Chang An: Trying to reverse the embarrassing situation of sales and profit divergence

Like many automobile companies in the first half of 2009, Changan’s profits have not kept pace with sales.

In the first five months of 2009, the sales growth of Changan Automobile in China's top ten auto companies was undeniably rapid: From January to May, sales increased by 28.68%, which was the highest among the four major automobile groups. “But the increase in profit did not coincide with the growth of car sales, which was a drop from the same period in 2008.” Zheng Changjiang, Director of Changan Public Relations Department, told the “China Business” reporter that Chang’an is trying its best to try to reverse sales. The embarrassing situation of departure from profit.

Yield increase

"It should be said that Chang'an's sales data is indeed good from January to May. Sales exceeded 560,000 vehicles." Chairman Xu Liuping of Changan Automobile could not conceal his excitement. He said: "We are satisfied with such sales figures. Thanks to the rapid growth in the micro-vehicle sector, it is understood that Changan Micro-vehicle has achieved a 50% growth from January to May 2009. “The self-owned brand car has grown very rapidly since it was not a high base in 2008!” said Xu Liuping.

It is understood that from January to May 2009, the automotive market continued to create a record high. According to the data released by the China Association of Automobile Manufacturers, in May, the nationwide automobile sales reached 1,119,700, a slight decrease of 2.89% from the previous month and a year-on-year increase of 35.38%. Sales volume continued to pick up. From January to May, cumulative sales were 4,956,800, an increase of 14.29% year-on-year, and continued to grow.

However, Changan’s profits are not on the table. According to the first quarterly report of 2009 disclosed by Changan Automobile (000625.SZ), Changan Automobile's profit fell by 89% and its net profit was only 28.39 million yuan when operating income increased by 22%. Sun Muzi, an automotive analyst, said: "Since the capacity utilization rate of auto companies was only rushed in around April, the capacity utilization rate in the previous months was not high, and the fixed dilution was not low. Therefore, the profits of auto companies in the first half of the year were very high. It's hard to make a big difference."

An important source of Changan’s performance in recent years is the Chang’an Ford Mazda Automobile Co., Ltd. (hereafter referred to as Chang’an Ford). Although Chang’an Automobile’s statistics show that from January to March 2009, Chang’an Ford’s output was only 52,765 units. This is much lower than the 67,676 vehicles in the same period of 2008, but this situation has changed after Chang'an Ford's Nanjing plant started production of the new Fiesta (parameter configuration). Changan Ford produced 106,037 units in the first five months of 2008, compared with 2008. The year-ago period was basically flat.

Therefore, the problem may still be in the independent brand body. Chang'an, which is relying on mini vehicles and self-owned brand cars, has caused a serious imbalance in output and input due to the weak profit of the model itself and the large investment in research and development of autonomous cars and new energy vehicles.

Reverse can be expected?

"Salary has finally been added!" On June 20, an engineer at the Chang'an Automobile Research Institute was quite happy to say that the engineer who participated in the development of Yuexiang (parameter configuration library) said: "Changan's own-brand sedan Yuexiang is well-received and relevant. R&D staff's salary has also been improved."

"China Business" reporter learned that as of June 16, Changan sedan has sold a total of 35,084 self-owned brand cars, Changan Automobile related sources said that sales growth of its own brand is changing Changan Automobile's long-term dependence on the joint venture to contribute profit.

With independent brands gradually recognized by the market, Changan Microcars will maintain a strong growth momentum in the second half of the year. Ai Jian Securities analyst Long Chun said: "The six micro-car companies are currently growing rapidly, in the rapid development of the regional economy and 'cars to the countryside' and other policies, pulling the northeast, central China, northwest, southwest and other original relative In the backward areas, the demand for the automotive market is growing at a rapid rate, so the mini-vehicle market is bound to maintain further growth in the third quarter of 2009."

However, compared to its own brand, Changan Automobile still feels relieved that Changan Ford’s starting power from April. “We have observed the enhancement of consumer confidence and market changes in a timely manner, quickly coordinated with suppliers and distributors, and ensured logistics. Now we gradually realize the supply and demand balance of Fox and Carnival on the market.” Yao Yu, Director of Public Affairs, Chang An Ford In May 2009, Changan Ford sold 27,839 units, compared to 18,727 units in the same period of 2008.

Obviously, the increase in the sales volume of independent brands alone cannot completely reverse the pattern of falling profits. A securities analyst in the auto industry told the “China Business” reporter: “The Chang’an auto executives proposed that the R&D expenses will continue to decrease in 2009, and the marketing advertising costs will not decrease. This is the case when Chang’an’s own brand business lost more than 500 million yuan in 2008. It is difficult to reverse the annual profit situation, and the self-owned brand business may continue to lose money in 2009."

At the same time, Changan Automobile's exports in 2009 have also been met with tremendous challenges. On June 17th, at the Armament Export Conference organized by the Armed Forces Corporation, related parties stated: “External operating pressures facing export companies will Continue to the end of the year or even next year!” Numerous unfavorable factors are still testing the Chang’an car with rapid growth in production and sales.