Source | Deep Blue Finance

Written by | Wu Ruixin

Residents of Guangzhou awoke to a shocking revelation. According to the latest 2024 GDP figures, Chongqing has overtaken Guangzhou, becoming China's fourth largest economy. Some netizens humorously suggested that the "Beijing-Shanghai-Guangzhou-Shenzhen" quartet might soon be replaced by "Beijing-Shanghai-Shenzhen-Chongqing." The reasons behind Guangzhou's GDP decline in 2024 are multifaceted, encompassing the automotive industry, real estate, and other structural issues. However, the automotive sector stands out as the most prominent and closely watched factor. As the saying goes, "Guangzhou's automotive industry pivots on Guangzhou Automobile Group." Should Guangzhou Automobile Group be held accountable for Guangzhou's lagging GDP? Judging by its performance, Guangzhou Automobile Group indeed suffered significant losses in 2024. Sales declined, and the company's performance took a major hit, with a net loss of 3.3 to 4.7 billion yuan after excluding non-recurring gains and losses, marking the company's first loss in two decades.

Meanwhile, on the final day of the Chinese New Year holiday, former Chairman Zeng Qinghong announced his retirement, sending subtle signals.

1

"China's Fourth Largest Economy" Changes Hands

Behind Guangzhou's Slowdown: Guangzhou Automobile Group's First Major Loss in 2024. With a GDP of 3,219.315 billion yuan, Chongqing surpassed Guangzhou's 3,103.25 billion yuan, officially claiming the title of "China's fourth largest economy." Not only did Chongqing outperform Guangzhou in total economic output, but its GDP growth rate also exceeded Guangzhou's by 3.6 percentage points. The development trajectories of these two cities immediately garnered national attention. Chongqing has seen rapid advancements in the new energy automotive industry in recent years, while Guangzhou has been gradually consolidating its position amidst the transformation of traditional industries. The reasons for Guangzhou's GDP decline are multifaceted, encompassing the automotive industry, real estate, and other structural issues. However, Chongqing's GDP growth is inextricably linked to its automotive industry.

For years, Guangzhou and Chongqing have competed for the title of "China's Top Automotive Manufacturing City." As two of China's major automotive hubs, the automotive manufacturing industry has significantly contributed to both cities' GDP. In 2024, Guangzhou, which had held the title of "China's Top Automotive Manufacturing City" for five consecutive years, was overtaken by Chongqing. Specifically, the added value of Guangzhou's automotive manufacturing industry declined by 16.4%, while Chongqing's automotive industry grew by 26.7%. Guangzhou's automotive industry heavily relies on Guangzhou Automobile Group, which accounts for 80% of the city's automotive production. However, Guangzhou Automobile Group stumbled in 2024. According to the company's 2024 performance forecast released before the Spring Festival, Guangzhou Automobile Group is expected to report a net profit of 800 million to 1.2 billion yuan in 2024, a decrease of 3.2 to 3.6 billion yuan compared to the previous year, representing a year-on-year decrease of 72.91% to 81.94%.

It's worth noting that these projected net profits of 800 million to 1.2 billion yuan for Guangzhou Automobile Group do not stem from car sales but from share sales. On December 3, 2024, Guangzhou Automobile Group issued an equity transfer announcement stating that it plans to sell a 18.82% stake in its subsidiary Guangzhou Giant Bay Technology Research to its controlling shareholder Guangzhou Automobile Industry Group for approximately 1.331 billion yuan. This transaction is expected to increase Guangzhou Automobile Group's net profit by 2.26 billion yuan in 2024. Without this, the company's net profit would have been in the red! According to the company's performance forecast, after excluding non-recurring gains and losses, Guangzhou Automobile Group expects a net loss of 3.3 billion to 4.7 billion yuan in 2024, representing a year-on-year decrease of 192.37% to 231.56%. This will be the company's first loss in two decades.

Guangzhou Automobile Group attributes its declining performance to internal competition, industry price wars, and drastic changes in the competitive landscape, leading to decreased car sales. To combat market competition, the company and its invested enterprises invested approximately 18 billion yuan in business policies such as sales subsidies. In fact, the decline in Guangzhou Automobile Group's performance has been evident for some time. According to previously released third-quarter report data, the company's automotive production in the first three quarters of 2024 declined by 26% year-on-year.

Entering 2025, Guangzhou Automobile Group's slowdown continued. According to the company's recently released production and sales data for January, automotive production was 116,300 units, a year-on-year decrease of 26.13%; sales were 98,400 units, a year-on-year decrease of 25.41%. Among its joint venture automotive enterprises, multiple entities experienced varying degrees of decline in production and sales: sales of Guangzhou Honda were 15,123 units, compared to 35,282 units in the same period last year, a year-on-year decrease of 57.14%; sales of Guangzhou Automobile Trumchi were 18,327 units, compared to 33,799 units in the same period last year, a year-on-year decrease of 45.78%; sales of GAC AION were 7,965 units, compared to 11,005 units in the same period last year, a year-on-year decrease of 27.62%. Only Guangzhou Toyota's sales increased year-on-year, with 57,000 units sold compared to 51,030 units in the same period last year, representing an increase of 11.7%.

2

Former Chairman's Shocking Statements

Why is Guangzhou Automobile Group Out of Sync? Previously, Guangzhou Automobile Group solidified its position as China's top automotive manufacturing city primarily due to its numerous Japanese joint venture brands. The company boasts brands such as Guangzhou Honda, Guangzhou Toyota, Guangzhou Mitsubishi, Guangzhou Automobile Trumchi, and GAC AION, with production gradually increasing over the past decade. In 2013, Guangzhou Automobile Group's overall production exceeded 1 million units, and then in 2017, it surpassed 2 million units. However, in the wave of new energy vehicles, joint venture brands have not kept pace, especially amid the recent trend of "major setbacks for joint venture brands," where Guangzhou Honda and Guangzhou Toyota have also encountered challenges. In 2024, Guangzhou Automobile Group's total annual auto sales amounted to 2.003 million units, a year-on-year decline of 20%.

Among them, Guangzhou Honda and Guangzhou Toyota, the two pillar joint venture brands, contributed only 1.209 million units in total, a year-on-year decline of 24%. On the other hand, Guangzhou Automobile Group's autonomous business, which had embarked on the new energy transformation early on, suddenly "fell behind" in 2024. In 2024, the total sales of Guangzhou Automobile Group's two autonomous brands, Guangzhou Automobile Trumchi and GAC AION, were 789,000 units, a year-on-year decline of 11%. Some believe that this is inseparable from the recent resignation of former Chairman Zeng Qinghong.

According to data, Zeng Qinghong is a "veteran" of Guangzhou Automobile Group. Starting in 1999, Zeng Qinghong successively served as the party secretary and executive deputy general manager of Guangzhou Honda, deputy general manager, deputy chairman, and general manager of Guangzhou Automobile Group. In 2016, Zeng Qinghong officially took on the role of chairman of Guangzhou Automobile Group. During his tenure at Guangzhou Automobile Group, Zeng Qinghong personally drove the development of joint ventures, enabling the company to collaborate with joint venture brands to create classic models such as the Camry and Accord. He also led the rise of autonomous brands like Guangzhou Automobile Trumchi and GAC AION. After taking office, Guangzhou Automobile Group's sales once exceeded 2.5 million units, with annual revenue peaking at 128.757 billion yuan.

However, in the past three years, the usually low-key Zeng Qinghong has frequently sparked controversy with his statements. For instance, at the 2024 China Automotive Chongqing Forum, Zeng Qinghong spoke out against price wars, saying, "This kind of intense competition is not a solution. The purpose of a business is to make a profit, contribute to the country and society, pay taxes, create jobs... What will this do to society and the country in the long run?" He also suggested that relevant government departments study "equal rights for oil and electricity" after new energy vehicles account for 50% of the market. At the 2023 China Automotive Chongqing Forum, regarding price wars among automakers, he said, "If you want to die early, then reduce prices early and reduce them more," appealing for standardized competition in the automotive industry. In 2022, amidst rising power battery prices, Zeng Qinghong spoke at the World Power Battery Conference, stating, "The cost of power batteries has accounted for 40-60% of the cost of automobiles. Am I not just working for CATL?" He also suggested that the national level and various departments strengthen supervision, guidance, and coordination in the battery industry to bring battery prices back to a reasonable range.

In an article, Huxiu analyzed that by disregarding the current state of the Chinese automotive industry and the true industry and market trends, Guangzhou Automobile Group ultimately became out of sync - in market competition, its efforts have long been conservative; in brand strategy, its planning has been biased; and at the technological level, key technologies are lacking.

3

Can New Chairman Feng Xingya Lead Guangzhou Automobile Group to Victory?

As the veteran retires and the new leader takes office, who will now steer Guangzhou Automobile Group following Zeng Qinghong's retirement? The announcement indicates that Feng Xingya, the former general manager of Guangzhou Automobile Group, has been promoted to chairman and will guide the company. Before Feng Xingya took office, at the end of 2024, Guangzhou Automobile Group announced that it would relocate its headquarters from Zhujiang New Town CBD in Guangzhou to Panyu Automobile City, transitioning from strategic management and control to operational management and control. The company also initiated a three-year "Panyu Action Plan": launching 22 new models in the next three years, covering pure electric, extended-range, and plug-in hybrid types; investing 50 billion yuan in research and development and industry; aiming to enter the global first tier in intelligent driving by 2027; and achieving over 60% of the group's total sales from autonomous brands by 2027, challenging the sales of autonomous brands to reach 2 million units and realizing the "Great Autonomous Strategy."

In January of this year, Guangzhou Automobile Group announced that it would deepen its cooperation with Huawei. Subsequently, Feng Xingya revealed that the two parties will jointly create a luxury smart new energy vehicle positioned in the 300,000 yuan range. After taking office, Feng Xingya immediately proposed more detailed goals for 2025: comprehensively deploying mainstream new energy power forms such as extended-range, plug-in hybrid, and pure electric; launching seven new models in 2025; achieving over 1 million units in sales of autonomous brands in 2025; and challenging to achieve break-even for the Great Autonomous Strategy. However, as Guangzhou Automobile Group unveils its major moves, other automotive brands are not willing to be outdone.

Particularly noteworthy is BYD, which kicked off the new year with a "bombshell" by introducing its self-developed high-level intelligent driving system "Tian Shen Zhi Yan" and directly applying it to models priced below 70,000 yuan. In addition, multiple automakers such as Zero Run, Xpeng, and Changan have also announced that they will equip high-level intelligent driving systems on more affordable models. It is foreseeable that this year's automotive industry will witness another fierce battle. Can the newly appointed Chairman Feng Xingya lead Guangzhou Automobile Group to successfully break through? Let's continue to pay close attention.

References:

"Changing Leadership is Only the First Step in Saving Guangzhou Automobile Group" - Huxiu

"From Ordinary Mechanic to Head of a State-Owned Automaker Worth Over 100 Billion Yuan: The Story of Zeng Qinghong" - EC Auto