Sales of Changan Ford, a joint venture brand that has long been regarded as a profit cow, continued to decline at an accelerated pace. From January to May this year, sales of Changan Ford fell by 70.2% compared with the same period last year. Industry analysts say that Changan Fords product matrix is in a period of weak competitiveness, and the current market demand has not been fully met by several models on sale. At the same time, Changan Ford is also facing pressure from luxury brands downward and independent brands upward. In addition, the overall weakness in Chinas auto sales has further exacerbated the decline in Changan Fords sales.
In addition, it should not be overlooked that since July 1 this year, 15 provinces and municipalities directly under the Central Government will formally implement the Sixth National Emission Standard, and some regions will also directly implement the Sixth National B Policy across the Sixth National A. At present, some models under the Fifth National Standard can not be licensed. Cui Dongshu, secretary-general of the National Passenger Car Market Information Joint Conference, told Sino-Singapore Longitudinal and Weft Clients that the impact of G6 emissions had a greater impact on Southwest China, resulting in a sharp increase in the inventory pressure of dealers. The inventory of Changan automobile is still high, which undoubtedly has a greater impact on its sales performance.
The inventory survey of automobile dealers released by China Automobile Circulation Association in April 2019 shows that the inventory coefficient of Changan automobile is 3.4, which is the brand with the highest inventory depth in that month. From the resellers inventory coefficient in May, the inventory depth of Changan passenger cars is still at a high level, ranking behind Guangqi Chuanqi, Dongfeng Yueda Kia, Dongfeng Citroen and Chery. In fact, since January 2018, Changan Automobile has ranked the top three in inventory depth for nine months.
China Automobile Circulation Association pointed out that in May, the environment of the automobile market was still relatively depressed. Affected by the five countries and six countriesswitching policies, the pressure of dealers clearing warehouses increased, and they were more cautious to enter cars. At present, many manufacturers and distributors still have a large number of Guowu models, which need to be shipped centrally before they stop licensing. A large backlog of inventory has significantly inhibited the sales of models.
Sino-Singapore longitude and latitude clients note that Chongqing and Sichuan are also among the six emission areas in China, and the local advantages of Changan Automobile have turned into stumbling blocks.
According to the May production and marketing data released by Changan Automobile, the cumulative sales of Changan Automobile in January-May of this year were 683,600, down 32.9% from the same period last year. Joint venture sector is still the main reason for overall sales decline, among which Changan Ford sales in May were 7418, down 70.2% from the same period last year; Changan Mazda is also not optimistic, with sales in May of 9522, down 39.6% from the same period last year.
In addition, sales of Chinas brand business sectors, including Chongqing Changan, Hebei Changan and Hefei Changan, also declined to varying degrees.
A fine of 160 million yuan
Changan Automobile said it had little financial impact
On June 5, the website of the General Administration of Market Supervision announced that a penalty of 162.8 million yuan was imposed on Changan Ford for implementing the vertical monopoly agreement.
Since 2013, the General Administration of Market Supervision has pointed out that Changan Ford has restricted the lowest resale price of downstream distributors in Chongqing by formulating a price list, signing a price self-regulation agreement and limiting the lowest price of downstream distributors during the auto show and the lowest price on the internet, which violates the anti-monopoly laws prohibition on operators and counterparts from reaching a limit to No. The provisions of the monopoly agreement on the lowest price of the resale goods by three persons.
On the afternoon of June 5, Changan Ford responded by posting on its official microblog that it fully respected and resolutely implemented the punishment decision made by the relevant state departments on the anti-monopoly investigation. The company has taken action to standardize regional sales management with its distributors.
As for the impact of the penalty on the company, Changan Automobile said, Because Changan Ford has made a pre-estimate of the risk cost caused by the above actions in 2018, according to the regulatory requirements of the national regulatory authorities, the financial impact of this penalty on Changan Ford and Changan Automobile in 2019 is not significant.
Behind the light response, there is still no way to hide its bleak performance dilemma. According to the annual report of Changan Automobile in 2018, the annual operating income of Changan Automobile is about 66.3 billion yuan, 17.14% less than that of the previous year, and the annual net profit is 681 million yuan, 90.46% less than that of the previous year. As for the reasons for the decline in performance, Changan Automobile explained as a result of the decline in investment returns from joint ventures.
This decline continued until the first quarter of 2019. The first quarter report of Changan Automobile showed that revenue in the first quarter was 16.08 billion yuan, down 20% from the same period last year; net profit loss was 2.096 billion yuan, down 25.62% from the same period last year. By the end of the first quarter of 2019, the net profit of Changan Automobile had declined for 15 consecutive months.
It is worth noting that among 173 A-share listed automobile companies, Changan Automobile ranked second last year with a government subsidy of 2.873 billion yuan, and it is the only listed company among the third-tier companies whose government subsidy is higher than net profit.
Some insiders pointed out that over-reliance on joint ventures, lack of competitiveness of independent products, low brand premium ability, shortcomings in product quality and other issues are the fundamental reasons for the loss of Changan automobile.
However, even the joint venture brands that Changan Automobile prides itself on have suffered a serious decline in performance. According to public reports, last year, Suzuki announced its withdrawal from the Chinese market; Hafei and Changhe gradually declined after integration, which also became a drag on the growth of Changan automobile performance. From the data point of view, the contribution of Changan Ford to Changan automobile sales has dropped from 957,500 vehicles in 2016, accounting for 31.26%, to 377,800 vehicles in 2018, accounting for 17.67%, and its net profit has also dropped from 18.165 billion yuan in 2016 to -804 million yuan in 2018.
Three years ago, Changan Automobile was the first domestic brand with double production and sales exceeding one million, but now it is hard to stop the decline in annual performance. Of course, behind this, Changan Automobile has a deep sense of crisis, but it seems too late. The self-owned brands such as Geely, Great Wall and Guangzhou Automobile, which were once expected to be behind it, have already caught up. Tan Benhong, the executive vice president of Changan Automobile, said earlier that it is not easy for Changan Automobile to continue to make profits in the future. Changan Automobile is undergoing a difficult transformation.
Cao Zhenyu, executive vice president of Changan Ford National Sales Service Agency, once told the media, Before that, it could be regarded as an abnormally irrational decline, and the brand value and cost-effective ratio were seriously underestimated. He also lamented that Changan Ford has gone smoothly for more than ten years since its establishment, but it is at a low ebb.
The persistent slump in sales and the impact of the 162.8 billion yuan fine imposed by the General Administration of Market Supervision will not be a major problem for Changan automobiles.
Sales Dilemma Difficult to Solve
Independent Brands Need to Enhance Competitiveness
It is understood that the independent brand of Changan Automobile has concentrated on updating several models in 2018, such as Ruijuan CC, the second generation of fugitive and other heavy products, the company hopes to rely on new products to boost sales, but according to its total sales data, the situation has not improved significantly.
Other data show that Changan has 16 production plants in Chongqing, Beijing, Nanjing, Hefei and Shenzhen, with a total capacity of over 4 million vehicles per year. However, in 2018, the annual capacity utilization rate was only 49.1%, less than half of the total capacity; in the first three months of 2019, the total capacity utilization rate was 41.8%, a 14.8% year-on-year decline.
Perhaps the dilemma of sales has not been solved. Perhaps it is the hope of the outside world that a white knight will appear. On May 27, it was reported that Changan Automobile will sell its Beijing factory to FAW Group, the same central enterprise. The two sides have been negotiating on this matter for a long time. However, Changan Auto official denied the incident to the media, saying that the news belonged to false information fabricated by individual media. Changan Automobile reserves the right to investigate the legal liability of the publisher for any losses and consequences arising therefrom.
In order to solve the problem of production capacity, on May 24, Changan Automobile and Green Chi reached an agreement to build new energy vehicles for them, which can alleviate part of the groups financial pressure and the problem of overcapacity, and promote the overall upgrading of the industry. However, in the view of industry insiders, the choice of Green Chi Auto OEM is not a long-term solution. If Changan Auto wants to survive in the fierce battle of new energy vehicles, it still needs to enhance the competitiveness of its products.
The Beijing News quoted industry insiders as pointing out that Changan Automobile and Green Chi Automobile reached an agreement to build new energy vehicles for them, which to a certain extent can increase the revenue of enterprises and temporarily alleviate some of the groups financial pressure and overcapacity problems. However, he believes that OEM is not a long-term solution and can not bring long-term profits for Changan Automobile. If Changan automobile wants to survive in the fierce competition of new energy automobile campaign, it still needs to enhance its product competitiveness. Strict control of product quality and improvement of product performance are the most important issues for Changan automobile.
It is worth noting that the growth momentum of new energy vehicles in Changan is one of its highlights. In 2018, the total sales of new energy vehicles in Changan were 86,800, accounting for 4.1% of the total sales, up 41.8% from the same period in 2017. In the first quarter of this year, the total sales of 11,900 vehicles increased by 24.2% compared with the same period in 2017. Changan passenger car, medium and high-end passenger car, Ocean and Kaicheng are the four independent brands of Changan automobile. China Gold Corporation believes that in the long run, the independent brand needs to focus on Changan passenger car and help Kaicheng and Ocean to go to Changan by mixing and introducing social capital to further activate the brand vitality. In addition, in the joint venture business, Changan Ford still needs to increase the localization layout to adapt to the increasingly competitive environment of Chinas car market and the more complex and diverse needs of consumers. (Zhongxin Jingwei APP) Source of this article: Responsible Editor of Finance and Economics Network: Wang Xiaowu_NF
It is worth noting that the growth momentum of new energy vehicles in Changan is one of its highlights. In 2018, the total sales of new energy vehicles in Changan were 86,800, accounting for 4.1% of the total sales, up 41.8% from the same period in 2017. In the first quarter of this year, the total sales of 11,900 vehicles increased by 24.2% compared with the same period in 2017.
Changan passenger car, medium and high-end passenger car, Ocean and Kaicheng are the four independent brands of Changan automobile. China Gold Corporation believes that in the long run, the independent brand needs to focus on Changan passenger car and help Kaicheng and Ocean to go to Changan by mixing and introducing social capital to further activate the brand vitality. In addition, in the joint venture business, Changan Ford still needs to increase the localization layout to adapt to the increasingly competitive environment of Chinas car market and the more complex and diverse needs of consumers. (Sino-Singapore longitude and latitude APP)