Recently, Changan Automobile released its 2005 annual report. Last year, it produced a total of 489,300 vehicles, an increase of 2.95% year-on-year, and sold 476,600 vehicles, an increase of 4.48% year-on-year, accounting for 8.24% of the national automotive market. The annual report shows that Changan Automobile's main business revenue increased by 3.46% last year, but its net profit decreased by 82.03%, and its earnings per share was 0.15 yuan, a decrease of 81.48% from the previous year.
The increase in main business revenue was due to the increase in sales of Changan Ford and Hebei Chang’an. The sharp decline in net profit was mainly due to the year-on-year decrease in net profit of parent company, Changan Ford and Changan Suzuki by 84.65%, 72.7% and 57.18%, respectively. As the top five domestic auto makers with independent brand share, the net profit of self-owned brands dropped by 84.26%. This phenomenon is worrying enough.
1 The minibus boss loses its affection
Chang'an Auto's 2005 earnings per share was only 0.15 yuan. As for Chang'an Automobile's current stock price of more than six, its performance is also acceptable. However, compared with the previous two years, people will find that the rate of return decline seems to be a bit too fast.
Chang'an earnings fell sharply
According to the previous annual report of Changan Automobile, the earnings per share in 2003 and 2004 were 1.18 yuan and 0.81 yuan. Even in 2002, when the joint venture company, Changan Ford, was not yet launched, Changan Automobile alone achieved sales of 269,000 units and 0.68 yuan per share in sales of the Antelope, Alto, and SC6350 series. At that time, sales of its own product, the SC6350, also reached 110,000 units. The average price is 40,500 yuan and the gross margin is 34%.
When the 2005 annual report came out, what surprised investors was that, even in 2004, when China's auto market was greatly adjusted, Changan Automobile’s earnings per share was still at RMB 0.68, but this year it was only RMB 0.15. And the biggest drop was in the company’s most important micro commercial vehicle business.
The annual report shows that Changan Auto's automobile business is divided into two major segments, namely micro-cars and cars. The main business of the micro-car last year reached 10.2 billion yuan, which was calculated from the 379,800 micro-car sales last year. The average price is only less than 30,000 yuan, and the gross profit rate has also been reduced to 15%. Therefore, the profit rate of the main business in this block has decreased by 27% compared with the previous year.
Microcar industry intensifies competition
In recent years, with the high oil prices and the increasing possession of city cars, the living space for small-displacement cars has greatly expanded, and miniaturization of automobiles is becoming a new fashion.
Major automobile manufacturers, such as FAW, SAIC, and Dongfeng, were not focused on the micro-vehicle field. In 2005, they all expressed their concern for this area. Because of this, Changan has traditionally been the only one in the micro-vehicle sector. There are four competing groups: SAIC, FAW, Chang'an, and Dongfeng.
On May 22 last year, Dongfeng Group entered the micro-vehicle market for the first time, cooperating with Chun'an Group, a Chongqing motorcycle company, to produce “Dongfeng Xiaokang†and built the Hubei Shiyan mini-vehicle base. In 2008, it plans to sell 150,000 vehicles.
At the beginning of last year, 30,000 SAIC-GM-Wulings that overtook Chang'an announced in June last year that they invested 3.2 billion in Liuzhou to build a new engine plant for GM Wuling. After the project is completed in 2007, it will have the capacity to produce 300,000 engines per year. Chen Hong, president, said that by 2010, the annual sales volume of mini-vehicles will reach 500,000 vehicles and win the micro-vehicle number one.
FAW Jiabao, produced by FAW Group in Jilin, has sold more than 90,000 vehicles in 2004. It also plans to increase production capacity and expand exports. In addition, Hafei and Changhe, both of the two micro-vehicles, are also gearing up for the fight.
The price war made a huge reduction in profits
In order to deal with the emerging competitors, Changan not only introduced new low prices in June, including Changan Express, which sells for RMB 22,800, and the Changan Micro Card, which was the first domestic product to break through the 20,000-yuan mark and sold for only RMB 19,800. , And in August and September last year, the prices of its products and spare parts were significantly reduced across the board: the total vehicle price dropped by 2,000-11,000 yuan; the price of up to 600 kinds of original parts was also lowered in full, with the highest drop of 75%.
It was the tide of price cuts provoked by Changan that the gross profit margin of micro-business declined from 26% in 2004 to 19% in 2005. The profit rate of its main business will drop from 20.45% to 17% this year.
Before and after the price reduction in Changan, Hafei and Changhe also responded with price cuts: Changhe AiDier Co., Ltd. reduced the price by 6,000 yuan and sold only 45,800 yuan. At the same time, Changhe also launched a basic type of $39,800. In November 2005, SAIC-GM-Wuling also initiated a “beyond action†with the company’s three-year anniversary celebration. From the 21st onward, SAIC-GM-Wuling’s price cuts for all mini-commercial vehicles were 5,000 yuan. At the same time, the price of more than 2,000 kinds of accessories also fell across the board, with a maximum discount of 80%.
Although the price war was provoked by Changan, the ultimate winner was not it. At the end of the year, the first prize in the mini vehicle industry was still SAIC-GM-Wuling. Last year, the sales volume was 337,100, which was only 40,000 less than Chang'an, but the profit was 434 million yuan, far exceeding Chang’an’s 150 million yuan. . Nanjing Chang'an even lost 29.91 million yuan. Although Changhe has increased its profits after price cuts, it has withdrawn from the ranks of the top ten auto manufacturers in terms of sales volume.
Low technical value leads to price war
As the Chinese auto market continues to mature, the competition between auto manufacturers has also developed in depth. In addition to prices, it is necessary to consider technologies, brands, safety, comfort, and other factors.
However, in the micro-vehicle market, which is dominated by relatively independent brands, micro-vehicle technology still remains at the level of the 1990s because it has not been able to develop synchronously with the world like the car market. Most mini-vehicles are still considered as commercial vehicles. Not only are their brands low in gold content, but they also have very low technology added value. Most of the micro-vehicles still use the chassis of the trucks for appearance, control, comfort, safety, energy consumption, The consumption of materials and the degree of environmental protection are very different from those of the developed countries. Because of the homogeneity of products and low technology added value, competition can only stay at low-level price wars. Chang’an’s big drop in profits last year was due in large part to this reason.
2 Market Giants and Profit Dwarfs
The pain of Chang’an’s profits has not only appeared in the micro-vehicle sector, but also has suffered from its own brand cars. For example, Chery sold 180,000 vehicles last year, but its profit dropped from 188 million yuan in 2004 to 0.95 billion yuan, and the profit of bicycles was only 500 yuan. In the first quarter of this year, Chery was ranked third in the country despite sales exceeding FAW-Volkswagen. However, the profit rate continues to decline. The income for the January-February period was 2.08 billion yuan, and the profit was only 22 million yuan. The profit margin was just over 1%. In the January-February period last year, the revenue was 770 million yuan, and the profit was 23.1 million yuan. The profit margin fell by more than 50%. Geely Automobile has not announced its 2005 annual report yet. According to the report of the listed company last year, the net profit was 40.77 million Hong Kong dollars, a 23.3% decrease from the previous month. From the sales of Geely from June to June of 64,400, the profit of bicycles was only 600 yuan.
Therefore, although Chery and Geely have entered the top ten of passenger vehicle sales, compared with the large profits of the joint venture companies such as Kwong Ben and Dongfeng Nissan, which have a profit of nearly 20,000 yuan, they can only say that they are "massive salesmen. Profits Dwarf".
However, the respective main brand enterprises are also in the process of change. In an interview with the media recently, Li Feng, chief executive of Chery’s sales company, said that Chery sold 71,000 units in the first quarter of this year and it was only considered “livingâ€. As for “living wellâ€, Li Feng revealed that the proportion of QQ in sales in March has fallen below 50%, while the sales volume of New Cowin has reached nearly 40%, and the sales of high-end brands Oriental Son and Tiggo are also different. It reached about 1,700 cars.
Taking into account Chery’s special corporate identity, they can “decade without dividendsâ€, but for Hong Kong-listed Geely, Brilliance and Great Wall, their “living well†requirements are all the more urgent.
A person close to Brilliance revealed that after the arrival of Brilliance CEO Luan Yumin in Hong Kong last year, he visited shareholders in Hong Kong and was informed that the reason why they still hold Brilliance Motors in their hands is because they are optimistic about the overall automobile market in China. It is expected that there will be a certain increase in Brilliance. the amount. However, once the development of the Chinese market has stabilized and Brilliance has no outstanding performance, it does not rule out the possibility of change. The reason why Sui Yumin frequently moves at the beginning of this year is undoubtedly also affected by shareholders.
The same is true for private companies listed in Hong Kong, Geely and Great Wall. Since the launch of the Freedom Ship last year, Geely has significantly accelerated the pace of pushing more high-end new cars, and has repeatedly appeared on the international stage. It is no doubt that this is also to increase profitability, give shareholders more confidence, and raise funds for the issuance of 5-year convertible bonds this year. 100 million U.S. dollars will be pave the way. The Great Wall sold 28,426 vehicles last year and earned 49.352 million yuan. It can be said that the profit of its own brand is the highest. Its share price is also the highest in the Hong Kong stock market. Its success is undoubtedly of some significance for other companies.
3 Calls on China's "Lotus" and "Porsche"
Although many reasons can be found for the low profits of the self-owned brands, fundamentally speaking, the same crux of the Chinese self-owned brand cars, Chinese shoes, Chinese textiles, and Chinese DVDs are all without core technology, and the added value of the products is too low. The direct consequence is that no matter how bright the sales are, the sales revenue and profit margins are still “stretched†compared with the joint venture brands.
Technology is the source of profit
For a technology-intensive product such as a car, technology can be said to be the source of profit for the product. Not to mention the comparison of Germany's cars that are known for their technology with American cars and Japanese cars. The most direct example, such as the high-performance car Bora R, is nearly 100,000 yuan more than the popular version of the Polaris.
In general, automotive technology can be divided into three major blocks: engine and transmission, body technology and chassis technology, but in domestic companies, not to say independent brands, joint ventures can fully grasp these three blocks are almost no. The localization of the joint venture is the best at car body technology. There is little interest in the engine, let alone the chassis.
The technology of the own brand itch
Among its own brands, Chery and Brilliance claim to be able to make their own engines. However, Chery's ACTECO engine was only loaded on some A520s, New Oriental sons and Tiggo, and the largest-selling QQ and Cowin had no chance of seeing it. It may be that the engine production failed to achieve economies of scale. The product loaded with the ACTECO engine was more expensive than the vehicle equipped with the Mitsubishi engine. The technical advantage did not reflect the product price, and the price was for the independent brand consumer. Quite sensitive, it may feel that the Mitsubishi engine is more mature and reliable. Perhaps because of this, Huachen Junjie’s self-produced 1.8T engine version also delayed its listing.
As for the bodywork, the independent brands basically achieved some design experience and database through cooperation with Italian and Japanese design companies. Although Chery claims that it can export car body designs to foreign countries, judging from the current situation, Chery and Geely After getting rid of the imitated shadow, the appearance does not look particularly coordinated. It is said that Chery has a consensus on the development of new cars in-house, that is, low-end products, good design, mid-range product design in Japan, and high-end product design in Italy.
As for the chassis, it has not been known which company dared to say it was designed by itself. Chery’s Tiggo, the son of New Oriental and the A520, the chassis was also adjusted by Lotus. Lotus has served more than one company, Hafei Lobo, Futian light trucks and even Chevrolet Epica have benefited from it, it is said that after entering China in 2004, it has received nearly 800 million yuan in technical service contracts. The chassis of Brilliance and Junjie were also adjusted by Porsche.
The Enlightenment of Lotus and Porsche
The names of Lotus and Porsche, the two high-performance sports cars, and Chinese independent brands are in the automotive industry, but the two companies are on the back-up list of most self-owned brands.
Lotus Automotive Engineering Corporation is a sister company of Lotus Corporation. It is one of the world's top professional automotive design and engineering consultancy companies. It specializes in vehicle system integration, powertrain and chassis engineering, and has the world's largest in Asia, North America and Europe. Leading automotive design and engineering technology research and development center. In 2004, the turnover was about 400 million pounds, and after it entered China in 2004, the amount of the contract for the preparation and operation of China-related projects was more than 770 million yuan.
Porsche has set up a research and development center since the late 1960s, and most of the world-renowned car companies have received technical support here. In 2001, the turnover reached 450 million marks, which dominated the automotive industry in many aspects.
The products of self-owned brands have been handed over by famous artists, but the technical advantages of self-owned brands have not yet been erected because technical foreign aid was invited. The cost of design, development and manufacture has increased, and the price has remained unchanged and even decreased. Next, the profit of self-owned brands is even thinner than a day. It seems to be a paradox that technology has improved but profits have become thinner. However, the core of the problem lies in the fact that when local companies ask these international technology companies to provide “fishâ€, they must also learn how to “fish.â€
It is this way that we have provided us with a new way of thinking. As it is now, each independent brand has its own politics, and it is not as good as all of us unite and work together to "fish." For example, led by the country, each independent brand manufacturer participates in the establishment of a service organization similar to Lotus and Porsche Automotive. It obtains or concentrates research and development related technologies through various channels. For example, weaker automotive electronics such as EFI , ABS, automatic transmissions, chassis, etc., as well as vehicle technology, provide technical services to all domestic companies. In fact, in the United States, there is a "two-millimeter project" (less than two millimeters combined), which is funded by the government for research and development and used by US automobile companies for free.
In this case, through the sharing of resources, independent brand enterprises can enable enterprises to increase their technological added value and control their costs, so as to obtain more reasonable profits that reflect their own technological value. And with the support of this platform, the technical level of Chinese cars can be expected to improve as a whole.
View related topics: independent brands, where to go?
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