Half of 2024 has passed, and all listed automakers have released their 2023 reports. In addition to market performance, discussions on executive compensation are also a hot topic every year.

As the jewel on the crown of industry, the automotive industry has attracted significant attention from investors and consumers in recent years due to the rise of domestic new energy vehicles.

Against this backdrop, executives of listed automakers must not only steer the ship from the driver's seat, leading the company through storms, but also undergo multi-faceted scrutiny from investors and consumers.

【Executive Compensation of New Forces Slightly Higher than Traditional Carmakers, with Stock-Based Payments Accounting for a Significant Proportion】

In the annual compensation review of automotive executives, new forces are an unavoidable topic.

From outsiders in the automotive industry to thriving innovators, the new forces, in addition to marketing, delivery volumes, and models, have also attracted media attention for their executive compensation.

In 2023, except for NIO, which did not disclose the specific compensation of its executives, members of the management teams of LIXIANG AUTO and Leapmotor took the top three spots in terms of total annual compensation.

According to public information, the annual salaries of two executives from LIXIANG AUTO, Ma Donghui and Li Tie, are 60.576 million yuan and 64.244 million yuan, respectively. Meanwhile, the annual salaries of Wu Baojun, President of Leapmotor, and Cao Li, Senior Vice President, were 47.4 million yuan and 32.3 million yuan, respectively. Additionally, the 2023 annual salary of An Conghui, CEO of ZEEKR, reached 28.907 million yuan.

Compared to the new forces, the compensation of executives from traditional carmakers is significantly lower. For example, among state-owned enterprises, the annual salary of Zeng Qinghong, Chairman of GAC Group, is 1.3337 million yuan, Zhu Huarong, Chairman of Changan Automobile, is 2.635 million yuan, Yang Qing, Chairman of Dongfeng Motor Corporation, is 1.04 million yuan, and Chang Rui, Chairman of Foton Motor, is 2.36 million yuan.

On the surface, there is a significant gap in compensation between executives of traditional carmakers and new forces, but in reality, the compensation of executives from new forces is not as lucrative as it appears.

For executives from new forces, in addition to salary payments, a significant portion of their annual compensation consists of stock-based payments.

For example, Li Tie, CFO of LIXIANG AUTO, earned a salary allowance of 2.463 million yuan, a pension of 1.65 million yuan, and stock-based compensation of up to 59.061 million yuan. As for Ma Donghui, one of the co-founders of LIXIANG AUTO, who took office as Executive Director and President on January 1, 2023, his total compensation for 2023 was 60.576 million yuan, of which stock-based compensation accounted for 54.782 million yuan.

Nezha Auto, which recently submitted its prospectus to the Hong Kong Stock Exchange, revealed in its prospectus that the annual salaries of Fang Yunzhou, Chairman, and Zhang Yong, CEO, were 47.675 million yuan and 30.994 million yuan, respectively. However, stock-based compensation accounted for 44.471 million yuan and 28.395 million yuan, respectively, while annual salary and wages were only 3.056 million yuan and 2.323 million yuan. The remaining portion consisted of stock-based payments. Therefore, if stock-based compensation is included, Nezha lags behind LIXIANG AUTO and Leapmotor. However, if stock-based compensation is excluded, the actual compensation of Nezha's executives is only at an industry average level. Industry insiders attribute this to Nezha's transition from a traditional automaker to a new energy startup, positioning its compensation between the two extremes.

According to market practices, these executives need to complete a specified service period or achieve specific performance targets to receive their stock-based compensation and obtain corresponding returns and recognition of value.

Compared to traditional carmakers, executives from new forces have achieved a leap from 0 to 1 over the past few years. As the new energy vehicle market has grown fiercely, the company valuations have also increased significantly, resulting in substantial equity returns for executives. However, their actual salaries are not the "astronomical compensation" hyped by the media. Instead, the risks they face in startup companies far exceed those faced by executives from traditional carmakers.

Additionally, according to the average compensation of management teams of A-share listed companies in 2023, the average annual salaries of chairmen, general managers (not serving as chairmen), board secretaries, chief financial officers, and deputy general managers were 1.317 million yuan, 1.3376 million yuan, 753,600 yuan, 795,100 yuan, and 1.174 million yuan, respectively.

Considering the large number of medium-sized companies on the A-share market and the growth potential and competition intensity of their respective industries, executive compensation in the new energy vehicle industry is not as outrageous as portrayed by the media.

【The Intensity of Competition in the New Energy Vehicle Industry is Unparalleled, and Innovators Deserve Proper Rewards】

In 2021, with the release of the Hurun Rich List, the wealth of many key figures from new energy companies, especially new energy automakers, skyrocketed, becoming a highly noteworthy highlight on the list.

Tesla's stock price on the other side of the ocean surged, making Elon Musk the world's first billionaire with a total wealth of 1.28 trillion yuan. In China, the market capitalization of multiple automakers continued to hit new highs, and the wealth of their core executives also saw rapid growth.

For a considerable period, the real estate industry, which has long been active on the Hurun Rich List, accounted for a significant proportion of Chinese companies. However, after 2014, with the booming development of the internet, the founders and executives of internet companies gradually gained prominence.

With the proposal of the dual-carbon strategy, industries represented by photovoltaics, energy storage, and new energy vehicles underwent a leap around 2021.

It can be said that the changes in Chinese companies on the Hurun Rich List reflect the evolution of China's industrial economic direction.

The Chinese automotive industry has long relied on the old path of market exchange for technology, but the development of new energy vehicles has enabled the Chinese automotive industry to successfully break free from this fate.

Today's Chinese new energy vehicle industry has given birth to a batch of excellent companies. For example, NIO, Xpeng, and LIXIANG AUTO have made significant achievements in replacing traditional automakers, while Nezha, as a representative, has achieved remarkable results in overseas expansion.

The reason for such achievements lies in their enthusiasm for innovation and respect for talent.

The new energy vehicle industry is one of the most competitive industries today, and the development of domestic new forces is even more challenging. In addition to continuous investment in research and development, competitive compensation is also crucial in attracting and retaining talent, providing ideal returns for innovators.

At Tesla's 2024 shareholders' meeting in June this year, Elon Musk's compensation package of up to $56 billion was approved by shareholders. As the most important business leader in Silicon Valley after Steve Jobs, Musk has led Tesla from a market capitalization of less than $60 billion to a giant exceeding $1 trillion. In this process, in addition to his sense of mission for the future of humanity, he also has expectations for wealth.

Domestic new energy vehicle manufacturers have just emerged from the mid-game, and their future depends on the efforts of more excellent managers and engineers.

Disclaimer

The content of this article concerning listed companies is based on the author's personal analysis and judgment of information disclosed by listed companies in accordance with legal obligations (including but not limited to interim announcements, periodic reports, and official interactive platforms). The information or opinions in this article do not constitute any investment or other business advice, and Market Value Observation assumes no responsibility for any actions taken based on this article.

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