Friday, June 14, 2024
spot_imgspot_imgspot_imgspot_img
HomeCar industryAutomotive software solutionsChinese automakers post sharp annual profit drops as international partners hit by...

Chinese automakers post sharp annual profit drops as international partners hit by domestic competition

Major Chinese car manufacturers, including SAIC and BAIC, saw double-digit declines in annual profits as the industry was hurt by slowing growth in new fossil fuel car sales and aggressive price cuts for their electric vehicles amid rising competition from the likes of BYD and Tesla. 

Why it matters: The latest financial results coincide with the rising momentum of plug-in hybrid electric vehicle (PHEV) sales in China. BYD, Geely, and Li Auto, all with a broad PHEV lineup, are among the few that reported both revenue growth and margin improvements, while traditional automakers and battery electric vehicle startups have been put under pressure to sacrifice profits for growth. 

  • The figures also signaled potential growing challenges for international carmakers as Chinese EV manufacturers take a stronger position at home. The market share of their joint venture brands with Chinese partners will fall from 40% to 10% over the next three to five years, BYD chairman Wang Chuanfu forecast at an investor meeting on March 27, reported Reuters. 

Details: China’s biggest car manufacturer SAIC reported revenue of RMB 744.7 billion ($102.9 billion) in 2023, an increase of just 0.1% from the same period last year, with net profit declining 12.5% year-over-year. Sales of its joint ventures with Volkswagen and General Motors last year fell 8% and 14.5% to roughly 1.2 million and 1 million units, respectively. 

  • BAIC Motor, a Hong Kong-listed unit of BAIC Group, also disappointed investors with a slower pace of revenue growth of just 3.9% in 2023, marking a slowdown from the brisk 8.3% rate notched a year earlier. Mercedes-Benz Group kept China sales flat with its joint venture partner last year, having slashed car prices by as much as a third over the last three months of 2023. 
  • Revenue of GAC Group grew at a solid clip last year partly thanks to strong sales of its Aion EVs. However, Toyota and Honda’s main China partner revealed a 45.1% nosedive in net profit to RMB 4.4 billion, which it blamed on an RMB 2.9 billion one-time loss due to charges tied to restructuring, as well as shrinking revenue at its joint venture with Mitsubishi.
  • Great Wall Motor’s annual results also offered a mixed picture as it struggles to ramp up EV sales profitably. Revenue grew a more robust 26.1% year-on-year to RMB 173.2 billion, but its profits fell 15.1% to RMB 7 billion. Some of its PHEV models such as Lanshan and Gaoshan fell short of expectations, Bernstein analysts wrote in a March 28 note. 
  • Dongfeng Motor Group posted a loss of nearly RMB 4 billion for 2023, compared with a profit of almost RMB 10.3 billion, marking its first annual loss in nearly two decades since going public in Hong Kong in 2005. Sales of its two joint ventures with Nissan plunged 21.5% and 10.2%, while deliveries of its proprietary passenger EVs declined 5.1% to roughly 303,900 units.

Context: Beijing is planning to unveil new measures to boost the performance of FAW, Dongfeng, and Changan, three automakers directly under the leadership of China’s State-owned Assets Supervision and Administration Commission (SASAC), by giving them more leeway and independence in EV operations. Local government-owned businesses, including SAIC, BAIC, and GAC, are also expected to benefit from the policy in the coming months.

READ MORE: Chinese officials reaffirm commitment to EV ambitions and promise raft of support measures amid industry doubts

RELATED ARTICLES
AdvertismentGoogle search engineGoogle search engineGoogle search engine
- Advertisment -CERAMIC COATINGS - Diamond Plate
- Advertisment -CERAMIC COATINGS - Diamond Plate

Most Popular

- Advertisment -CERAMIC COATINGS - Diamond Plate