Semi-annual review of domestic brands: mixed results from sluggish market

In the first half of 2018, the ups and downs of China's independent brands and the sluggish growth of the entire industry complemented each other.

According to data released by the China Automobile Dealers Association, the inventory warning index of auto dealers reached 59.2% in June, and the inventory warning index is still above the warning line (50%). This means that in the middle of the year, the overall market sentiment of China's auto market showed a downward trend.

"Overall, due to the sluggish SUV and MPV markets, the overall performance of domestic brands is relatively average." On July 9, Cui Dongshu, chairman of the China Passenger Car Association, said in an interview with a reporter from 21st Century Business Herald.

2018 is already halfway through, and major auto groups have released their sales data for the first half of the year. Among the domestic brands that have announced their sales for the first half of the year, SAIC Passenger Vehicles performed better than expected due to the development of new energy star models, successfully washing away the charge of "dragging the group's feet"; GAC Trumpchi brand's profitability was significantly affected due to the deterioration of the industry's competitive landscape, dragging down its overall performance, while BAIC is in the process of deep adjustment.

In the first half of this year, Geely Auto's total sales volume reached 767,000 units, a year-on-year increase of 44%, and has achieved 49% of the annual sales target of 1.58 million units. Under the trend of slight growth in the auto market, Geely Auto delivered a brilliant answer sheet for the first half of the year's "mid-term exam" with a growth rate far exceeding the industry.

Great Wall, the most promising company in previous years, has also begun to see a decline in sales. Although the June sales of Great Wall and Geely have not yet been announced, compared with Geely's May sales, Great Wall's May sales were 52,000 units behind Geely; Great Wall's cumulative production and sales in the first five months were 409,000 units, 230,000 units behind Geely.

The Matthew effect deepens

As soon as July began, perhaps because the results of the "midterm exam" were too satisfactory, SAIC Group took the lead in announcing its first-half performance.

In June this year, SAIC Motor sold 554,000 vehicles, up 7.2% year-on-year from 517,000 vehicles in the same period last year. From January to June, the cumulative sales volume reached 3.52 million vehicles, up about 10.9% year-on-year.

Among them, domestic brands Roewe and MG performed rapidly: sales in June reached 56,000 units, a year-on-year increase of 65.2%; cumulative sales from January to June reached 359,000 units, a year-on-year increase of 53.67%. The problem of domestic brands lagging behind was also resolved.

Compared with the same period last year, SAIC Passenger Vehicle has added new models including the new MG6, Roewe Ei5, Roewe RX3, and Roewe RX8, creating a chain reaction of popular models.

The hot sales of new energy vehicles also helped the growth of domestic brands. In this regard, the relevant person in charge of the China Passenger Car Association told reporters that SAIC Passenger Vehicle currently has two major brands (Roewe and MG) and 18 models. New energy and Internet cars are their distinctive features and are favored by young people. Among them, the two models of Roewe Ei5 and Roewe ei6 contributed more than 60% of the sales. The sales of Roewe Ei5 reached 4,661 units, which was a blowout. In terms of hybrid, the sales of Roewe Ei6 hit a record high, breaking through 4,000 units for the first time.

Although hybrid vehicles still account for a large proportion, it can be clearly seen that the proportion of pure electric vehicles is gradually increasing, from 24% at the end of last year to 37.6%.

In contrast to the high sales of SAIC passenger cars, GAC Group's own brands declined. According to the production and sales data released by GAC Group in the first half of 2018, the cumulative production reached 1,047,000 vehicles, a year-on-year increase of 7.67%. However, the performance of its own brands was sluggish, with sales of 268,000 vehicles in the first half of the year, a year-on-year growth of 6.9%, and only 38.31% of the annual sales target of 700,000 vehicles was achieved.

It is worth noting that from the second half of 2017 to the first half of this year, the sales of GAC Trumpchi's star model GS4 have gradually declined. After a year-on-year drop of 13% in May, the decline widened to 14.4% in June, affecting GAC Trumpchi's overall sales.

After the mid-term facelift, the new car sales and terminal price strength of GS4 remain to be verified, and the market capacity of the GS8 seven-seater model is limited. It will face the challenge of SAIC Roewe RX8 in the next two years.

According to further forecasts by Ping An Securities, as the industry growth rate further declines, the competitive landscape further deteriorates, and price wars disrupt the profitability of automakers, the net profit growth rate will be negatively affected.

"The trend of slow growth will become normalized, and the golden age of 17% and 18% growth rates has passed. According to the development in the first half of the year, the trend of extensive cooperation, technical alliances, and joint ventures among domestic enterprises has become more obvious, and the integration of mergers and reorganizations will be greater. In the era of low profits in the automobile industry, companies must play the overall card. The electrification of automobiles is also irreversible, and intelligent networking will become standard."

On July 9, Jiang Zili, deputy general manager of BAIC Group, said in an interview with a reporter from 21st Century Business Herald that BAIC Group released its first-half performance that day, with vehicle sales reaching 1.203 million units, a year-on-year increase of 7.6%, outperforming the market for the first time in a year.

Jiang Zili said that since April this year, the automotive industry has undergone drastic changes. The impact of lowering tariffs and expanding opening up is that the price center of gravity of the entire industry is being pushed down.

"First, luxury brands take the lead in lowering product prices, and joint venture brands and domestic brands are also lowering prices. Due to the decline in the entire price system, many brands are close to the edge of micro-profits. The entire industry is in a period of large-scale integration and adjustment. The performance of central enterprises has fluctuated greatly, and the capital chain of local enterprises is tight. The Matthew effect is becoming more and more obvious, and the strong will become stronger." Jiang Zilii emphasized.

Independent new energy faces challenges

As some of the earliest companies to develop new energy vehicles, BAIC New Energy and BYD Auto chose to release their production and sales data for the first half of the year on July 9.

It is worth noting that in the list of double-point calculations for 2017 just announced by the Ministry of Industry and Information Technology and other four ministries, BYD ranks first in terms of positive points for new energy vehicles and average fuel consumption.

From January to June this year, BYD Auto sold 220,000 vehicles, a year-on-year increase of 21%. In terms of new energy, BYD sold a total of 71,270 new energy vehicles from January to June this year, a year-on-year increase of 106%, continuing to lead the new energy market.

Among them, PHEV plug-in hybrid models sold 47,430 units in the first half of the year, a year-on-year increase of 197%; Qin and Song DM took the first and second place in this field. Qin also became the first PHEV plug-in hybrid model in China to exceed 100,000 units in cumulative sales.

In contrast, BAIC New Energy achieved vehicle sales of 54,000 in the first half of the year, a year-on-year increase of 78.5%, and BYD's cumulative sales of new energy vehicles reached 71,000, completing only 35.6% of its 2018 sales target of 200,000. On July 9, Li Yixiu, deputy general manager of BAIC New Energy and general manager of the marketing company, said in an interview with reporters that BAIC New Energy is very weak compared to the group, accounting for only 100,000 sales of the group, and "really needs all kinds of care."

However, BAIC New Energy has also set its "ambitions": one is that before 2020, BAIC New Energy must "stand firm at the back" and maintain its position as the number one new energy pure electric vehicle in China; the second is that after 2020, it must continue to be a leader in product and market-oriented operations.

As for how to achieve this goal, Li Yixiu told reporters, "We must quickly get rid of our dependence on subsidy policies, coordinate the entire supply chain, and achieve cost-effectiveness."

However, at this stage, the industry is most concerned about BAIC Group and how Changhe will develop independently after Suzuki withdraws from China.

"Next, the key to dealing with the Changhe issue lies in deepening reform and adjustment. Now BAIC is involved in the brand sorting of Weiwang, Changhe and the original Suzuki brand, especially channel planning and the integration of the three teams. Therefore, the reform of Changhe has not yet come to an end, and it is estimated that the next one or two years will be a period of reform and adjustment. In addition, we are promoting dual-core drive, which is traditional power + new energy." Jiang Zilii said.

It is understood that the comprehensive new energy transformation that BAIC Group is vigorously promoting is a huge project with many related parties. BAIC Group and Daimler have jointly invested more than 11.9 billion yuan to develop new energy luxury brands; signed a strategic cooperation framework agreement with Didi Chuxing to deepen business cooperation in the fields of new energy vehicle operations, big data applications, travel services, customized vehicles and battery replacement; and strategically cooperated with Magna. The two parties will establish a joint venture in Zhenjiang, Jiangsu to create an open and shared high-end intelligent pure electric vehicle R&D and manufacturing center, and plan to first put into production related models of BAIC New Energy's high-end brand ARCFOX.

In addition, it signed a strategic cooperation framework agreement with Brilliance Automotive Group to jointly explore the new energy vehicle market in Northeast China and the whole country. It will cooperate in the fields of new energy official vehicles, taxis, online car-hailing, private cars, express logistics vehicles and time-sharing leasing, and jointly commit to the demonstration and promotion of new energy vehicles in the Northeast market in Shenyang, and further expand to the national market in the future.

However, since 2018, new energy vehicle forces have been scrambling to seize the market where subsidy policies are declining. On the other hand, with the implementation of the double-point policy, new energy vehicle manufacturers and multinational automakers have also begun to increase the pace of new car launches in this field, and the competition for the new energy vehicle market has become more intense.

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.