BAIC New Energy's stock price plummeted 37% on the first day of its backdoor listing. Where should investors break out in the future?

On September 27, BAIC New Energy, which was listed on the A-share market through a backdoor listing of Qianfeng Electronics, saw its stock price plummet by 37% immediately after its listing. Faced with such an attitude of capital, can the establishment of new financing channels really help BAIC break through in the capital-intensive automobile industry?

Will the “June deadline” appear again and again?

In the pure electric vehicle market from January to August 2018, BAIC New Energy continued to rank first with sales of 70,118 units, far behind the second-ranked Chery with 46,564 units, and is likely to retain the title of pure electric vehicle market for the sixth consecutive year. However, if we look at the data of new energy vehicles including plug-in hybrid vehicles and hybrid vehicles, we see a different picture.

In 2017, in the comprehensive sales ranking of three new energy vehicles, BAIC New Energy still won the championship with 102,696 sales, beating BYD's 87,748. However, all of BAIC's new energy vehicles are pure electric vehicles, while BYD's sales are mostly from 52,397 plug-in hybrid vehicles. The third place SAIC Passenger Cars sold only 40,473 vehicles, which is a big gap from the top two.

From January to August 2018, BYD took the top spot in the new energy vehicle market with a large advantage of 111,126 vehicles. BAIC New Energy Automobile could only rank second with 75,922 vehicles. SAIC, which still ranked third, also sold 66,118 vehicles, successfully entering the first group.

Although it still surpasses SAIC in total sales, what worries BAIC New Energy is SAIC's performance in Beijing from January to April. According to Beijing's compulsory traffic insurance registration data, SAIC Roewe became the champion in registration volume from January to April with 1,753 vehicles. BAIC New Energy, which has the home advantage and the support of the local government, actually lost.

Among the three major series of models of BAIC New Energy, the EC series is positioned in the A00-class sedan market, the EU series is positioned in the A-class sedan market, and the EX series is positioned in the A0-class SUV market. In the total sales from January to August this year, the EC series of 43,434 vehicles accounted for more than half, which shows that BAIC has not completed the transformation from low-end to high-end in the electric vehicle market.

As consumers in big cities accept new energy vehicles, more and more people are no longer satisfied with using new energy vehicles to "occupy a license plate" but want to directly buy the right level and configuration. In this case, BAIC, which relies too much on low-end vehicles, undoubtedly faces considerable operating risks.

Changes in subsidy policies have made the transformation more urgent.

The new subsidy policy officially implemented on June 12 will make it impossible for A00-class cars equipped with low energy density batteries and low mileage to receive subsidies, so many car companies have released a large number of targeted promotional policies in May. The sales volume of A00-class electric vehicles in May was 44,926 units, a year-on-year increase of 141%. BAIC New Energy continued to be the monthly champion of new energy vehicles with a year-on-year increase of more than 2 times in the EC series.

Subsidy rules to be implemented from June 12

After the last frenzy, the sales volume of BAIC New Energy EC series in June was only 3. Due to the lack of subsidies, the EC series was basically out of stock from June to August. Only in July, the EC220 rental and sales were launched, and at the end of August, the EC 3, which replaced the high-energy density battery and could get subsidies, was launched. However, the former could not enjoy subsidies, and the sales volume in July and August was only 1,000 to 2,000.

BAIC EC3 continues to enjoy subsidies

From June to August after the implementation of the new subsidy policy, BAIC New Energy ranked third for consecutive months, firmly suppressed by BYD and SAIC Passenger Cars, and the gap with Geely Auto, which ranked fourth, was not obvious.

The problem is that the new subsidy policy will continue to change before 2020. Judging from the current situation, BAIC New Energy, which is struggling to survive at the bottom, will face the "June subsidy deadline" again and again in the future, and will be forced to cut its main low-end models. Can such a company still talk about sustainable development?

Can going public help BAIC New Energy break through?

BAIC New Energy also recognizes its own low-end brand problem. The independent brand ARCFOX is an important channel for it to break through. However, the brand, which was established in 2016, has been in operation for more than two years but has not launched mass-produced models for the public. Although it is now cooperating with Magna, known as the "Foxconn of the automotive industry", the effect still needs to be tested. Relying on luxury brand endorsements is a common method in the automotive market. Geely Automobile used Lynk & Co to suppress Great Wall Motor's Weipai by sharing the CMA platform with Volvo Cars. However, although Magna has manufactured luxury cars such as Mercedes-Benz and BMW, its brand power is not as good as Volvo. In addition, how to extend the brand power of the traditional automobile market to the new energy vehicle market is also an unresolved issue. Tesla's successful capture of the mid-to-high-end market share of electric vehicles, while traditional manufacturers with a long history and strong brand power have been unable to respond, truly illustrates this point.

Geely Lynk & Co 03

In fact, the road to vertical upgrading from the low end is inherently difficult, and there are precedents in the traditional fuel vehicle market. Great Wall Motors, which once became the sales champion of independent car companies in the country with its SUV models alone, has resisted the strategy of horizontal expansion for many years and has placed its bets entirely on the SUV market. After the legendary Haval H6 occupied the low-end market, Haval H8 and H9 failed to break through to the high-end market. The independent luxury brand Weipai, which is now being built with all its strength, is not very ideal. At present, Great Wall Motors has been completely surpassed by Geely Automobile.

Weipai P8

The automotive industry has always been capital-intensive and burns money quickly. With subsidies declining, it is natural to raise funds again. Choosing a backdoor listing, which does not require waiting in line, shows that BAIC New Energy is anxious about the speed of listing. This may be due to its judgment of the big cycle of the capital market.

The current US interest rate hike cycle has begun. In terms of time, it has been 10 years since the economic recovery in 2009, which has exceeded the average length of economic cycles in history. If you don't go public now while the stock market valuation is high, once the economy clears and the bubble bursts, it will take several years for the same company's shares to be sold at the current price. In fact, it is not only NIO, which has been listed on the New York Stock Exchange, and Niu Electric, which has just submitted its prospectus, that are eager to go public. The Hong Kong Stock Exchange, which has carried out the reform of the two-tier equity system, has also been pushed to the throne of the largest IPO amount in 2018 by Chinese Internet companies including Xiaomi and Meituan. This shows that it has become a consensus that this round of economic and financial cycle is coming to an end.

On the other hand, facing the increasingly stringent IPO rules, BAIC New Energy's own strength is not strong enough. IPO companies are required to make profits for the past three consecutive years. However, BAIC New Energy lost 184 million yuan in 2015 and only started to make profits in 2016. To meet the continuous profit conditions, it is necessary to postpone the IPO time to 2019 on the premise of ensuring profits from 2016 to 2018. In addition, starting from the second half of 2017, the new IPO Examination Committee adopted a strict review method to try to solve the problem of the "dam lake" in the IPO queue. This made the net profit of the companies that passed the IPO in 2018 reach more than 80 million yuan in the last year. This is also a severe test for BAIC New Energy.

In 2017, BAIC New Energy's net profit was only 35.9966 million yuan, a sharp drop from 108 million yuan in 2016. However, the poor performance corresponds to a grand goal. BAIC New Energy's "Optimus Prime Plan" will invest 10 billion yuan to build 3,000 battery swap stations across the country and put 500,000 battery swap vehicles into use. The company's mid-term strategic goal is to enter the top 100 in the world by 2020. Reality and ideals are in a state of flux, and the only thing that can support it is the funds obtained from a quick listing.

ARCFOX-7

Conclusion:

For new energy vehicle companies, going public is just the first step in a long journey. Tesla, which went public in 2010, is still struggling in the quagmire of losses. Its credit rating has been reduced to CCC after repeated financing, and Musk has also fallen into hesitation and anxiety. If BAIC New Energy cannot break through before the deadlines for the subsidy reduction in the future, it is likely to fall into an embarrassing situation after stopping the sale of fuel vehicles in 2025.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.