AutoBeta(AutoBeta.net)03/27 Report--

"without Mercedes-Benz, BAIC would no longer exist, because 96% of BAIC's money is earned by Mercedes-Benz," netizens said.

Recently, Beijing Automobile Co., Ltd. (hereinafter referred to as "Beijing Automobile") released its annual performance report for 2021. According to the report, the revenue of Beijing Automobile reached 175.916 billion yuan in 2021, down 0.6 percent from the same period last year. The results announcement shows that the decline in revenue is due to the decrease in gross profit of Beijing Mercedes-Benz and the increase in gross loss of Beijing brands. According to the data, the gross profit of Beijing Automobile in 2021 was 37.643 billion yuan, down 10.67 percent from the same period last year; the annual net profit was 15.151 billion yuan, up 16.95 percent from the same period last year; and the net profit belonging to the company's equity holders was 3.858 billion yuan, up 90.17 percent from the same period last year.

In the past year, the production, operation and profitability of major car companies have been restricted by the epidemic and the supply of spare parts, and it is really worth showing off that Beijing Automobile has been able to achieve a sharp rise in net profit in this context. However, although the net profit of Beijing Automobile has soared, Beijing Automobile is currently in a state of loss if the contribution made by Beijing Mercedes-Benz is put aside.

According to the financial report, Beijing Automobile achieved 175.916 billion yuan in revenue in 2021, including 8.174 billion yuan for Beijing brands and 167.966 billion yuan for Beijing Mercedes-Benz. In other words, 95% of Beijing Auto's revenue comes from Beijing Mercedes-Benz and only 5% from Beijing brands. In addition, the gross profit of Beijing Automobile in 2021 is 37.643 billion yuan, of which the gross profit of Beijing brand is 4.512 billion yuan and that of Beijing Mercedes-Benz is 42.255 billion yuan. In other words, if Beijing Mercedes-Benz is excluded, Beijing Automobile is in a loss-making state. Of course, the net profit can better reflect the relationship between Beijing Mercedes-Benz and Beijing Automobile than gross profit, but Beijing Automobile does not disclose the net profit performance of the relevant brands. However, according to an announcement issued by Beijing Automobile on March 11, the profit generated by Beijing Automobile's continued operation after tax in 2021 was 1.868 billion yuan, compared with 3.205 billion yuan for the latter. This means that excluding the profits of Beijing Mercedes-Benz, the loss of Beijing Automotive's other businesses is 1.337 billion yuan.

Beijing Automobile is one of the five major automobile groups in China, mainly engaged in passenger car R & D and manufacturing, spare parts manufacturing, automotive service trade, R & D, education, investment and financing and other business. among them, the passenger car business is carried out through Beijing Mercedes-Benz, Beijing Hyundai, Fujian Mercedes-Benz and Beijing brands. It should be noted that the financial data disclosed by Beijing Automobile only include the Beijing brand and Beijing Mercedes-Benz.

Data show that Beijing Mercedes-Benz is a joint venture company formally established between Mercedes-Benz Group and Beijing Automobile on August 8, 2005. it is headquartered in Beijing Economic and technological Development Zone, in which Beijing Automobile owns 51%. Mercedes-Benz Greater China Investment Company and Mercedes-Benz Group have a combined stake of 49%. According to the data, Mercedes-Benz Group sold 2.33 million vehicles worldwide in 2021, of which 759000 were sold in China, including 561000 in Beijing and 32000 in Fujian, which is still the largest single market of Mercedes-Benz in the world.

It can be said that with Beijing Mercedes-Benz, Beijing Automobile can lie down and make money, and thanks to the continuous profit contribution of Beijing Mercedes-Benz, coupled with the formal liberalization of foreign equity ratio, Beijing Mercedes-Benz is also surging undercurrent at present, and the news about improving its stock ratio is frequently exposed. Negotiations with BAIC have been largely completed, and Mercedes-Benz's multi-year increase in Beijing Mercedes-Benz may be settled by the end of this year, according to the Financial Associated Press, citing people familiar with the matter. In this regard, Mercedes-Benz China and BAIC said they had not heard the news, while BAIC insiders told the Financial Associated Press that such information should be available only to a small number of senior executives of the group.

It is worth mentioning that in order to improve profitability, BAIC announced on December 13, 2021 that it would increase its stake in Mercedes-Benz to 9.98%, making it the largest shareholder of Mercedes-Benz. According to Mercedes-Benz's 2021 results, excluding the already independent Daimler truck and bus business, Mercedes-Benz's full-year net profit rose 255 per cent year-on-year to 14.2 billion euros, while BAIC, which holds 9.98 per cent, will receive 524.3 million euros, or about 3.67 billion yuan.

So what will be the impact on Beijing Automotive if Mercedes-Benz Group controls Beijing Mercedes-Benz? Beijing Mercedes-Benz is the most fundamental source of profit for Beijing Automobile, and it has a significant impact on the financial performance of BAIC. Once Mercedes-Benz controls Beijing Mercedes-Benz, Beijing Mercedes-Benz will no longer be included in the financial statements as a major part of Beijing Automobile, which will greatly affect the book data of Beijing Automobile, and will also weaken Beijing Mercedes-Benz's profit contribution to Beijing Automobile. BAIC may once again increase its stake in Mercedes-Benz to more than 12% in order to counter the impact of Mercedes-Benz's holding of Beijing Mercedes-Benz, according to people familiar with the matter. at present, the increase is also supported by Mercedes-Benz. Of course, the above news has not been officially confirmed.

At present, BAIC relies on Beijing Mercedes-Benz for blood transfusion, Beijing Mercedes-Benz is responsible for making money, and other sectors are responsible for spending money. BAIC Langu, a new energy vehicle division of BAIC, owns two product brands, ARCFOX and BEIJING, with total sales of 26127 vehicles during the reporting period, up 0.82% from 25914 in 2020. The net profit belonging to shareholders of listed companies after deducting non-recurring profits and losses was-5.544 billion yuan that year, compared with-6.646 billion yuan in the same period last year. In addition, Beijing Hyundai, a 50:50 joint venture between Beijing Automotive Investment Co., Ltd. and Hyundai Automotive Co., Ltd., has terminal sales of 384000 vehicles in 2021, a decline for five consecutive years compared with the same period last year. The annual completion rate of 560000 vehicles at the beginning of the year was only 68%. The net loss after tax for the current year was 4.995 billion yuan. However, shareholders have high hopes for an additional $942 million (5.993 billion yuan) in Beijing Hyundai on March 18, leaving their 50:50 share ratio unchanged. With regard to the use of capital increase, it will provide financial guarantee for the future introduction of new products, increase the layout of new energy vehicles, expand exports and other businesses.

For BAIC, Beijing Mercedes-Benz is a profit cow, while for Mercedes-Benz, it is also an important channel in the global market. At present, Mercedes-Benz is in a critical period of cost reduction, efficiency improvement and the transition to electrification, and elephants need more nutrition to turn around. If Mercedes-Benz can successfully increase its stake in Beijing Mercedes-Benz, it will be of great benefit to stabilize its revenue and profits.

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