Written by | Xingxing

Source | Beiduo Finance

Recently, Great Wall Motors Co., Ltd. (http://02333.HK, 601633.SH, hereinafter referred to as "Great Wall Motors") released its 2024 annual earnings forecast, announcing a year-on-year increase in net profit attributable to shareholders of 76.60% to 85.14%, marking a new high in profit scale.

However, it should be noted that in the past year, Great Wall Motors strategically abandoned the "loss-leader" pricing tactic to gain market share and instead focused on the performance and value of its automotive products, aiming for "market share with quality." Under this strategy of prioritizing profit and quality, the upward trend in the company's profit curve is not solely driven by sales growth.

Consequently, the lagging completion rate of the annual sales target remains a persistent challenge for Great Wall Motors. To achieve a high-quality balanced development encompassing both "quantity and quality," the company must first boost confidence in its sales performance.

I. Impressive Profitability

Great Wall Motors' earnings forecast indicates that the company expects to achieve a net profit attributable to shareholders of RMB 12.4 billion to RMB 13 billion in 2024, representing a year-on-year increase of 76.60% to 85.14%. After deducting non-recurring gains and losses, the net profit is projected to be approximately RMB 9.4 billion to RMB 10 billion, also registering a significant increase of 94.47% to 106.88%.

Great Wall Motors attributes the 2024 performance growth to its commitment to high-quality development, emphasis on quality, creation of an ultimate product experience, increase in overseas sales, and further optimization of the domestic product structure, all of which have propelled the net profit attributable to shareholders into an upward trajectory.

Previous performance reports revealed that Great Wall Motors' revenue scale in the first three quarters of 2024 reached RMB 142.254 billion, up 19.04% year-on-year, setting a new record for total revenue in this period. This is more than double the RMB 62.143 billion reported in the first three quarters of 2020, demonstrating robust growth momentum towards the RMB 150 billion mark.

Simultaneously, Great Wall Motors' comprehensive gross margin stood at 20.76%, an increase of 1.92 percentage points compared to the same period in 2023. The net profit attributable to shareholders was RMB 10.429 billion, a year-on-year increase of 108.70%, while the net profit after deducting non-recurring gains and losses was RMB 8.374 billion, up 119.93% year-on-year, both achieving double-digit growth.

Based on available data, it can be calculated that Great Wall Motors' net profit attributable to shareholders for the fourth quarter alone is approximately RMB 1.971 billion to RMB 2.571 billion, while the net profit after deducting non-recurring gains and losses is approximately RMB 1.26 billion to RMB 1.626 billion. In comparison, the company's net profit attributable to shareholders and net profit after deducting non-recurring gains and losses for the third quarter were RMB 3.35 billion and RMB 2.722 billion, respectively.

Despite the lingering sales momentum from the traditional "Golden September and Silver October" season, Great Wall Motors' net profit in the fourth quarter showed a sequential decline, with a nearly 50% drop. It was the company's performance accumulation in the first three quarters that contributed to the significant profit increase for the entire year of 2024.

Nevertheless, overall, Great Wall Motors, with this "report card" showcasing significant profit growth, can be considered to have regained its confidence. In 2023, the company's net profit attributable to shareholders had experienced a negative growth of 15.06%, dropping to RMB 7.022 billion. Although the net profit after deducting non-recurring gains and losses increased to RMB 4.834 billion, the growth rate was only in the single digits.

II. Sales Target Not Met

According to Great Wall Motors' latest December 2024 production and sales bulletin, the company's monthly production in December was 139,700 vehicles, an increase of 41.99% compared to 98,400 vehicles in the same period of 2023. Sales stood at 135,300 vehicles, up 20.25% from 112,500 vehicles in December 2023.

However, unlike the performance uptick, there has been no substantial growth in Great Wall Motors' sales performance. The company's annual total sales increased from 1.2307 million vehicles in 2023 to 1.2333 million vehicles in 2024, with a net increase of 2,588 vehicles and a meager growth rate of 0.21%, practically "standing still."

Great Wall Motors had set its annual sales target for 2024 at 1.9 million vehicles. Based on this, the company's annual sales target completion rate is only 64.91%. In contrast, in the mainstream domestic automobile market, both BYD and Geely exceeded their annual sales targets, and among new-energy vehicle startups, Li Auto and NIO also delivered impressive sales results.

What led to the low completion rate of sales targets for Great Wall Motors among domestic auto companies? According to the production and sales bulletin, the company's tank brand and WEY brand achieved sales growth of 42.12% and 31.55%, respectively, in the past year. However, sales of 231,000 and 54,700 vehicles were insufficient to drive an increase in total sales.

In contrast, Haval Motor, which contributes more than half of Great Wall Motors' sales, saw its sales scale decrease by 1.25% year-on-year to 706,200 vehicles in 2024. Sales of Great Wall Pickup also decreased by 12.47% year-on-year to 177,100 vehicles, and sales of the Ora brand, targeting the new energy sector, fell to 63,300 vehicles, a decline of 41.69%, the most significant among the segmented brands.

Great Wall Motors sold 42,300 new energy vehicles in December 2024, with cumulative sales for 2024 reaching 321,800 vehicles, an increase of 22.82% compared to 262,000 vehicles in the same period of 2023. However, this is not comparable to traditional automakers with sales in the millions or new-energy vehicle startups that have deeply cultivated this sector.

Moreover, the sales volume of new energy vehicles by Great Wall Motors only accounted for 26.09% of its total sales. To achieve Wei Jianjun, Chairman of Great Wall Motors' goal of "achieving global annual sales of 4 million vehicles by 2025, with 80% being new energy vehicles," the company still needs to focus on building its brand matrix.

III. Committing to the Ultra-Luxury Market

In Wei Jianjun's view, the safety and quality of automobiles depend on cost, and excessive price competition is a vicious cycle. He stated that "Great Wall Motors is not afraid of sales declines and does not pursue meaningless sales." Brands with severe losses will sell moderately less, while those that are profitable or only slightly losing will be vigorously promoted.

At the beginning of 2025, Great Wall Motors announced that it would aim its development goals at the ultra-luxury market. The company issued an announcement stating that it would establish a new organization, "Great Wall Brand Ultra-Luxury BG (Business Group)," with Wei Jianjun personally serving as Chairman and Song Dongxian, Vice President of Technology at Great Wall Motors, as CEO.

The primary task of this new organization is to manufacture "ceiling products in the automotive industry," operating in a "high-quality, small-batch" manner, distinct from conventional mass-produced vehicles. Separately, media reports indicated that the company has registered the "Zixin Automobile" trademark and applied for multiple new brand logos, potentially related to new models.

In fact, this is not the first time Great Wall Motors has ventured into the high-end luxury segment. The company launched the Salon brand in 2020, with the first mass-produced car, "Salon Armored Dragon," unveiled at the Guangzhou Auto Show in 2021. Positioned as a pure electric coupe, the limited edition had a guide price of RMB 488,000 and was scheduled for delivery in the fourth quarter of 2022.

However, ultimately, consumers did not receive news of the Salon Armored Dragon's launch, and the Salon brand merged with Ora, which has yet to be mass-produced. Furthermore, as time passed, the operating costs of the Ora brand were reduced, and the "Ora ORA" app ceased operations entirely in 2024, with related service functions migrated to the Great Wall Motors app.

Regardless of Great Wall Motors' own brand operation capabilities and the future competitiveness of new models, the crisis has spread to the ultra-luxury automobile market amidst the wave of new energy and fierce "price wars." Data released by the China Passenger Car Association revealed that sales of Bentley, Maserati, and Ferrari fell by 71%, 23%, and 43%, respectively, in the first 11 months of 2024.

Clearly, Great Wall Motors still has a long way to go in achieving "market share with quality."