AutoBeta(AutoBeta.net)03/29 Report--

Beijing Auto announced its 2018 results that Beijing auto revenue in 2018 was about 151.92 billion yuan, an increase of 13.2 percent over the same period last year, and net profit was about 4.43 billion yuan, an increase of 96.6 percent over the same period last year. Among them, Beijing Mercedes-Benz has an annual income of 135.42 billion yuan, an increase of 16.0% over the same period last year, accounting for nearly 90% of Beijing Automobile's total revenue in 2018.

Beijing Automobile includes four business segments: Beijing Brand, Beijing Mercedes-Benz, Beijing Hyundai and Fujian Mercedes-Benz. Its revenue and profit growth in 2018 is still mainly from the contribution of Beijing Mercedes-Benz, of which Beijing Mercedes-Benz's revenue in 2018 is about 135.42 billion yuan, an increase of 16.0% over the same period last year, accounting for 89.1% of Beijing Automobile's total revenue in 2018. As for independent brands in Beijing, revenue in 2018 was 16.505 billion yuan, down 5.1% from the same period last year, mainly due to the decline in sales, while the decline of new energy subsidies also affected the revenue of the new energy business.

Although Beijing Mercedes-Benz has achieved varying degrees of growth in sales, revenue and profit, its gross profit margin has declined for the first time since 2015. Although Beijing Mercedes-Benz gross profit increased by 6.1% to 40.523 billion yuan in 2018, higher than Beijing Automobile's total gross margin of 37.001 billion yuan, but its gross profit margin fell 2.8 percentage points to 29.9% from 32.7% in 2017. Beijing Auto explained that the decline in Beijing Mercedes-Benz gross profit margin was caused by new revenue guidelines that shifted some freight from distribution fees to the cost of sales.

In addition to Beijing Mercedes-Benz, the gross margin of Beijing's own brands fell again. According to the financial report, the gross profit of the Beijing brand has changed from-2.68 billion yuan in 2017 to-3.516 billion yuan, which is the second year in a row that Beijing brand has suffered losses since it first reversed its losses in 2016, and the loss has further expanded. Beijing Auto explained: year-on-year decline in brand sales in Beijing, provision of additional discounts to the market in response to the domestic consumer environment, adjustment of Weiwang's business strategy, and adjustment of some freight charges from distribution fees to sales costs according to revenue criteria.

In terms of sales volume, Beijing Mercedes-Benz and Fujian Mercedes-Benz sold 485000 and 27600 vehicles respectively in 2018, up 14.8 per cent and 29 per cent respectively over the same period last year. After adjustment, Beijing Hyundai sold 790000 vehicles in 2018, up 0.7 per cent from the same period last year. The Beijing brand sold 156000 passenger cars in 2018, and the annual sales of its new energy passenger vehicles were 45000, an increase of 94.2% over the same period last year. Except for new energy, the annual sales of Beijing Saab, Beijing and Weiwang all declined. Among them, the annual sales of Saab series were 65000, down 24.1% from the same period last year; and the sales of Beijing series were 31000, down 22.4% from the same period last year. As a result of strategic adjustment, Weiwang business achieved sales of 15000 vehicles, down 82.9 per cent from the same period last year.

In January, BAIC announced its operating results of 2018 and its development plan for 2019. BAIC sold 2.402 million vehicles in 2018, with operating revenue of 480.74 billion yuan, an increase of 2.2% over the same period last year, and profits of 30.13 billion yuan, up 7.3% from the same period last year. As for the 2019 development plan, BAIC said it would challenge the sales target of 2.45 million vehicles, with revenue plans to reach 500 billion yuan. As for the joint venture brand, Beijing Mercedes-Benz aims to sell 560000 vehicles in 2019, Fujian Mercedes-Benz 28500, and Beijing Hyundai to target 900000.

Last year, after the Ministry of Commerce of the National Development and Reform Commission issued new foreign investment management measures and announced the lifting of restrictions on foreign equity ratios in passenger cars by 2022, there was news that Mercedes-Benz wanted to increase its stake in Beijing Automobile. In December 2018, Bloomberg reported that Daimler had said it wanted to increase Beijing Mercedes-Benz's stake from 49% to 65%, but the talks gradually ended, and BAIC denied Daimler's plans to increase its stake in Beijing Mercedes-Benz. Reuters reported in March that Daimler had commissioned Goldman Sachs to help it increase its stake in Beijing Automotive, and the talks are still at an early stage.

Beijing Mercedes-Benz has always been the profit cow of BAIC. Beijing Mercedes-Benz contributed nearly 90% of Beijing Automobile's revenue in 2018. Daimler's increase in its stake in Beijing Mercedes-Benz is equivalent to putting benefits into its own pocket. Beijing Auto will not relax easily.

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