A dire need for radical reform

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Years of car manufacturing went unnoticed, but a single incident of logo removal made ARCFOX famous. This could be said to be a true portrayal of ARCFOX Automobile. ARCFOX Automobile, which has been relatively unknown in the automotive market, has recently gained popularity. Regarding the fire incident and logo removal of ARCFOX Alpha S, I believe everyone has heard about it. Here, I will extract a few key pieces of information: a two-month-old car caught fire, ARCFOX Automobile staff's first reaction was to cover the entire car with a black car cover, remove the car logo, and disassemble internal parts, even stating that they would compensate financially if necessary.

A fire incident has exposed issues with ARCFOX Automobile's product quality and service attitude. Although ARCFOX Automobile stated that the cause of the fire is still under investigation, it has failed to quell outside doubts about the safety of ARCFOX products. Furthermore, the inappropriate handling by staff at the scene of the accident is even more unacceptable.

To be honest, incidents of new energy vehicles catching fire are not uncommon, but ARCFOX Automobile's act of removing the car logo is indeed a "once-in-a-century" event. The sensitivity of ARCFOX Automobile staff to the exposure of vehicle logos also reflects, to a certain extent, that this brand is more concerned about protecting its brand image than other automakers.

Unlike other brands that primarily target C-end customers, ARCFOX Automobile's customers mainly come from the B-end, making it even more crucial for ARCFOX to maintain a good reputation for quality reliability. Currently, ARCFOX Automobile has failed to make significant waves in the C-end market. If it fails to manage its brand image, it will not only lose B-end customers but also investors' confidence, dealing a fatal blow to ARCFOX Automobile.

ARCFOX can't afford any more setbacks

The reason ARCFOX Automobile became the focus of public opinion this time is that the brand's response to product failure issues was bizarre. When the vehicle caught fire, ARCFOX Automobile staff's first priority was not to concern themselves with the user's personal safety but to worry about someone recognizing the burning vehicle as an ARCFOX Alpha S and immediately covered it with a car cover and removed the logo.

Although ARCFOX Automobile acknowledged that staff mishandled the accident, it also reflects the brand's poor public relations handling capabilities and the difficulties it faces. ARCFOX Automobile's sensitivity in handling the fire incident is inextricably linked to its challenging situation.

Let's first understand ARCFOX Automobile's hard power. ARCFOX Automobile is a new force in the automotive industry born with a golden key and is the brand that Beijing Automotive Group (BAIC) BluePark has fully invested in during its transformation. Its shareholders include BAIC BJEV and multinational automotive parts giant Magna International. With state-owned assets as its backdrop, ARCFOX Automobile's products are manufactured by BluePark Magna, a joint venture between BAIC BluePark and Magna International in China. As one of the world's largest automakers, it is evident that ARCFOX Automobile has a strong backing. At the delivery ceremony for the first batch of ARCFOX S5 owners, the chairman of BAIC Group even announced plans to invest 100 billion yuan to support ARCFOX.

Whether the 100 billion yuan investment will materialize is not our concern here, but one thing is certain: ARCFOX Automobile has funds, production resources, and automotive manufacturing technology. It was once highly anticipated by BAIC BluePark and set a goal of selling 40,000 vehicles annually in 2022, contributing to BAIC BluePark's annual sales target of 100,000 vehicles.

However, ARCFOX Automobile only achieved sales of 12,600 vehicles that year, while BAIC BluePark delivered 50,200 vehicles. To this day, ARCFOX Automobile's market performance has shown no signs of improvement, with sales of only 18,000 vehicles in the first half of 2024. Although this represents a year-on-year increase of 110.24%, the sales base remains low.

ARCFOX Automobile indeed cannot afford any more setbacks. With low market popularity, if issues with product quality are widely spread online, ARCFOX Automobile's models will find it even harder to attract consumer attention. From ARCFOX Automobile's perspective, it is not difficult to understand why the brand is eager to cover and dismantle the logos of burning vehicles.

ARCFOX Automobile needs to improve its brand image to change its current performance dilemma. Unlike other new energy automakers, its primary customer base is B-end rather than C-end. Although ARCFOX Automobile had planned to expand into the C-end market, hoping not to rely heavily on the ride-hailing market like its parent company, BAIC BJEV, it has consistently struggled to gain traction in the C-end sector. Under sales pressure, it has ultimately fallen back on its B-end customer base. The burning vehicle in question belonged to a ride-hailing rental company.

Ride-hailing companies have extremely high requirements for vehicle reliability due to the high frequency of use and long operating hours, making vehicle quality a top priority for users. Therefore, ARCFOX Automobile is extremely sensitive to the exposure of burning vehicle logos, attempting to conceal everything about the vehicle. However, in today's interconnected world, ARCFOX Automobile's fire and logo removal incident has become widely known.

Even more afraid of losing capital's trust

As everyone knows, it is difficult for new energy automakers to achieve profitability. Currently, only a handful of automakers like BYD, Li Auto, and Tesla are profitable, while others, including ARCFOX Automobile with sluggish sales, are operating at a loss. This is reflected in BAIC BluePark's financial reports.

BAIC BluePark's previously released financial reports indicate an estimated loss of between 2.4 billion and 2.7 billion yuan for the first half of 2024. According to statistics, the company has been unprofitable for four consecutive years from 2020 to 2023, with losses of 6.646 billion yuan, 5.544 billion yuan, 5.838 billion yuan, and 6.018 billion yuan, respectively, totaling a staggering loss of 24.046 billion yuan.

Due to insufficient cash flow generation capabilities, BAIC BluePark has had to rely on external funding. It is understood that since its backdoor listing in 2018, BAIC BluePark has conducted four private placements, raising a cumulative amount exceeding 40 billion yuan. According to BAIC BluePark, the funds raised will be used for projects such as the development of skateboard platforms for scenario-based products, upgrades to vehicle products, and R&D and core competency development.

However, judging from ARCFOX Automobile's sluggish market performance and BAIC BluePark's unimpressive financial reports, BAIC BluePark's so-called product upgrades and technological research and development have not received positive feedback from the market, and there is even a sense of stagnation.

Regarding the whereabouts of BAIC BluePark's over 40 billion yuan in funds, we can gain some insight from its annual reports. BAIC BluePark's previously released annual reports show that from 2020 to 2023, its marketing expenses were 1.008 billion yuan, 1.672 billion yuan, 1.992 billion yuan, and 1.999 billion yuan, respectively, while its technology and product R&D expenses were 973 million yuan, 1.208 billion yuan, 1.249 billion yuan, and 1.186 billion yuan, respectively.

It is evident that BAIC BluePark's spending on marketing has consistently exceeded its technology R&D expenses, unlike other automakers. Taking BYD as an example, its R&D expenses have been significantly higher than its marketing expenses for many years, with the increase in R&D expenses exceeding 100% in the past two years. The reason is not difficult to understand. The competition in the automotive market ultimately boils down to the competition of core technologies, which is also the main reason why BYD has been able to dominate the market.

In contrast, BAIC BluePark prioritizes marketing over technological R&D, and even saw a year-on-year decrease in R&D expenses last year. The result, as mentioned above, is a sluggish market performance. It is worth noting that even with BAIC BluePark's heavy investment in marketing, ARCFOX Automobile's market influence does not seem to have improved significantly.

With insufficient competitiveness in core technologies, ARCFOX Automobile's products struggle to keep pace with the times. Yu Chengdong, Executive Director of Huawei, Chairman of the Terminal BG, and Chairman of the Intelligent Automobile Solutions BU, once stated, "There are issues with ARCFOX (Beijing Automotive Group's) product definition and competitiveness." Undoubtedly, when products fail to meet market demand, ARCFOX Automobile will find it difficult to achieve satisfactory market results and self-sustain.

It is understood that after ARCFOX Automobile partnered with Huawei, it was highly regarded by the capital market. However, after Yu Chengdong's criticisms, ARCFOX Automobile and BAIC BluePark's reputation in the capital market is likely to suffer a significant blow, further impacting BAIC BluePark's fundraising plans. Upon seeing this, it is not difficult to understand why ARCFOX Automobile is so sensitive about the exposure of burning vehicles. If ARCFOX Automobile's quality again attracts negative publicity, losing the trust of the capital market will make its future fundraising journey even more difficult.

Pressure on Dai Kangwei

For ARCFOX Automobile to gain recognition from the capital market and consumers, simply covering up flaws is not enough. As industrial products, new energy vehicles inevitably have defects. When a model malfunctions, the key is to face and resolve the issue, not to address it by burying one's head in the sand. ARCFOX Automobile's handling of this incident was indeed inappropriate.

Although ARCFOX Automobile has publicly apologized for the fire incident, staff's indifference towards users has already left a poor impression on consumers. For ARCFOX Automobile to gain more consumer trust, it needs to further enhance its core technology R&D and innovation while also improving its service channels.

However, optimizing ARCFOX Automobile's development strategy requires a stable management team. For any enterprise to achieve long-term stable development, a stable management layer is essential to ensure business continuity and stability. However, since BAIC BluePark launched ARCFOX Automobile, the company's internal management has been in a state of flux.

Recently, BAIC BluePark underwent a leadership adjustment, with Liu Yu, former Deputy General Manager of BAIC Group and Chairman of BAIC BJEV, no longer concurrently serving as Chairman of BAIC BJEV. He was succeeded by Dai Kangwei, former Secretary of the Party Committee and General Manager of BAIC BJEV. It is understood that Liu Yu served as Chairman from 2021 for only about three years.

However, prior to this leadership adjustment, BAIC BluePark had undergone several significant personnel changes. For example, Wang Qiufeng, who served as Vice President and General Manager of ARCFOX Automobile's Marketing Company in 2020, resigned in November 2022. In another instance, Zhang Guofu took over as the legal representative of ARCFOX Automobile from Fan Jingtao in January 2023. According to statistics, ARCFOX Automobile has undergone three changes in legal representatives from 2020 to 2023. Whether Dai Kangwei can maintain his position as Chairman for the long term is indeed uncertain.

Undoubtedly, with unstable corporate leadership, ARCFOX Automobile's development strategy will continue to change with personnel changes. In such circumstances, how can ARCFOX Automobile develop steadily? It can be said that ARCFOX Automobile's sales dilemma and BAIC BluePark's continued losses are closely related to the unstable management team.

Now that Dai Kangwei has taken office and is fully in charge of ARCFOX Automobile's development, BAIC BluePark will usher in a new era. Whether ARCFOX Automobile's development strategy can be steadily advanced under Dai Kangwei's leadership, whether the quality of its new energy vehicles can be significantly improved, and whether ARCFOX Automobile can be reborn and reverse its sluggish performance – only time will tell.