Understanding the Essence of Business and Striking at the Heart of the Enterprise

Author | Wang Lin

Following the publication of the article "Eight Years of Losses Totaling 13.8 Billion Yuan, Significant Reduction in Financing, JAC Motors Under Great Pressure," the internet erupted in discussion. Many voiced their grievances, criticizing Anhui JAC Motors Group Co., Ltd. (securities abbreviation "JAC Motors," stock code: 600413.SH) for neglecting its core business in recent years and being misguided by its leadership. Some even mocked JAC's partnership with Huawei to develop the Zunjie brand.

In summary, there is widespread resentment. Lao Wang wonders if JAC had developed better, would there have been less controversy? However, with 21,408 employees, can Chairman Xiang Xingchu treat everyone equally? Coincidentally, JAC is currently experiencing a challenging period. The major reforms of recent years have been painful, with some people failing to recognize or adapt to them, feeling frustrated, helpless, lost, and confused...

But as a seasoned professional with 31 years at JAC and now 55 years old, can Xiang Xingchu not foresee the development trends in the automotive industry? As he approaches retirement age, doesn't he want to leave behind a masterpiece before stepping down?

Lao Wang has had private discussions with Xiang Xingchu regarding these issues. What are his true intentions? Why take the risk of partnering with Huawei to manufacture cars?

01

When Battling Desperately, Controversies Are Inevitable

JAC Motors has had numerous high-profile moments.

For instance, during its initial and early development stages (1964-1993):

• On May 20, 1964, the Chaohu Automobile Parts Factory was officially established, serving as JAC Motors' predecessor and the first automobile enterprise listed in Anhui Province.
• In 1968, JAC Motors' first-generation entrepreneurs manually constructed Anhui Province's first 2.5-ton truck, filling a gap in the province's automobile industry.
• In 1970, the HF140 3-ton truck was launched and mass-produced, becoming the first finalized product of JAC's first-generation light trucks.
• In 1990, China's first dedicated bus chassis, the HFC6700, was successfully trial-produced, addressing the lack of a dedicated chassis in China's bus industry.

Another example is the stage of rapid development and entry into the passenger vehicle market (1994-2003) — JAC Motors introduced the Refine MPV produced using H1 technology from Hyundai Motor Company of South Korea (March 2002), successfully launched the first Gellfort heavy-duty truck (October 2003), and completed the JAC sedan base with the mass production of the Binyue sedan (2008).

Furthermore, in the stage of new energy vehicles and intelligent transformation (2004 to present), JAC Motors launched its first batch of new energy vehicles, becoming the earliest domestic new energy vehicle enterprise to enter the private sector (2010), partnering with NIO to begin contract manufacturing of NIO vehicles (2016), and releasing the "MIS Intelligent Modular Architecture" technology brand to promote intelligent transformation (2021)...

However, the most significant impact and change occurred in 2023 when JAC Motors jointly developed the Zunjie S800 with Huawei.

Figure: JAC Motors and Huawei Cooperation Announcement Source: Company Announcement

This seemingly straightforward partnership holds great expectations for Xiang Xingchu.

Those familiar with JAC may know that since 1990, JAC Motors has had three chairmen: Zuo Yan'an, known as the "JAC Patriarch" (1990-2012), the mixed-reviewed An Jin (2012-2021), and Xiang Xingchu, who was appointed during a crisis (2021-present).

Each chairman had distinct historical missions and different fates.

When Xiang Xingchu took the helm, JAC Motors was in a dire situation both internally and externally: The company's profitability was highly reliant on government subsidies, and its self-sufficiency was weak. Since 2017, its non-deductible net profit has consistently been in the red, with losses continually expanding. Simultaneously, market competition became increasingly fierce. The company's traditional strength in the "commercial vehicle" market declined, the passenger vehicle market showed weak growth, and there was immense pressure on technology and transformation.

The most challenging aspect is that An Jin left behind a "big but not strong" JAC that was continuously declining. In April 2024, three years after his retirement, the former chairman of JAC Group, An Jin, fell due to serious violations of discipline and law.

Figure: Notice on An Jin's Violations of Discipline and Law Source: Official Website of the Central Commission for Discipline Inspection

It's conceivable how heavy the burden was on Xiang Xingchu, who took office during a crisis, as the accumulated problems within JAC Motors gradually surfaced. From 2017 to 2020, JAC Motors' non-deductible net profits were -93 million yuan, -1.877 billion yuan, -978 million yuan, and -1.719 billion yuan, respectively (as shown below).

Figure: JAC Motors' Performance During the Tenure of Three Chairmen (Unit/10,000 yuan) Source: Wind

At this critical juncture, minor adjustments are insufficient; deep reforms are imperative!

Xiang Xingchu's partnership with Huawei is not merely a need for a powerful business and product alliance. More importantly, it's about unblocking the meridians and collaterals, leveraging Huawei's unique expertise, learning from others' strengths to strengthen oneself, and systematically reforming internal values, corporate culture, management style, and other aspects to reshape a "new JAC"!

This is an extremely bold and difficult reform. Success will bring eternal fame, while failure will result in scorn!

Xiang Xingchu chose to fight desperately. The reform has also touched the interests of many, with various criticisms arising.

02

Xiang Xingchu Has No Turning Back

This desperate battle unfolds across multiple dimensions. What outsiders can observe is the collaboration result between JAC Motors and Huawei — the Zunjie S800. Will the market embrace it?

It is understood that the Zunjie S800 will be officially launched on May 30. As the brand's first flagship large vehicle, the car has already started pre-sales with a pre-sale price of 1 to 1.5 million yuan and an intention deposit of 20,000 yuan. The new car has completed the Ministry of Industry and Information Technology's application process and will offer extended-range and pure electric versions, both providing dual-motor and triple-motor models.

Figure: Zunjie S800 Source: HarmonyOS Intelligent Mobility Official Website

However, recent news suggested that the selling price of the Zunjie S800 has been reduced to around 800,000 yuan, with the final selling price to be confirmed at the launch event.

In Lao Wang's opinion, the sales performance of the Zunjie S800 upon its launch will be the litmus test for JAC Motors' strategic transformation! It's even a "college entrance exam" that will determine the fate of Xiang Xingchu's career!

Xiang Xingchu is approaching his 60s. Here's a brief introduction:

Xiang Xingchu, male, born in August 1970, is a member of the Communist Party of China and holds a master's degree in business administration from Anhui Business Administration Institute with equivalent education. He has successively served as the employee director of Anhui JAC Motors Group Holding Co., Ltd., general manager assistant, chief quality officer, general manager of the heavy commercial vehicle company, managing director, deputy secretary of the Party committee, director, and general manager of Anhui JAC Motors Group Holding Co., Ltd., as well as vice chairman and general manager of Anhui JAC Motors Group Co., Ltd. He is currently the secretary of the Party committee, chairman, and general manager of Anhui JAC Motors Group Holding Co., Ltd., as well as the secretary of the Party committee and chairman of Anhui JAC Motors Group Co., Ltd.

As far as Lao Wang knows, for the Zunjie S800 project, JAC Motors has allocated significant resources (funds, manpower, etc.). Even within the company, opposing voices will be criticized. As a result, JAC's traditional strength in the commercial vehicle segment feels quite disappointed, and although the passenger vehicle segment has received great attention, many people are uncertain about the success of the Zunjie S800.

For Xiang Xingchu, this is a life-altering decision with no turning back!

The current passenger vehicle market is fiercely competitive. New energy vehicles are no longer simple transportation tools; they have evolved into a new generation of intelligent terminals with functions far superior to smartphones but with much higher technical thresholds. New electrical architectures and ICT (information and communication technology) pose significant challenges to all automakers. Without cross-border cooperation, it's basically a dead end.

To delve deeper, SAIC Motor Corporation Limited (600104.SH) once boasted that they would not give the "soul" to Huawei. Now, pressed by the market, they eventually had to partner with Huawei.

Both Thalys (601127.SH) and Changan Automobile (000625.SZ) have collaborated with Huawei, but their outcomes are vastly different. This also underscores that current cross-border cooperation, especially with Huawei, requires more than just technical collaboration; some deeply ingrained aspects also need to change.

But this is precisely the hardest part to change. Xiang Xingchu is well aware of this. He hopes to witness this deep-level transformation, even if it means betting on his career. He aspires for a brand-new "JAC," one that truly possesses high competitive barriers and can achieve sustainable development regardless of who is at the helm!

Time is running out for JAC Motors. Wind data shows that by the end of 2024, JAC Motors had cumulatively raised 15.542 billion yuan through direct financing, achieved a cumulative net profit of 4.746 billion yuan, and distributed 2.9 billion yuan in cash dividends. However, during the four years that Xiang Xingchu has been at the helm of JAC Motors (2021-2024), the company's non-deductible net profit has also been in continuous loss, amounting to -1.884 billion yuan, -2.795 billion yuan, -1.718 billion yuan, and -2.714 billion yuan, respectively.

Perhaps realizing the risks, Xiang Xingchu is preparing for the winter. According to the updated private placement draft disclosed by JAC Motors on April 22, the company plans to raise 3.5 billion yuan through private placement of shares to invest in the development of a high-end intelligent electric platform.

Xiang Xingchu still holds onto his initial dream.

But this battle is destined to be fraught with difficulties. What will be the outcome? Let's wait and see!

END

Typesetting | Wu Yue

Editor-in-Chief | Lao Chao

Images sourced from the internet