AutoBeta(AutoBeta.net)01/19 Report--

In 2019, passenger car sales in China fell by as much as 9.3% from the same period last year, falling into negative growth for two consecutive years, and the automobile industry entered the stock market or shrinking market. With the adverse effects of intensified competition and declining sales, the decline in profits of car companies will become a common phenomenon. SAIC, the largest auto group in China, recently issued a performance forecast that SAIC is expected to make a net profit of about 25.6 billion yuan in 2019, a decrease of as much as 10.4 billion yuan compared with the same period last year.

SAIC, which has repeatedly achieved good results, suffered its first profit decline in the past decade in 2019, wiping out tens of billions of profits.

According to the SAIC announcement, according to preliminary estimates by the financial department, the net profit attributed to shareholders of listed companies is expected to be about 25.6 billion yuan in 2019, a decrease of about 10.4 billion yuan and 28.9 percent compared with the same period last year.

In addition, SAIC's net profit after deducting non-recurring gains and losses belonging to shareholders of listed companies is about 21.4 billion yuan, which will be reduced by about 11 billion yuan and 34% compared with the same period last year.

As for the main reasons for the decline in performance, SAIC said that its vehicle sales in 2019 were 6.238 million, down 11.54% from the same period last year. At the same time, the switching between five and six models aggravated the contradiction between supply and demand, and domestic new energy vehicles subsidised slope and other factors.

SAIC Group has 11 vehicle companies, and SAIC Volkswagen Motor Co., Ltd. accounts for the largest proportion of sales. In 2019, SAIC-Volkswagen sales reached 2 million vehicles, down 3.0% from a year earlier, of which Volkswagen brand sales increased by 1.723 million vehicles, while Skoda brand sales of 278000 vehicles, down 20.9% from the same period last year.

SAIC GM sales continued to decline, the three major brands are lost. SAIC GM sold 124497 vehicles in December, down 27.6 per cent from a year earlier, and cumulative sales for the year were 1.6 million, down 18.8 per cent from a year earlier.

It is more difficult to promote the Buick, Chevrolet and Cadillac brands of SAIC GM in 2019. The sales volume is maintained through price reduction at the end of the market, which has a great impact on profits by the way of price for volume. During the switch between national five and national six models, the terminal prices of many SAIC GM products fell below history. in order to clear inventory, SAIC employees bought SAIC GM national five models at a discount of 6-30%, further dealing a blow to overall profits.

With regard to the sales strategy of "price for volume", Wang Yongqing, general manager of SAIC GM, said that when the auto market is growing at a high speed, it is also useful for car companies to fight a price war in order to seize market share, but as consumers begin to return to rationality, the concentration and loyalty of brands are getting higher and higher, and customers' requirements for enterprises are getting higher and higher. in such a competitive environment, only price war is out of place.

According to GM's report, Buick brand sales in 2019 were 850000, down more than 15 per cent from a year earlier; Chevrolet brand sales were 418000, down 20 per cent from a year earlier; and Cadillac sales were 213717, down 6.3 per cent from a year earlier.

As a big profit cow of SAIC Group, SAIC GM Wuling fell by 20%. SAIC GM Wuling's overall sales in 2019 were 1.66 million vehicles, down 19.5% from a year earlier. The main reason is that the MPV market continues to shrink, resulting in a great impact on the main industry; at the same time, the auto market has a great impact on the low-end car market, and Wuling and Baojun brands are under pressure. at present, Baojun Automobile focuses on brand promotion and transformation to the SUV market.

Shanghai passenger cars remained basically stable, with cumulative sales of 673255 vehicles for the whole year, down 4 per cent from the same period last year. However, in the new energy sector where SAIC passenger cars are powered, profits will also be further cut due to the sharp decline in subsidies in 2019.

On the face of it, declining sales and price concessions are the main reasons why SAIC lost tens of billions of profits. From the perspective of the general environment, the automotive industry is depressed, and the performance and profits of many automobile enterprises have declined. However, even if profits shrink by 10 billion yuan, SAIC is still the most profitable car company in China.

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