Woodcutter, Creator, Cars, and the Jianghu Witness the Rise of China's Auto Industry Together

SAIC Motor delivered a disappointing performance in the second quarter with a loss of 1.1 billion yuan (excluding non-recurring gains and losses).

As the largest automaker in China for 18 consecutive years, SAIC's rapid decline exceeded market expectations.

SAIC's decline marks the end of an era and the beginning of a new one.

1. SAIC Ends Its Reign with a Huge Loss of 1.1 Billion Yuan

On the 29th, SAIC announced its half-year financial results. From January to June, SAIC Group sold 1.827 million new vehicles wholesale, a year-on-year decrease of 11.8%. During the same period, the company's total revenue was 284.69 billion yuan, a year-on-year decrease of 12.8%; net profit was 6.63 billion yuan, a year-on-year decrease of 6.5%.

It is worth noting that out of SAIC's 6.63 billion yuan in net profit in the first half of the year, 5.13 billion yuan came from the sale of shares in MG Motor India Pvt. Ltd. Accountants refer to gains from the sale of shares as non-recurring gains and losses. In layman's terms, a normal company would not sell shares every day, hence the term 'non-recurring gains and losses'.

SAIC's net profit excluding non-recurring gains and losses in the first quarter was 2.12 billion yuan. In the second quarter, its net profit excluding non-recurring gains and losses was only 1.02 billion yuan. In other words, SAIC suffered a recurring loss of 1.1 billion yuan in the second quarter.

It can be said that the second quarter marked a turning point for SAIC, as it transitioned from prosperity to decline and from profitability to loss over the years.

Now that SAIC has entered the era of Wang Xiaoqiu, it remains to be seen how he will turn things around and revive SAIC's former glory.

However, the business world is like sailing against the current; one must move forward or fall behind. The market will not pause or wait for SAIC to catch its breath before starting anew. As SAIC's position weakens, BYD is poised to take over its crown.

2. BYD Earns 13.6 Billion Yuan While Competing on Price

In contrast to SAIC's decline, BYD is showing strong upward momentum. In the first half of the year, BYD generated revenue of 301.1 billion yuan, a year-on-year increase of 16%. From January to July, it delivered a cumulative total of 1.95 million vehicles, a year-on-year increase of 29%. It is worth noting that BYD's overseas market has grown rapidly, with cumulative exports exceeding 230,000 units, a year-on-year increase of 152%. The overseas market is expected to take over from the domestic market and drive BYD's continued strong growth.

It is worth mentioning that BYD invested 20.2 billion yuan in research and development in the first half of the year, 6.6 billion yuan more than its net profit. This shows the importance BYD places on research and development.

In terms of electric drive systems, BYD has built a solid technological moat.

BYD's most pressing need is to develop its autonomous driving capabilities. Great rewards come with great risks, and it remains to be seen whether BYD can make a breakthrough in this area.

Regarding government subsidies, BYD received 3.401 billion yuan in government subsidies in the first half of the year (included in current profit and loss). Excluding these government subsidies, BYD would still have achieved positive profits.

Objectively speaking, it cannot be said that BYD relies on subsidies to survive. On balance, BYD's upward momentum is clear and strong, and it is expected to take over from SAIC as China's largest automaker this year.

3. The Automotive Race is a Marathon

The competition between SAIC and BYD is essentially a battle between joint ventures and independent brands, as well as between fuel-powered and electric-powered vehicles. SAIC's decline and BYD's rise represent the victory of independent brands over joint ventures and electric vehicles over fuel-powered vehicles.

These conclusions are supported by data. In terms of sales, independent brands have long surpassed joint ventures. In terms of market penetration, electric vehicles surpassed 50% penetration last month, becoming the mainstream.

However, the automotive race is a marathon. SAIC's decline does not necessarily mean its end; BYD's sudden strength does not guarantee its permanent dominance. For example, BYD's autonomous driving capabilities are not commensurate with its size. It is important to note that BYD's rise has only occurred in the past three years.

The automotive industry is still evolving, and the next opportunity lies ahead. Whoever seizes the next opportunity will take off again.

The automotive world is never short of legends.