Eastland

Eastland

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Author | Eastland

Head Picture | Movie X-Men: Apocalypse

Article Summary

Changan Automobile and Huawei have a memorandum of cooperation, with both parties having both joys and sorrows. Changan Automobile is promoting the rise of its own brand and actively promoting cooperation with Huawei.

• •    Changan Automobile's revenue increased by 24.8% and actively promoted cooperation with Huawei

• •    The sales of independent brands have been increasing year by year, becoming a highlight of Changan Automobile's development

• •    Changan Automobile and Huawei cooperate in a dual pronged manner, with joint ventures becoming an important cooperation model

On November 27, 2023, Chongqing Changan Automobile (SZ: 000625) released an Investment Cooperation Memorandum, stating that Huawei plans to establish a new company that specializes in automotive intelligent systems and component solutions. Changan Automobile plans to invest in the target company (with a shareholding of no more than 40%) and carry out strategic cooperation. The final transaction documents will be signed before May 25, 2024.

At the beginning of 2024, Zhu Huarong, Chairman of Changan Automobile, publicly asked three "yes" questions about Huawei's intelligent selection model - does it comply with industry laws? Does it meet the requirements of industrial policies? Does it guarantee the fundamental interests of users?

It seems that Changan Automobile does not intend to choose Yu Chengdong's favorite "Huawei Smart Selection" mode.

In 2023, Changan Automobile's revenue reached 151.3 billion yuan, a year-on-year increase of 24.8%; The net profit after deduction was 3.78 billion yuan, a year-on-year increase of 16.2%.

In Q1 2024, Changan Automobile's revenue was 37 billion yuan, a year-on-year increase of 7.1%; The net profit after deduction was only 110 million, a year-on-year decrease of 91.8%.

The situation of Changan Automobile is mixed, although somewhat reluctant, it still actively promotes cooperation with Huawei.

Once upon a time, there was one in three parts of the world

Changan Automobile started with the production and sales of micro cars and engines. In 1995, the sales volume reached 66000 units (with an average price of 36000 yuan), ranking first in the country in terms of market share.

In 2002, Changan Automobile sold 270000 vehicles (including micro van, Alto, Lingyang and other models). Ranked fourth after SAIC, FAW, and Dongfeng. Among them, the sales of micro box trucks reached 152000 units, with an average price of 39000 yuan; The sales volume of Alto sedans is 48800 units, with an average price of 38000 yuan. Although the grade is not high, the net profit margin is not low, with a net profit of about 3000 yuan per bike.

In 2003, Changan Automobile's sales reached 410000 units, still ranking fourth in the country, including:

Changan Suzuki (holding 51% of the shares) mainly produces SC7130 series antelope sedans and SC7080 series Alto sedans. In 2003, the revenue and net profit were 4.59 billion and 380 million respectively;

Changan Ford (holding 50% of the shares) mainly produces Carnival and Mondeo series sedans, with a revenue of 520 million yuan in 2003;

The main products of Nanjing Changan (holding 63.33% of the shares) and Hebei Changan (holding 89.8% of the shares) are micro trucks/trucks (including SC1013, SC1010, SC6330, SC1011, SC1016 and other series), with a total sales revenue of about 1.5 billion yuan.

In 2003, the combined sales of Nanjing Chang'an and Hebei Chang'an accounted for one-third of China's micro bus/truck market.

In 2004, Changan Automobile landed on the A-share market and raised approximately 1.1 billion yuan in funds.

It's not the same company anymore

Changan Automobile has two sources of profit: first, the production and sales of independent brand cars (physical operation); The second is investment income accounted for using the equity method (investment control).

The invested companies are divided into two categories: one is joint ventures (with a shareholding ratio of 50% or more), including Changan Ford and Changan Mazda (Changan Peugeot was liquidated in April 2000); The second is joint ventures (with a shareholding ratio of less than 50%).

From Changan Suzuki, Changan Ford, and Changan Mazda, the impact of equity investment gains and losses (equity method) on Changan Automobile's performance is crucial, especially Changan Ford (which holds 50% equity).

Chang'an Suzuki

Changan Suzuki is the first joint venture company invested by Changan Automobile, with a 50% stake, mainly producing Alto micro sedans.

In 1996, the investment income generated by Changan Suzuki under the equity method was negative 21.26 million yuan.

In 2009, Changan Suzuki's revenue reached 9.3 billion yuan, but only contributed 40.16 million yuan in investment income;

In 2011, Changan Suzuki's investment income surged to 94.5 million yuan before falling back. In 2012, it fell below 50 million yuan, and in 2013, it was only 918000 yuan# Otto can't sell anymore#

Changan Ford

In 2001, Changan Automobile invested in Changan Ford, holding a 26% stake;

In 2003, Changan Automobile acquired 24% equity of Changan Ford from Changan Group, with a shareholding ratio of 50%.

In 2009, Changan Ford achieved a revenue of 37 billion yuan and a net profit of 1.69 billion yuan, contributing investment income of 835 million yuan;

In 2014, Changan Ford's revenue reached 106.4 billion yuan and net profit was 14.4 billion yuan, bringing investment income of 7.15 billion yuan to Changan Automobile, equivalent to 98.2% of its net profit after deduction.

In 2016, Changan Ford's net profit reached 18.2 billion yuan, bringing investment income of 9.03 billion yuan to Changan Automobile, equivalent to 95.6% of non deductible net profit!

In 2017, Changan Ford contributed more investment income than Changan Automobile's net profit deduction!

In 2018, Changan Ford's revenue plummeted, with a net loss of 800 million yuan, resulting in an investment loss of 416 million yuan for Changan Automobile;

In 2023, Changan Ford sold 236000 vehicles, and the investment profit and loss recognized under the equity method was negative 712 million. The year-end equity investment book balance is reset to zero.

However, the cooperation between Changan and Ford has not ended, and both sides have established Changan Ford New Energy Vehicle Technology Co., Ltd. The first strategic product CX810 is being orderly promoted.

Chang'an Mazda

In 2012, Chang'an Mazda was separated and newly established; Contributed approximately 50 million yuan in investment returns in 2013;

In 2014, investment income of 510 million was recognized using the equity method; In 2015, it increased to 830 million;

In 2018, Changan Mazda contributed an investment income of 1.26 billion yuan, alleviating the impact of Changan Ford's sharp decline in performance. The listed company's net profit after deducting taxes was negative 3.2 billion yuan;

In 2019, Changan Mazda contributed an investment income of 930 million yuan, but Changan Ford was at a loss of 1.93 billion yuan and Changan Peugeot was at a loss of 1.11 billion yuan... In the end, the listed company Changan Automobile suffered a net loss of 4.8 billion yuan after deducting non recurring expenses;

As of the end of 2023, the book balance of equity investment in Changan Mazda was 880 million;

Back then, one of its joint ventures (Changan Ford) contributed 90% of its net profit through investment returns. Today's Changan Automobile is no longer the same company.

The rise of independent brands

1) Sales bottomed out and rebounded

In 2016, Changan Automobile's sales surged to 3.06 million units and began to decline; In 2017, it decreased by 6.2% to 2.87 million vehicles; In 2018, it plummeted by 27.8% to 2.14 million vehicles; In 2019, it hit a rock bottom with sales of 1.76 million vehicles.

In 2020, Changan Automobile's sales began to slowly recover; In 2022, the sales volume was 2.35 million vehicles.

In 2023, Changan Automobile sold 2.55 million vehicles, a year-on-year increase of 8.8%, approximately 83.3% of the peak in 2016.

In Q1 2024, Changan Automobile sold 692000 vehicles, a year-on-year increase of 13.9%.

The sharp decline in sales after reaching its peak is rooted in joint venture brands; The recent bottoming out rebound is due to the rise of independent brands.

2) The rise of independent brands

Changan Automobile has five independent brands under its umbrella: Changan Qiyuan, Changan Gravity, Changan Kaicheng, Shenlan, and Avita.

In Q3 2021, the sales of domestic brands reached 385000 vehicles, accounting for 72% of the total sales; Among them, 34000 new energy vehicles accounted for 8.9% of the sales of domestic brands;

In Q3 2022, the sales of domestic brands reached 423000 units, accounting for 76% of the total sales; Among them, 71000 new energy vehicles accounted for 16.9% of the sales of domestic brands;

In Q3 2023, the sales of domestic brands reached 529000 units, accounting for 81% of the total sales; Among them, 131000 new energy vehicles accounted for 24.7% of the sales of domestic brands;

In 2023, the total sales of domestic brands reached 2.1 million units, accounting for 82.2% of the total sales. Among them, the sales of new energy vehicles were 474000 units, accounting for 22.6% of the sales of domestic brands.

In Q1 2024, the sales of domestic brands reached 589000 vehicles, accounting for 85% of the total sales; Among them, 129000 new energy vehicles accounted for 21.9% of the sales of domestic brands.

The transformation of new energy has achieved initial results, but lags behind the overall market - in April 2024, wholesale penetration of Chinese new energy vehicle manufacturers has reached 40%; The penetration rate of independent brand new energy vehicles has reached 53.6%.

Collaboration with Huawei

Changan Automobile clearly intends to take a dual approach: while striving to do well in its own source and deep blue; Actively promoting external cooperation. For example, establishing joint ventures with Huawei and Horizon.

1) Avita cannot say success

In 2017, Changan and NIO reached a strategic cooperation, and in 2018, Changan NIO officially established a joint venture company.

In the following years, there was no substantial progress, and in 2021, the joint venture company was renamed Avita Technology. Introducing CATL, signing with Huawei, and establishing the "CHN" model (Changan, Huawei, CATL).

In 2023, Avita sold less than 30000 vehicles, far from the sales target of 100000 vehicles. The annual revenue was 5.64 billion yuan, with a net loss of 3.69 billion yuan (a net loss of 2.02 billion yuan in 2022). According to the equity method, Changan Automobile confirmed an investment loss of 1.58 billion yuan.

In 2023, Changan Automobile sold 474000 new energy vehicles, with Avita accounting for less than 6%.

Sales are not ideal, losses have not narrowed, and Avita cannot say success. But in 2023, Changan Automobile will invest an additional 1.23 billion yuan in Avita.

At the same time, Changan Automobile invested 1.33 billion yuan to increase its holdings in Shenlan Automobile, with a shareholding ratio of 51%. From February 1, 2023 to the end of the year, Deep Blue Automobile's revenue reached 25.88 billion yuan, about 4.6 times that of Avita.

Changan Automobile maintains its sincerity and patience in cooperating with Huawei while fully cultivating its own brand, especially Deep Blue.

2) Mutual accommodation

On January 16, 2024, Huawei invested 1 billion yuan to register and establish Shenzhen Yinwang Intelligent Technology Co., Ltd. (hereinafter referred to as "Yinwang Intelligent").

Huawei plans to inject its intelligent automotive solution business (including core technology and personnel) into the new company, while promising not to engage in business that competes with the target company's business scope.

Smart cars are not Huawei's main channel business and there is no hope of a closed loop, so divesting them means no longer burning money for them. The new company must take responsibility for its own profits and losses, and make its own decisions.

On April 24, 2024, Huawei Automotive BU made its debut after becoming independent, releasing an intelligent automotive solution called "Huawei Qiankun".

The most important shareholder and strategic partner of the new company is Changan Automobile. According to the Memorandum of Cooperation signed by both parties on November 25, 2023, the maximum equity limit for Changan Automobile and its affiliates is 40%.

The height reached by Changan Automobile in 2016 is ten times higher than the historical record of Jianghuai and Xiaokang, and even BYD may not break it until 2024.

As the saying goes, "A skinny camel is bigger than a horse." Moreover, Changan Automobile is a state-owned enterprise with strong roots. Huawei has chosen Changan Automobile as its main partner and building a joint venture company is very rational.

On May 6, 2024, Changan Automobile announced that "the two parties are further negotiating on key terms" and it is expected to sign the final transaction document no later than August 31 (delayed by three months from the original plan).

As is well known, Huawei's intelligent car BU has three cooperation models with car companies: upper, middle, and lower: the best strategy is the intelligent car selection model, with deep cooperation between Celes, JAC, Chery, and Huawei; Zhongce adopts the HI mode, which is only adopted by Avita, a subsidiary of Changan Automobile; The bottom line is the component supplier model.

However, Changan Automobile only accepts the Chinese strategy, namely the HI model, and Huawei must accommodate it. Because the establishment of Yinwang Intelligence is the winner of Huawei's automotive business, but it is not Changan's.

According to Yu Chengdong, SAIC, JAC, BAIC, and Chery have all received invitations to participate in the stock market, and Dongfeng and FAW are also potential investors. But the above-mentioned car companies have not yet expressed their investment intentions.

*The above analysis is for reference only and does not constitute any investment advice

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Popular comments

Sniff Friend PUj25

Sniff Friend PUj25

Changan is very dominant, having eliminated both Ford and Mazda, but becoming increasingly fierce. My classmate admires me very much, he despises Huachen the most.

2 hours ago, Sichuan

fifty

Latest comments

Roudolfyoung

Roudolfyoung

SAIC's "soul theory" is an idea that any independent car company should have! So Chang'an must be the same!

54 minutes ago, Zhejiang

00

Free Bird

Free Bird

I'm not optimistic about this Yiwang Intelligence. If Changan is the sole shareholder, why do other brands want to participate? Peers are enemies, such as Salis, JAC, BAIC, Chery, and Changan. Everyone's products are in the same segment, competing for the same consumer group. If each other shares the same shares and engages in a joint venture, the story of three monks without water to eat is well-known.

Only car manufacturers can achieve success by investing and not participating in operations, with Huawei at the helm and treating each investing car company with a fair and neutral attitude.

2 hours ago, Guangdong

ten

Roudolfyoung

Want to expect a company to be "fair and just" without relying on contracts?

53 minutes ago, Zhejiang

00

Hindrance

Hindrance

A century old Ford, destroyed in Chang'an.

3 hours ago, Ningxia

twenty

Da Yuanbao INGot

Da Yuanbao INGot

Boycott Changan and support Huawei

3 hours ago, Beijing

00

华为拗不过长安