The major car companies seem to have fallen into a strange circle: selling more and more, making less and less money?
In the past two years, Chinese brands have entered a golden period of development. According to data released by the China Association of Automobile Manufacturers, in the first quarter of this year, the production and sales of automobiles were 6.606 million and 6.72 million respectively, a year-on-year increase of 6.4% and 10.6% respectively. Among them, the sales of Chinese brand passenger cars were 3.392 million units, a year-on-year increase of 26.4%, and the market share reached 59.6%.
According to the analysis of the China Association of Automobile Manufacturers, the rapid growth of new energy vehicles and the rise of Chinese brands have made the signs of recovery of China's auto market more and more obvious, bringing new vitality to the entire industry.
However, behind the sales figures, most car company executives still can't laugh. Judging from the financial reports of the first quarter of 2024 released by a number of listed car companies, under the influence of intensive price wars and other external factors, the profit structure of car companies has not only changed significantly, but also the profitability has begun to polarize. Under the new pattern of increasingly fierce competition, it has become a normal problem for many car companies to increase revenue without increasing revenue and increasing profits without increasing profits.
Therefore, Yin Tongyue, Secretary of the Party Committee and Chairman of Chery Holding Group, said with a lot of emotion in an interview with China News Weekly that Toyota's profits are more than the sum of the profits of almost all China's automobile industries.
High-end ingredient watershed
Judging from the financial report data of the eight listed car companies compiled by China News Weekly, half of the companies with net profit growth and half of the companies with losses. For the four companies that have achieved growth, the explanation of the reasons for growth in the financial report, in addition to the growth of sales scale and cost control, also has an obvious feature, that is, the growth of high-end and export business.
Specifically, BYD achieved revenue of 124.94 billion yuan in the first quarter, a year-on-year increase of 42%; net profit was 4.57 billion yuan, a year-on-year increase of 10.6%. Great Wall Motor achieved revenue of 42.86 billion yuan in the first quarter, a year-on-year increase of 47.6%; net profit was 3.23 billion yuan, a year-on-year increase of 1752.6%. Cialis achieved revenue of 26.56 billion yuan in the first quarter, a year-on-year increase of 421.8%; The net profit was 220 million yuan, an increase of 850 million yuan year-on-year, turning losses into profits. Dongfeng Motor's revenue in the first quarter was 3.286 billion yuan, a year-on-year increase of 24.61%; net profit was 140 million yuan, a year-on-year increase of 46.51%.
Among them, BYD's Denza and Yangwang, Great Wall Motor's tank, Dongfeng Motor's VOYANT, and Celis's Wenjie M9 all occupy a place in the current high-end market.
The financial report of Guojin Securities pointed out that BYD's cost control is strong, and in the context of the overall price reduction of mainstream models, thanks to the solid cost control ability + lithium carbonate decline + the continuous increase in the proportion of exports and high-end models, the cost of a single vehicle has dropped sharply to make up for the price reduction gap, and the overall profit of a single vehicle has stabilized month-on-month, driving the gross profit in the first quarter to exceed expectations.
Image source: Great Wall Motors
Great Wall Motor's growth path is clearer, that is, the proportion of exports and high-end models has increased. "If the loss is particularly serious, we will moderately reduce sales, and if there is no loss or a slight loss or the profit is relatively high, we will vigorously promote it." Wei Jianjun, chairman of Great Wall Motors, said at the shareholders' meeting on May 10 that Great Wall should pursue a high-quality market share.
According to the research report of Hualong Securities, the average price of a single car of Great Wall Motors in the first quarter was 156,000 yuan, a year-on-year increase of 24,000 yuan and a month-on-month increase of 9,000 yuan. Sales of high-end brand models such as Tank and WEY accounted for 21.4%, up 8.8% year-on-year. Export sales accounted for 33.7%, a year-on-year increase of 10.1%.
Compared with Great Wall Motors, Cialis has attracted more attention in the capital market due to the fire of the world, as the company behind the "dark horse" in the new power car brand, unlike the glamour on the sales list, Cialis has actually just turned around.
According to the financial report of Cialis, due to the growth of the sales volume of the new M7 in Wenjie, the scale effect has been accelerated, and the efficient internal management has improved the gross profit margin of the product to 21.5%, a year-on-year increase of 12.6%. This level of gross profit margin can be regarded as "far ahead" at home and even internationally: the gross profit margin of Li Auto, which is known as the most profitable among new power brands, will be 21.5% in 2023, Tesla's gross profit margin in 2023 will be 18.2%, and BYD, which has the highest gross profit margin per car in domestic car companies, will have a gross profit margin of 23.02% in 2023.
Cinda Securities believes that Cialis has turned losses into profits after four years of losses, mainly due to the increase in scale effect brought by the delivery volume. At the same time, with the further expansion of the high-end model M9 and the launch of the new M5, the company's profitability is expected to increase with the scale effect.
In stark contrast, brands such as SAIC Group's Zhiji, Changan Automobile's AVATAR, GAC Group's Haobo and BAIC Group's Jihu have not yet met sales expectations in the high-end market, and their reflection in the financial report is naturally not obvious.
In the first quarter, SAIC's revenue was 143.07 billion yuan, a year-on-year decrease of 1.95%; net profit was 2.71 billion yuan, down 2.48% year-on-year. Changan Automobile achieved revenue of 37.023 billion yuan in the first quarter, a year-on-year increase of 7.14%; net profit was 1.158 billion yuan, down 83.39% year-on-year. GAC Group achieved a total operating income of 21.566 billion yuan in the first quarter, a year-on-year decrease of 18.8%; net profit was 1.220 billion yuan, down 20.6% year-on-year. BAIC Blue Valley achieved operating income of 1.504 billion yuan in the first quarter, a year-on-year decrease of 39.75%; The net loss was 1.016 billion yuan, a year-on-year decrease of 13.92%.
In addition to the impact of Changan Automobile's acquisition of Shenlan Automobile confirming an investment income of 5.021 billion yuan, Changan Automobile and GAC Group's financial reports directly pointed out that they were affected by the "price war" for the reasons for the decline in performance.
The double-edged sword of "price war".
In the past two years, the competition in the automobile market has been escalating, and many weak brands and even some smash hit joint venture brands have withdrawn one after another. The continuous strengthening of the survival of the fittest has led to the fact that many car companies have to continue to survive in exchange for price, and the "price war" that has lasted so far has higher and higher requirements for the hematopoietic ability of the enterprise itself.
Jia Jianxu, general manager of SAIC Volkswagen, said frankly in an interview with China News Weekly, "You can't follow BYD to continue to reduce prices, because no car factory can compare with BYD in the vertical integration of the entire supply chain. In his opinion, SAIC Volkswagen will be more difficult in 2023~2025, and by the second half of 2025 and 2026, the products with the current layout will be launched one after another, and it will become different. In 2027, the current first generation of users will be faced with the choice of a second or third car, which will bring some new opportunities to the public to some extent.
Wei Jianjun also believes that in 2024~2026, the competition intensity of the industry will not decrease, and Great Wall Motors needs to use long-termism to face market competition in the next three years. In his opinion, if it is all a loss, it will not be able to hold on in the long run, and it must have its own hematopoietic ability.
Yin Tongyue also pointed out that the manufacturing industry is the cornerstone of our country's economy, but the profitability of our country in the manufacturing industry is not good. For example, Toyota's just-announced profit is more than the total profit of almost all of China's auto industry.
On May 8, Toyota announced its financial results for the last fiscal year, which were mentioned in various interviews recently, including Chery, NIO and other Chinese company executives.
According to public data, Toyota's revenue in fiscal year 2023 (March 2023-March 2024) was 45.1 trillion yen (about 2 trillion yuan), a year-on-year increase of 21.4%; Net profit was 4.94 trillion yen (about 230 billion yuan), a year-on-year increase of 101.7%.
According to official data, in fiscal year 2023, the cumulative global sales of Toyota Group (including Toyota, Lexus, Hino, Daihatsu, etc.) will be about 11.09 million units, a year-on-year increase of 5%. The total sales volume of the three domestic car companies SAIC, BYD and Geely Automobile in 2023 is also nearly 10 million units, but the profitability is very different.
It is this difference in profitability that has allowed Toyota to stick to its own pace even in the face of repeated doubts about the slow pace of electrification.
At Toyota's earnings briefing, Toyota President Tsuneji Sato announced that Toyota Motor will invest nearly 2 trillion yen in the transformation into a mobility company. Of this amount, approximately 1.7 trillion yen will be spent on BEVs, artificial intelligence, and software R&D, with the aim of accelerating Toyota's SDV (software-defined vehicle) and BEV transformation.
"Whether the time-to-market of BEVs is related to earnings, the answer is no. Toyota will decide on the investment based on whether there is actual demand. Compared to gasoline vehicles and HEVs, the difference in investment in batteries is an order of magnitude. Toyota can make its own batteries. If you have a battery that you can look forward to, and that battery can compete for 5 or 10 years, then Toyota will invest in it. The target of 3.5 million BEV sales by 2030 has not changed. To this end, we will develop BEVs, and the actual demand for BEVs is steadily increasing. Hiroki Nakajima, vice president and chief technology officer of Toyota Motor Corporation, said in an interview with China News Weekly.
Moreover, in the face of the intensifying involution of the electric vehicle market, Toyota seems to retain enough leeway. At present, many domestic companies are betting on solid-state batteries, and solid-state batteries with a range of more than 1,000 kilometers are expected to fully reverse the range anxiety of electric vehicle owners and raise the penetration rate of electric vehicles to a new level.
According to Toyota, the development of solid-state batteries is progressing smoothly according to the plan for mass production in 2027. The advantages of long life and short charge-discharge times remain unchanged. Toyota is conducting research on material development and production facilities. The remaining challenge is how to produce it efficiently and cheaply in large quantities. In addition to solid-state batteries, we are also developing batteries such as prismatic and bipolar. For example, low-cost batteries with short cruising range, Toyota is also promoting the multi-path development of batteries by combining the technology of the battery itself to meet the needs of customers.
This means that if the EV market really enters the solid-state battery era in the future, Toyota's cost advantage will still be able to maintain its profitability in the EV market.
In view of the profitability problems of domestic car companies, especially the huge difference with international car companies, Yin Tongyue said: "German companies have BBA, Volkswagen, strong supply chains, and excellent suppliers that are constantly innovating. The innovation of excellent suppliers has promoted the development of German automotive OEMs, which are mutually reinforcing. Therefore, I think a healthy ecology is very beneficial to the economic development of our country. ”
Image source: Chery Automobile
Yin Tongyue bluntly said that he has always been relatively disapproving of price wars, and there is always a limit to going down, and the price war is to reduce costs, reduce the price of suppliers, and when the price of suppliers drops to a certain limit, quality will be sacrificed. The price war will definitely make some enterprises unable to hold on, and after these enterprises die, who will serve its users, and where will its employees go to work? Even many enterprises have bank loan repayment, and there are a series of problems. Therefore, in Yin Tongyue's view, it is still necessary to have the ability to go up. This is also the reason why Chery puts technological innovation in a very important position.
Li Bin, chairman of NIO, also believes, "We believe that R&D investment in core technologies can not only increase the company's ability to respond to technological changes and industrial policy changes, but also improve the company's gross profit margin and technological competitiveness." ”
As far as the current situation is concerned, although the profitability of domestic auto companies is seriously polarized, and they are trying to overcome problems such as high-end, supply chain and gross profit margin, there is still a long way to go when looking at the international market.
(Source: China News Weekly)