Author | You Li

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SAIC Motor's new energy vehicle sales finally surpassed those of traditional fuel vehicles.

Unexpectedly, SAIC Motor made headlines due to a decline across all business lines. The July production and sales report recently released showed a 37.16% decline in monthly sales, marking the largest single-month sales drop this year. Sales of well-known brands such as SAIC Volkswagen, SAIC-GM, and Roewe all plummeted, with SAIC-GM experiencing a staggering 82.42% drop.

Furthermore, an announcement issued by SAIC Motor Group at the beginning of July revealed that Chairman Chen Hong had resigned due to retirement age. According to public records, Chen Hong served for a cumulative 10 years, rising from liaison officer, technician, and workshop director in SAIC's car project group under the tractor factory to Chairman of the Group.

According to Jiemian News, Wang Xiaoqiu has taken over as the new Chairman of SAIC Motor. Wang Xiaoqiu has held positions in quality management, technology research and development, production management, procurement, and sales, with a Doctorate in Engineering, adding a professional touch to his role. Following him, SAIC-GM's top executives have also undergone significant changes, while Roewe recalled a veteran executive.

The new management team has been in place for a short time, and the effects are not yet evident. However, such frequent personnel changes are already evidence of internal changes within SAIC Motor. Can SAIC Motor continue to solidify its position in the first tier of new energy vehicles?

1

Change of Leadership at SAIC-GM

Examining sales data to date, SAIC Motor has been on a downward trend since April. Cumulative sales in the first half of the year decreased by 11.8% year-on-year, with 1.827 million vehicles sold, accounting for only 33.5% of the annual sales target.

The significant decline in SAIC Motor's sales stems primarily from SAIC-GM.

According to SAIC-GM's production and sales report, vehicle sales in 2023 decreased by 14.45% year-on-year, with only 1.001 million vehicles sold. Instead of slowing down, the decline has intensified.

In June, SAIC-GM's sales plummeted by 72.02% year-on-year, with total sales in the first half nearly halved compared to last year. From January to July, cumulative sales reached 240,600 vehicles, down 55.14% year-on-year.

Notably, according to data from the China Passenger Car Association, the retail penetration rate of new energy vehicles in the Chinese market exceeded 50% for the first time in July, with 51.1%, an increase of 15 percentage points from the same period in 2023. In contrast, SAIC-GM's sales for over half a year in 2024 are less than a quarter of last year's, causing considerable alarm within the company.

Less than a month after Wang Xiaoqiu took office, Lu Xiao, previously Executive Deputy General Manager of Pan Asia Technical Automotive Center, succeeded Zhuang Jingxiong as General Manager of SAIC-GM. Zhuang Jingxiong had held the position for just 15 months before Lu Xiao's appointment.

Both Zhuang Jingxiong and Lu Xiao share a prominent label as "technical leaders," possibly appointed in times of crisis.

Zhuang Jingxiong took over from Wang Yongqing in May last year when SAIC-GM's sales were already declining.

2010 marked the year when China surpassed the United States as GM's largest market. SAIC-GM reached its sales peak in 2017, selling over 2 million vehicles annually. In 2019, of the 7.75 million vehicles sold globally by GM, 3.09 million came from China, 210,000 more than the United States.

However, following the explosion of China's electric and new energy vehicle market, SAIC-GM's sales plummeted, decreasing to 1.1701 million in 2022 and further shrinking by 170,000 in 2023.

Therefore, Zhuang Jingxiong's first priority was to break the market's inherent perceptions and establish Buick as a representative of new energy intelligent connected vehicles.

However, this goal was not achieved. Like Zhuang Jingxiong, Lu Xiao has a technical background, indicating that SAIC-GM remains committed to the philosophy of prioritizing technology.

Lu Xiao joined Pan Asia Technical Automotive Center in 1997, when it was the first Sino-foreign joint venture automotive design and research center in China, developing a close relationship with SAIC-GM over the years.

Lu Xiao has a deep understanding of SAIC-GM's research and development and product structure. According to public records, he led the development of important models such as the Buick Regal, LaCrosse, and Chevrolet Malibu, and is the first Chinese Chief Engineer of GM's global platform.

When announcing the leadership change, SAIC-GM emphasized its commitment to advancing in electrification and intelligence, striving for breakthroughs in technology, products, and marketing—a continuation of Zhuang Jingxiong's vision.

A more significant change occurred in the deputy leadership. Concurrent with Lu Xiao's appointment, the Sales Vice President of SAIC-GM changed from Lu Yi to Xue Haitao, a member of the SAIC-GM Wuling Executive Committee previously responsible for sales. This is the first time a senior executive from SAIC-GM Wuling has taken on this role at SAIC-GM, leading some industry insiders to speculate that SAIC-GM, previously focused on the luxury and high-end market, is seeking change and may replicate the low-cost, down-to-earth approach of Wuling.

2

Can SAIC Volkswagen Remain a Pillar?

As a multi-brand enterprise, SAIC Volkswagen is SAIC Motor's most significant revenue contributor, surpassing SAIC-GM.

However, according to the July production and sales report, while SAIC Volkswagen had the highest sales among nine brands, with 81,03 vehicles sold, this represented an 18.18% decline compared to nearly 100,000 vehicles sold last year.

In contrast, China's narrow-sense passenger vehicle retail sales declined by only 2.8% in July 2024.

This marks SAIC Volkswagen's third consecutive monthly decline this year, with the sales gap gradually widening. In May, sales were 90,013 units, down 3.01% year-on-year; in June, sales were 82,003 units, down 14.43% year-on-year. In February, sales were 111,000 units, down 8.9% year-on-year, with combined sales of 301,000 units from January to February, down 10.4% year-on-year.

From the current data, SAIC Volkswagen's cumulative sales from January to July declined by less than 2% year-on-year, essentially on par with last year. However, maintaining sales at this level has relied on price cuts.

In 2023, SAIC Volkswagen's sales declined by 8.1% to 1.215 million vehicles, still ranking among joint venture automakers. However, the cost was a 64.12% decrease in net profit compared to 2022. The company's financial report showed a decrease in capacity utilization to 58%.

Feeling the pressure on SAIC Volkswagen's profitability, a price increase notice from SAIC Volkswagen dealers suddenly surfaced online in July, announcing a reduction in terminal discounts starting in August, with adjustments potentially resulting in price increases of up to 12,000 yuan.

This notice suggested the end of a price war to many insiders, as BMW China, Mercedes-Benz, and Audi—luxury car brands that simultaneously announced their exit from the price war—quickly reached a consensus. Toyota, Volvo, and others also reduced discounts, while domestic brands like NIO took similar measures.

However, long-term perspectives suggest that it's easier to reduce prices than to increase them. According to Xiao Yizhuo, a new energy vehicle researcher, automakers' subsidies to dealers and tacit price reductions failed to significantly boost sales but eroded profits, damaged brands, and disrupted the market ecosystem, demonstrating the detrimental effects of price wars on the competitive environment.

When everyone expected SAIC Volkswagen to abandon the price increase, the company officially denied the rumor, stating that the news was untrue.

Xiao Yizhuo analyzed, "BMW and Mercedes-Benz first lowered prices and then raised them, leveraging their brand strength to test the market. Some automakers were forced to follow suit, and even if the top players abandon the price war now, these automakers still lack bargaining power with consumers."

Industry insiders revealed that SAIC Volkswagen's slight price increases in the first half were related to promotional activities.

For example, the launch of the Passat Excellence model in March offered a 20,000 yuan price reduction compared to the previous model, with minimal configuration changes, effectively amounting to an indirect price cut.

Earlier this month, SAIC Volkswagen also offered a series of limited-time discounts, including up to 59,000 yuan for models like the Lavida, Lamando, and Tiguan L.

3

Should We Reach Out to Huawei?

Overall, the fundamental reason for SAIC Motor's declining performance may be the challenge posed by new energy vehicles.

July data showed that SAIC Motor sold a total of 251,484 vehicles, with 71,106 being new energy vehicles. Calculating the latter's share reveals that new energy vehicle sales penetration at SAIC Motor Group stands at only 28.27%.

In the new energy era, joint venture brands like Honda and Toyota still rely heavily on traditional fuel vehicles or hybrid vehicles. Compared to them, SAIC Motor's new energy vehicle penetration rate is higher but still low.

These brands, already on divergent paths, appeared even more isolated in 2024, as new energy vehicle penetration exceeded 50% for two weeks in April and for the entire month of July, marking a milestone in China's transition to electric vehicles.

Managing both fuel and new energy vehicles is challenging, especially for joint venture brands like SAIC Volkswagen and SAIC-GM, which face prominent "turning" issues due to long-term cooperation with foreign forces. It's unrealistic for them to quickly pivot to new energy vehicle development like startups or cross-industry players like Baidu and Xiaomi. SAIC Motor must find new approaches, such as partnering with Huawei.

Recent news of ROEWE hiring HarmonyOS development engineers sparked heated debate, centering on whether SAIC Motor was softening its stance towards Huawei.

In 2021, former SAIC Motor Chairman Chen Hong stated at a shareholders' meeting that "SAIC Motor's soul must remain in its own hands," implying a reluctance to collaborate on development.

This stance faced opposition at the time, and with Chen Hong's retirement, the possibility of SAIC Motor softening its stance may re-emerge.

On one hand, ROEWE is one of the few growing categories within SAIC Motor. In July, ROEWE sales increased by 249%. In the first half of the year, ROEWE sold 22,500 vehicles, up 129.34% year-on-year, demonstrating significant potential despite trailing top new energy vehicle brands.

On the other hand, SAIC Motor has witnessed the rise of Huawei partnerships like Seres and JAC Motor.

As Dongfeng and FAW advance their participation in Huawei's Vehicle Business Unit, GAC Motor officially joined the HarmonyOS ecosystem, and with Huawei partnering with Chery for the Zhide brand and with BAIC for the ARCFOX brand, Huawei's "circle of friends" continues to expand. Exploring in-vehicle connectivity solutions with Huawei, which boasts mature models and development paths, may naturally lead to SAIC Motor's entry into this realm.

As Xiao Yizhuo noted, SAIC Motor's foothold in the Chinese market and its role in helping GM become a automotive giant were built on solid products and supply chain management. These efforts cannot be faked, and only with solid capabilities can SAIC Motor talk about its future.

"SAIC Motor is currently in a painful transition phase. It might as well take a bigger step forward. Even if it doesn't partner with Huawei, as long as SAIC Motor persists in exploring in-vehicle ecosystems and intelligence, there's still meaningful room for it to maneuver," Xiao Yizhuo concluded.

The article reflects the author's personal views. For any questions or feedback, please leave a comment below.