Changan Automobile Profit Dilemma: Subsidies as the Main Profit Source

category:Finance
 Changan Automobile Profit Dilemma: Subsidies as the Main Profit Source


In fact, in recent years, Changan Automobile has been continuously increasing government subsidies, but the net profit of Changan Automobile has continued to decline, leading to the government subsidies have gradually become the main source of profits of Changan Automobile.

According to statistics, government subsidies accounted for only 4% of the net profit of Changan automobile in 2015, but by the first half of 2018, the proportion soared to 69%. Data show that the net profit of Changan automobile declined by 90% in 2018, with a net loss of 3.165 billion yuan after deducting recurrent gains and losses. Meanwhile, in 2018, Changan Automobile received a government subsidy of 2.873 billion yuan, which has become the main source of profits.

In fact, as an important source of profit for Changan Automobile, the joint venture sector was in trouble in 2018, which became one of the reasons for the overall performance decline of Changan Automobile. Among them, Changan Ford sales continued to decline, DS brand under Changan PSA did not improve, Changan Suzuki lost the Chinese market, Changan Mazda sales also showed double-digit decline. Among them, Changan Ford and Changan Mazda have always been the profit cows of Changan Automobile. The sharp decline in sales of these two enterprises is the main reason for the huge loss of Changan Automobile in the first quarter.

In 2016, the net profit of Changan automobile was 10.285 billion yuan, of which Changan Ford contributed 9.929 billion yuan, accounting for 87% of the net profit of Changan automobile; in 2017, the net profit of Changan automobile declined to 7.137 billion yuan, and Changan Ford contributed 6.039 billion yuan, accounting for 84% of the net profit. But in 2018, sales fell to the waist, resulting in a loss of nearly 800 million yuan for Changan Ford and a sharp drop in profits for Changan Automobile.

Cui Dongshu, secretary-general of the National Passenger Car Joint Conference, said that Chinas automobile market has entered a period of deep adjustment and is at the key point of market transformation. Competition in the automobile market is more intense. It is difficult for enterprises with slow pace adjustment to adapt to the changes of intense competition.

In terms of its own brand, Changan Automobile said that it would adhere to the car + SUV two-legged walk, keep up with the trend of the public, and accelerate the transformation to the new energy + intelligent trend in accordance with the Shangri-La Plan strategy; in terms of the new energy strategy, the company will continue to promote mixed transformation and strive to enter the domestic new energy by 2020. The first camp, in 2025, became a market leader. In fact, since April 2019, Changan Automobile has proposed the third venture with the intention of transforming from fuel vehicles to new energy vehicles. At the same time, Changan Automobile issued its third business plan, Innovation and Entrepreneurship Strategy, to accelerate the distribution of intellectualization and new energy, and to this end launched the intellectualization strategy Beidou Tianshu Plan and the new energy strategy Shangri-La Plan. In this regard, industry insiders believe that under the pressure of sales and profits, Changan wants to find a way out through transformation, but the strategic landing still takes time, and in the short term, it is not helpful to boost Changans profits. Source: Guo Chenqi_NBJ9931, Responsible Editor of Beijing Business Daily

In fact, since April 2019, Changan Automobile has proposed the third venture with the intention of transforming from fuel vehicles to new energy vehicles. At the same time, Changan Automobile issued its third business plan, Innovation and Entrepreneurship Strategy, to accelerate the distribution of intellectualization and new energy, and to this end launched the intellectualization strategy Beidou Tianshu Plan and the new energy strategy Shangri-La Plan. In this regard, industry insiders believe that under the pressure of sales and profits, Changan wants to find a way out through transformation, but the strategic landing still takes time, and in the short term, it is not helpful to boost Changans profits.