q05 are facing competition from multiple brands of models at the same price in the market, and the pressure is not small.
Chang'an Qiyuan A05 (Source: Chang'an Qiyuan's official Weibo)
The Deep Blue brand will achieve a sales peak in 2023, achieving monthly sales of more than 18,000 units in December last year. However, after entering 2024, the sales of Deep Blue Automobile are like stepping on the brakes, with only about 9,900 units sold in February this year, 12,744 units sold in April, and an average sales of about 13,000 units in the first four months of this year.
After achieving sales of more than 7,000 units in January this year, AVATAR's sales fell off a cliff to 2,457 units in February, and the monthly sales in March and April remained around 5,000 units.
AVATR 12 (Source: AVATR official website)
It is worth noting that the above sales results have been the result of Changan Automobile's participation in the "price war" this year.
On February 13th, Deep Blue Automobile officially announced that the price of the whole series of Deep Blue S7 will be reduced by 10,000 yuan, after the reduction, the price range of the pure electric version of Deep Blue S7 will be reduced to 169,900-192,900 yuan;On February 20, Deep Blue Automobile announced that its SL03 new pure electric version was officially launched, with a price range of 156,900 yuan to 173,900 yuan, and the starting price of the new car was reduced by 27,000 yuan.
On February 28, Changan Deep Blue Automobile once again announced the launch of SL03 and S7 Glory Edition models, with a limited-time cash discount of 10,000 yuan. After the discount, the starting price of the dark blue SL03 Glory Edition is 139,900 yuan, and the starting price of the dark blue S7 Glory Edition is 149,900 yuan.
On March 12, AVATR 11 Qianli Zhixiang was launched, with a starting price of 250,000 yuan, and the average annual rate of new cars combined with financial car purchase was as low as 2.4% and a replacement subsidy of 6,000 yuan, compared with the previously sold 300,000 to 390,000 yuan Hongmeng version of the upgraded model, the starting price of AVATR 11 dropped from 300,000 yuan to 250,000 yuan.
Source: Chang'an Qiyuan's official Weibo
However, as a result of the "price war", the sales of Deep Blue Cars in April did not increase but decreased compared with March; AVATAR's sales increased by less than 5% compared with March; Kaizen's sales increased significantly to 15,000 units in March, but fell back to 11,000 units in April.
Not only that, but the ongoing "price war" has also had a negative impact on Changan Automobile's earnings. According to the research report of Minsheng Securities, the average selling price of Changan Automobile in the first quarter of this year was 76,000 yuan, down 11,000 yuan year-on-year and 27,000 yuan month-on-month, and the gross profit margin was 14.4%, down 4.1% year-on-year and 5.1% month-on-month. Although the "price war" has brought short-term sales growth, it has also made Changan Automobile face the embarrassing situation of "it is difficult to make money when the car is sold".
In addition, Changan Automobile has also been complained and defended by consumers from time to time due to quality defects. "Consumer Reports" noticed that on platforms such as Cheqq.com, Qiyuan Q05, Qiyuan A05, Deep Blue SL03, Deep Blue S7 and other models have a number of quality complaints involving engines and motors.
Therefore, it is not comprehensive to blame Changan Automobile's ups and downs in recent years on the "lagging" of the joint venture brand. Product quality problems, high sales of new energy products are blocked, and "price wars" lead to increased revenue but no profits...... The problems that plague Changan Automobile are numerous.
Changan Automobile is not a "joint venture nemesis", and hopes not to become a "domestic nemesis" and a "new energy nemesis".