Photo credit: Duge

Photographed at the Shanghai Auto Show in April 2023

During the period of profound transformation in the automotive industry, even "giants" like SAIC Motor (600104.SH) are continuously experiencing "growing pains," with increasing operational pressures.

On the evening of August 29, SAIC Motor disclosed its financial results for the first half of 2024. According to the announcement, the company's revenue for the reporting period was RMB 277.086 billion, a year-on-year decrease of 12.43%; net profit was RMB 6.628 billion, a year-on-year decrease of 6.45%.

This means that in the first half of this year, SAIC Motor's revenue and net profit both declined. The underlying reason is closely related to its unsatisfactory sales performance. In the first half of the year, SAIC Motor sold a total of 1.827 million vehicles, a year-on-year decline of 11.81%. Among them, the overall sales of SAIC-GM, SAIC Passenger Vehicles, and SAIC MAXUS all declined to varying degrees.

Furthermore, due to extremely poor performance, SAIC-GM became the biggest "drag," with a net profit turning from a profit of RMB 528 million in the same period last year to a loss of RMB 2.275 billion in the first half of this year.

It is known that there have been significant changes in the senior management of SAIC Motor recently, including several of its subsidiaries. So, can SAIC Motor successfully navigate through this "growing pains" period and enter a new era after its management underwent a "metamorphosis" amidst this ever-changing landscape?

1

Performance Under Pressure ●

According to SAIC Motor's 2024 interim report, the company sold 1.827 million vehicles wholesale in the first half of the year, with terminal deliveries reaching 2.115 million vehicles. While maintaining its leading position in the domestic industry, it effectively alleviated inventory pressures in sales channels.

Among them, SAIC Motor's new energy vehicle terminal deliveries reached 524,000 units, an increase of 29.9% year-on-year, ranking second among Chinese automakers; overseas market terminal deliveries reached 548,000 units, an increase of 12.7% year-on-year, continuing to lead the industry.

However, these are just the positive aspects. Compared to the above-mentioned "leading" and "pioneering" achievements, SAIC Motor is likely facing even more risks and challenges.

For example, during the reporting period, SAIC Motor achieved total operating revenue of RMB 284.686 billion, a year-on-year decrease of 12.82%; operating revenue was RMB 277.086 billion, a year-on-year decrease of 12.43%; net profit was RMB 6.628 billion, a year-on-year decrease of 6.45%; basic earnings per share were RMB 0.577, a year-on-year decrease of 6.33%.

Not only that, SAIC Motor's deducted net profit in the first half of the year also decreased by 82% year-on-year to RMB 1.02 billion, a more significant decline compared to other financial indicators.

The company explained that this was mainly due to the decline in the gasoline vehicle market and the unprecedented intense price war, leading to a reduction in the company's sales revenue and gross margin. In the first half of 2024, SAIC Motor's overall production and sales volumes were 1.8133 million units and 1.827 million units, respectively, down 13.94% and 11.81% year-on-year.

Faced with this adverse situation, SAIC Motor mentioned that in the first half of the year, the company firmly promoted innovation and transformation, focused on key model projects, accelerated the implementation of innovation achievements, maintained operational resilience during the structural adjustment period, and worked hard to consolidate its foundation and enhance its development potential.

Specifically, the company held the "SAIC New Energy Technology Conference," where new-generation innovative technologies such as solid-state batteries and the Intelligent Vehicle Full Stack 3.0 solution were officially launched. "Central Brain," central coordination motion controllers, and others completed phased development and achieved mass production applications. In addition, the company also jointly developed multiple pure electric and hybrid products for the Chinese market with joint venture partners.

However, we noticed that SAIC Motor's investment in research and development decreased in the first half of the year. In the first half of 2024, SAIC Motor's research and development expenses were RMB 7.675 billion, a decrease of 3.51% from RMB 7.954 billion in the same period last year.

This seems to be different from other leading automakers in the industry. Among the listed automakers that have already released their interim reports, BYD, Great Wall Motor, and others have all seen year-on-year increases in research and development expenses. It appears that under unfavorable performance conditions, SAIC Motor is being more cautious with its spending.

2

Who's Holding Back Progress? ●

As mentioned in SAIC Motor's interim report, the market environment has undergone significant changes in the first half of this year, and China's automotive industry is facing complex challenges with "internal competition and external pressure."

On the one hand, affected by insufficient effective demand, domestic market sales growth is under pressure, and the "price war" has caused consumers to hold off on purchases, leading to higher-than-normal industry terminal inventory levels. On the other hand, while automobile exports and new energy vehicle production and sales have maintained rapid growth, significantly contributing to the industry's stable growth, the growth rate of new energy vehicle exports has slowed down significantly due to international trade protectionism, further intensifying industry competition and increasing business operational pressures.

Caught in the middle, SAIC Motor is inevitably affected, but from its own perspective, it is not without problems. Its joint venture automakers and independent brands have obviously lost their rhythm in the wave of transforming to new energy vehicles.

Data shows that among SAIC Motor's subsidiaries in the first half of 2024, SAIC-GM experienced the most significant decline in sales, with cumulative sales of 225,600 vehicles, a year-on-year decline of 49.98%; SAIC Passenger Vehicles sold 334,800 vehicles, a year-on-year decline of 18.49%; and SAIC MAXUS sold 96,300 vehicles, a year-on-year decline of 9.18%.

This led to a revenue of RMB 32.002 billion for SAIC-GM in the first half of the year, a year-on-year decrease of 48.42%; net profit was -RMB 2.275 billion, turning from a profit of RMB 528 million in the same period last year to a loss. For SAIC Passenger Vehicles and SAIC MAXUS, specific revenue and net profit figures were not disclosed in the interim report.

Change is imminent, and fortunately, SAIC Motor is undergoing a series of strategic changes and business adjustments, starting with significant personnel changes.

Following Wang Xiaoqiu's succession as Chairman of SAIC Motor and Jia Jianxu's appointment as President of the company, SAIC-GM announced new personnel appointments: Lu Xiao, the former Executive Deputy General Manager of Pan Asia Technical Automotive Center, succeeded Zhuang Jingxiong as General Manager of SAIC-GM, while Cai Bin, Assistant President of SAIC Motor, became the Party Secretary of SAIC-GM. Meanwhile, Xue Haitao, the former Deputy General Manager of SAIC-GM Wuling, assumed the position of Deputy General Manager of the company, responsible for marketing-related work.

Not long ago, according to the official account of SAIC Passenger Vehicles, Yu Jingmin, the former Party Secretary and Executive Deputy General Manager of Sales and Marketing at SAIC Volkswagen Automotive Co., Ltd., became the Executive Deputy General Manager of SAIC Motor Passenger Car Division; Zhu Yong, the former Executive Director of Power Drive Platform, Business Planning and Project Management Department of SAIC Passenger Vehicles, became the Deputy General Manager of SAIC Motor Passenger Car Division.

At the same time, SAIC Volkswagen also announced that Tao Hailong, the General Manager of SAIC Volkswagen, concurrently assumed the position of Party Secretary of SAIC Volkswagen. Fu Qiang, the former Executive Director of Volkswagen Brand Marketing Business, succeeded Yu Jingmin as Executive Deputy General Manager of Sales and Marketing at SAIC Volkswagen and General Manager of SAIC Volkswagen Sales Co., Ltd.

From the Intensive personnel changes , it is evident that SAIC Motor is deploying its strategy and targeting its core business segments. Whether SAIC Motor's performance can return to an upward trajectory under the new leadership team remains to be proven over time.

Author | Li Li

Source | CarVisibility

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