Changan automobile can’t get back to its peak: the joint venture brand is depressed, and its own brand is big but not strong.
Li Ping | Author
Watson | editor
Lishi finance | produced
For a long time, among the top three independent automobile brands (Geely, Great Wall and Chang ‘an),Has always been a slightly embarrassing existence. On the one hand, Changan Automobile has a long history, which can be traced back to the Shanghai Yangpao Bureau during the Westernization Movement, and belongs to one of the four earliest automobile groups in China.
In terms of sales volume, the total sales volume of Changan Automobile also ranks first among the top three independent companies for a long time, and it is also the first self-owned brand automobile enterprise in China to exceed 1 million vehicles. According to the data of the 2021 annual report, Changan Automobile achieved a sales volume of 2.301 million vehicles throughout the year, including 1.755 million vehicles of Changan’s own brand, up 16.7% year-on-year. In contrast, Geely Automobile,In 2021, the total sales volume was 1.328 million and 1.28 million respectively, which was obviously different from Changan Automobile.
In addition, Changan Automobile was once the automobile enterprise with the largest number of joint venture brands, and has successively established strategic partnerships with multinational companies such as Ford, Suzuki, Mazda, Volvo and PSA, and has owned several joint venture brands such as Changan Ford, Changan Mazda, Changan Suzuki and Changan Peugeot Citroen (sold).
On the other hand, due to the problems of state-owned enterprise system, low-end products and over-reliance on joint venture brands, Changan Automobile’s operating efficiency is not high, its revenue scale and net profit level are among the lowest among the three independent companies, and its operating performance fluctuates sharply. During the period from 2018 to 2020, Changan Automobile deducted non-net profit for three consecutive years, with a total loss of more than 10 billion yuan.
Because of this, Changan Automobile’s presence in the secondary market is not strong. Before 2021, the market value of Changan Automobile hovered around 100 billion yuan for a long time.
In 2021, Changan Automobile was with Huawei,The joint launch of Aouita, a high-end brand of new energy vehicles, has attracted a lot of attention. The total market value of the company has doubled in four months (May-August 2021), and the total market value once exceeded 150 billion yuan. Since then, because the progress of Aouita is less than expected, Changan Automobile’s share price has fallen sharply again, hitting an interval low (6.40 yuan/share) on April 27th, and the total market value has dropped back to 68 billion yuan.
Dramatically, since April 27th, the share price of Changan Automobile has increased by more than 200% in two months. On June 28th, Changan Automobile’s share price closed at the daily limit (20.35 yuan/share), and its market value climbed to 201.9 billion yuan, breaking through the 200 billion yuan mark for the first time in history and becoming a relay of A shares.、After Great Wall Motor, it is the fourth complete vehicle enterprise in China with a total market value exceeding 200 billion yuan.
It’s not hard to find that favorable policies such as halving the purchase tax and the release of new cars of Aouita and Deep Blue brands have become important catalysts for Changan Automobile’s share price increase.
On May 31, in order to further encourage automobile consumption, the Ministry of Finance and the State Administration of Taxation issued the Announcement on Reducing the Vehicle Purchase Tax for Some Passenger Cars, which clearly stipulated that the vehicle purchase tax would be reduced by half for passenger cars with a displacement of 2.0 liters and below whose purchase date was from June 1 to December 31 and the bicycle price (excluding VAT) did not exceed 300,000 yuan.
In addition to favorable policies, the promotion of new energy automobile business is also a catalyst for the rise of Changan Automobile’s share price. On June 25th, at Chongqing Auto Show, Changan Automobile exhibited six electric electrification products including Changan Deep Blue SL03, UNI-K iDD, UNI-V iDD, Auchan Z6 iDD, LUMIN and Aouita 11. In particular, Aouita, blessed by Huawei and Contemporary Amperex Technology Co., Limited, is regarded as the hope for Changan Automobile to break through in the field of new energy vehicles.
The rise of share price undoubtedly represents investors’ longing and expectation for the future development of Changan Automobile, but from a fundamental point of view,Changan Automobile’s joint venture brand is difficult to return to its peak, its own brand is big but not strong, and the progress of new energy vehicles is backward, and so on.Remove the aura of Aouita, Changan Automobile is still the slightly moderate Changan Automobile.
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Independent brands are big but not strong.
From the perspective of revenue composition, Changan Automobile is divided into two parts: joint venture brand and independent brand. Among them, the joint venture sector mainly includes Changan Ford and Changan Mazda, and its own brands mainly include Changan Automobile, Auchan Automobile, Kaicheng Automobile (commercial vehicle) and the newly released two new energy brands, Aouita and Changan Deep Blue.
According to official data, Changan Automobile achieved a sales volume of 2.301 million vehicles in 2021, a year-on-year increase of 14.8%, and its sales volume returned to the fourth place in the automobile group. Of course, this data includes the total data of China brands and joint venture brands, passenger cars and commercial vehicles under Changan Automobile Group.
Specifically, Changan sold 1.755 million China brand cars, a year-on-year increase of 16.7%; Among them, the cumulative sales of passenger cars in 2021 exceeded 1.2 million, up 23.1% year-on-year.
In terms of passenger cars, Changan brand and Auchan brand achieved sales of 966,000 and 228,000 respectively, up by 20.0% and 49.0% respectively. In terms of new energy vehicles, Changan Automobile Benben E-Star sold more than 70,000 vehicles in the whole year.
In addition to passenger car business, commercial vehicle business also occupies an important position in the total sales of Changan Automobile. According to the data, Changan commercial vehicles include eight series of products, including micro-passengers, light passengers, micro-trucks, light trucks, pickup trucks, commercial MPV, large and medium-sized buses, school buses and corresponding new energy sources, special vehicles, etc., and they have products brands such as "Changan Ruixing, Changan Shenqi, Changan Kaicheng, Changan prodigy, Changan Ounuo, Changan Star and Changan Star Card". In 2021, the annual sales volume of Changan Kaicheng brand exceeded 185,000 units.
In terms of joint venture brands, Changan Ford sold 304,700 vehicles in 2021, a year-on-year increase of 20.29%. Among them, Lincoln brand sold 89,000 vehicles, a year-on-year increase of 109.1%. Changan Mazda’s annual sales volume was 89,700 vehicles, up 5.28% year-on-year.
It can be seen that although the sales volume of Changan Automobile’s own brand claims to have exceeded 1.75 million, this data includes the sales volume of more than 500,000 commercial vehicles. From the perspective of passenger car sales alone, the sales volume of Changan Automobile’s own brand is only 1.2 million, accounting for about 52% of the revenue, and the total sales volume is not as good as that of Geely Automobile (1.32 million).
In addition, due to the low-end products and the slow promotion of new energy vehicle business, Changan Automobile’s own brand has been in a state of being big but not strong. As can be seen from the following figure, although Changan Automobile’s vehicle sales rank first among the top three independent companies, it is not as good as Geely and Great Wall in terms of revenue scale, net profit and average bicycle price, and the sales of new energy vehicles also rank last.
Changan Automobile started as a mini-car and then entered the passenger car market. According to the sales data in 2021, the main sales models of Changan Automobile are still CS series and Yidong series.
Among them, the CS series covers SUVs in the price range of 60,000-210,000, and the sales volume in 2021 is about 540,000, accounting for about 36% of the independent brands; Yidong brand mainly focuses on the car market below 100,000 yuan. In 2021, the sales volume is about 170,000, and the revenue accounts for about 11%. In addition, the sales volume of Auchan series, a low-end model converted from commercial vehicles to passenger cars, is about 228,000, accounting for about 15%.
In terms of vehicle types, the CS75 model is positioned in the compact household SUV market of 100,000-120,000 yuan. In 2021, the cumulative sales volume exceeded 280,000, accounting for 14% of the sales volume. Yidong is positioned in the low-end car market of 70,000-90,000 yuan. In 2021, the annual sales volume exceeded 170,000, accounting for 10% of the sales volume.
In addition, three low-end models, changan CS55, Auchan X5 and Changan Benben EV, account for 9%, 9% and 5% of Changan Automobile’s own brand sales respectively, and their prices are all below 100,000 yuan.
Unlike Changan Automobile products, which are mainly concentrated in the low-end market, Geely and Great Wall have successively launched independent high-end brands such as Lectra and WEY since 2016. In 2020, the annual sales volume of Lectra reached 175,000 vehicles, up 37% year-on-year, and basically stabilized the mid-to-high-end market.
Facing the backward situation in the mid-to-high-end market, Changan Automobile did not launch the UNI series positioned in the mid-to-high-end market until 2020. In 2021, Changan Automobile UNI series achieved sales of 120,000 vehicles, accounting for about 8%.
However, even as a high-end series of Changan brand, the price of UNI series models is still concentrated in the market range of 100,000-150,000 yuan. Among them, the guide price of UNI-T, the first model of UNI brand, is 113.39-133.9 thousand yuan, and the price range of UNI-K, the second model, is 153.9-184.9 thousand yuan. In contrast, the products of Geely Link brand and Great Wall WEY brand are mainly concentrated in the market of 150,000 yuan and above.
Due to the difference in product structure, the average ex-factory price and profitability of Changan Automobile’s new cars are significantly lower than those of competitors such as Geely and Great Wall. As can be seen from the following figure, in the past four years, Changan Automobile’s sales volume ranked first among the top three independent companies, but its net profit level was far less than Geely and Great Wall.
In addition, unlike Geely and Great Wall Motor, whose main profits come from independent brands, Changan Automobile’s operating performance is highly dependent on the joint venture brand Changan Ford. Therefore, if the profit contribution of the joint venture brand is not considered, the gap between the profitability of Changan Automobile’s own brand and its competitors will be even greater.
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Joint ventures are no longer brave.
Similar to SAIC, Changan Automobile’s operating profit is highly dependent on Changan Ford, a joint venture company, while its own brand is in a state of meager profit or even loss. From 2015 to 2017, the net profit of Changan Automobile was 9.923 billion yuan, 10.277 billion yuan and 7.208 billion yuan respectively. Among them, the investment income from joint ventures and joint ventures is 9.440 billion yuan, 9.564 billion yuan and 6.855 billion yuan respectively, of which more than 90% of the profits come from Changan Ford.
According to the data, Changan Ford was established in April 2001, and the shareholding ratios of Changan Automobile, Ford Asia Pacific and Ford Motor (China) are 50%, 35% and 15% respectively. In 2016, the sales volume of Changan Ford reached a historical high of 940,000 vehicles, and contributed 9.08 billion yuan of investment income to Changan Automobile.
However, the sales of Changan Ford have gone from bad to worse since 2017 due to problems such as the broken shaft of Changan Ford Maverick and the aging of products. The data shows that from 2017 to 2019, the sales of Changan Ford were 828,000, 337,800 and 184,000 respectively, with year-on-year declines of 12.27%, 54.37% and 51.3% respectively.
With the sharp decline in sales volume, Changan Ford’s operating performance also fell sharply, and it fell into a loss during 2018 -2019. In this context, the operating performance of Changan Automobile has also been severely impacted. The data shows that from 2018 to 2020, the non-net profit deducted by Changan Automobile was-3.165 billion yuan,-4.762 billion yuan and-3.25 billion yuan respectively, and the net operating loss during the three years exceeded 11 billion yuan.
Facing the total collapse of the China market, Ford Global decided to separate the China market from the Asia-Pacific region and become the two core markets of Ford alongside the North American market. In April 2019, Ford Motor Company released the "Ford China Product 330 Plan", and plans to launch more than 30 new models in the China market in the next three years. Since then, the new Focus, Ford Ruiji and Ford Explorer have been listed, and Lincoln Navigator/Aviator/Adventurer SUVs have also been localized.
With the update of vehicle models and the launch of Lincoln brand, Changan Ford’s sales and operating performance also rebounded. In 2020, Changan Ford sold 253,300 vehicles throughout the year, up 37.67% year-on-year; In 2021, the sales volume of Changan Ford reached 304,700 vehicles, a year-on-year increase of 20.29%. Among them, Lincoln brand sold 89,000 vehicles, a year-on-year increase of 109.1%; The net profit was 2.284 billion yuan, which was significantly higher than the net profit of the same period in 2020 (16 million yuan).
However, the sales volume and net profit level of Changan Ford in 2021 are far from the peak in 2016. Through simple comparison, it can be seen that Changan Ford’s sales volume in 2021 is still less than one-third of that in the same period of 2016, and its net profit is only 13% of that in the same period of 2016. In addition, if the sales volume of Lincoln brand is not calculated, the sales volume of Changan Ford in 2021 is only 215,000, which is almost the same as that in 2019 in the trough period, which shows that the sales volume of Ford, the main brand, has not really improved.
In addition to the aging problem of products, the slow transformation of electrification is also an important reason why Changan Ford’s sales are blocked. Up to now, Changan Ford’s new energy vehicles are only sold in the leading EV, sharp hybrid version and Mustang Mach-E (electric mustang). Among them, the leading EV belongs to Jiangling Ford, while the monthly sales volume of the sharp plug-in hybrid version has been less than 100 since its launch, and the cumulative sales volume has been less than 1,000.
As the first electric vehicle of Changan Ford, Ford Mustang Mach-E (Electric Mustang) was not officially delivered in China until December 26th, 2021. By the end of May 2022, the cumulative sales volume of Mustang Mach-E was less than 500 vehicles.
The latest data shows that from January to May this year, Changan Ford sold 85,500 vehicles, down 13.87% year-on-year. Among them, the sales volume in May was 13,200 units, down 32.4% year-on-year. Obviously, with the rising of independent brands and the rapid penetration of new energy vehicles, it is difficult for Changan Ford, which lacks pure electric explosion models, to return to the peak, and the road to recovery is probably still very long.
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It is difficult for Aouita to carry the banner.
Since the second half of 2020, new energy vehicles have become a key point to rapidly increase the market share of independent brands. BYD, Geely and other car companies have successfully achieved double growth in sales volume and brand upward with the help of transforming new energy. However, in the field of new energy vehicles, Changan Automobile is still in a relatively backward state, which further aggravates the difficulty of its brand promotion.
According to the data, Changan Automobile entered the new energy vehicle much earlier than its competitors. As early as 2001, Changan Automobile began to research and develop new energy technologies and developed the first hybrid prototype. In December 2009, Chang ‘an Benben MINI EV went off the production line, with a cruising range of 50km and a top speed of 120km/h, becoming the first pure electric vehicle in China.
However, due to problems such as too small battery capacity, too long charging time, short battery life and poor heat dissipation, Changan Benben MINI EV did not realize mass production immediately. It was not until 2017 that Benben MINI was listed in the promotion catalogue of new energy vehicles of the Ministry of Industry and Information Technology.
In April 2015, the Ministry of Finance, the Ministry of Science and Technology, the Ministry of Industry and Information Technology and the Development and Reform Commission jointly issued the Notice on Financial Support Policies for the Promotion and Application of New Energy Vehicles in 2016-2020, to carry out the promotion and application of new energy vehicles nationwide. Since then, Changan Automobile has launched three electric vehicles in 2015, 2016 and 2018, namely Yidong pure electric version, Ounuo pure electric version and Changan Benben LOVE pure electric version, but they all belong to "oil-to-electricity" models, and the market response and sales volume are relatively flat.
It is not difficult to see that although Changan Automobile entered the new energy vehicle early, it did not really tackle the technical problems, so that Changan Benben MINI EV could not be mass-produced because of battery problems after trial production, while Yidong pure electric version, Ounuo pure electric version and other models were all "oil-to-electricity" models, and more were introduced for subsidies.
It is this short-sightedness in strategy that finally made Changan Automobile fall into the end of "getting up early and catching up late" in the field of new energy vehicles. From the sales list of new energy vehicles, except for the occasional list of Benben EV, several other models have a flat response. In 2020, Changan Automobile’s new energy vehicle sales volume is only 34,900 vehicles, accounting for only 1.5% of the sales volume, and it is mainly A00-class cars.
Facing the backward situation in the field of new energy, Changan Automobile, together with Huawei and Contemporary Amperex Technology Co., Limited, jointly launched the high-end electric brand Aouita and released the first model Aouita 11. At the same time, it launched a brand-new digital pure electric brand "Changan Deep Blue" and released the first strategic model C385 of Changan Deep Blue.
With the blessing of two giants, Huawei and Contemporary Amperex Technology Co., Limited, Aouita science and technology has attracted much attention. In March this year, Aouita Science and Technology conducted the first round of financing, and the registered capital of the company increased from 288 million yuan to 1.172 billion yuan. Contemporary Amperex Technology Co., Limited officially became the second largest shareholder of Aouita Science and Technology with a shareholding ratio of 23.99%.
However, the joint efforts of the three parties have certainly improved the level of power battery technology and intelligence in Aouita, and alleviated the financial pressure of Changan Automobile to a certain extent, but it will also lead to the core technologies of Changan Automobile, such as driverless driving and power battery, being controlled by others.
In fact, Changan Automobile has fallen far behind competitors such as Geely and Great Wall in battery technology, pure electric platform and driverless driving. For example, as early as 2019, Geely created the vast intelligent architecture of SEA, and Great Wall Motor subsequently released the intelligent electric platform for coffee. However, it was not until April this year that Changan Automobile released the all-electric EPA1, mainly serving Changan Deep Blue.
In January this year, the B round of financing of Changan New Energy was settled, with a capital increase of 4.977 billion yuan, and the shareholding ratio of Changan Automobile was diluted from 48.95% to 40.66%. According to the company’s plan, Changan New Energy will start the IPO process.
However, from the operating situation, Chang ‘an’s new energy situation is not optimistic. The data shows that in 2021, Changan New Energy achieved an operating income of 5.632 billion yuan and a net loss of 2.772 billion yuan, which further expanded compared with the same period last year (1.16 billion yuan).
In addition, from the perspective of shareholder structure, Changan New Energy’s capital contributors are mainly financial investors such as Bank of Communications Yubo No.1 and Chengyuan Fund, which obviously lacks the support of industrial capital. With the technical strength of Changan Automobile alone, it is difficult for Changan New Energy to compete with a number of new forces, such as Geely Krypton, SAIC Zhiji, Weilai, Tucki and Ideality, which have been mass-produced.
People familiar with Changan Automobile may know that as early as 2017, Changan Automobile put forward the "Shangri-La Plan" strategy, announcing that it would completely stop selling traditional fuel vehicles in 2025 and invest 100 billion yuan in the whole new energy vehicle field. By then, Changan will launch 21 new pure electric vehicles and 12 plug-in hybrid vehicles.
In the following 2018, Changan Automobile set a new sales target: in 2020, the sales volume of new energy vehicles was 350,000, entering the first echelon of the industry; By 2025, 1.16 million new energy vehicles will be sold, making China the first brand.
At present, Changan Automobile is unlikely to achieve this goal. In 2021, the sales volume of new energy vehicles in Chang ‘an was 108,900, far below the target of 2020 (350,000). From January to May this year, Changan Automobile’s new energy sales volume was 51,000 vehicles, with a market share of 3%, ranking eighth among manufacturers in terms of sales volume.
Therefore, although Changan Automobile seems to have ambitious goals in the field of new energy, it still gives people a feeling of "old wine in new bottles". In other words, Changan Automobile, an old tree, is trying to sprout, but its spring is far from coming.