Great Wall Motor's mid-term net profit slips by nearly 50% SUV will “reach top” in 2020

Last year, the Great Wall Motors, which had a net profit of more than 10 billion yuan and ranked first in profits from bicycles, saw an inflection point in the first half of this year.

On July 22nd, Great Wall Motor released its interim results report for 2017. It showed that both its revenue and profit were declining, and net profit declined by nearly 50%.

The reporter consulted the June sales and sales report issued by Great Wall Motor. He also found that although the company’s overall sales maintained growth, the rare sales volume of the Haval H6, which the industry called “Shenzheng”, had dropped by 5.7% year-on-year.

There is a view in the industry that although the SUV still leads the domestic passenger car market, the upside has been very limited. After the automobile market began to adjust, the automakers dominated by SUVs are facing increasing pressure while their risks are increasing.

More advertising, less profit?

According to the 2017 interim results report released by Great Wall Motors, in the first half of this year, the company's total operating revenue was 41.256 billion yuan, which was 1% lower than the same period last year, which was 416.72 billion yuan; net profit was 2.492 billion yuan, a year-on-year drop of 49.42%. .

As for the reasons for the double reduction of revenue and profit, Great Wall Motor stated in the performance report that the first is to use profit-free customers through activities such as car-shaking and red envelopes to promote existing products and influence the level of revenue and gross profit margin;

Second, brand and product promotion through all aspects of the Internet, television, outdoor and other media, resulting in a larger increase in advertising fees;

The third is to continue to increase the competitiveness of SUV products and continue to increase investment in R&D, resulting in a larger increase in R&D expenses.

In March of this year, Great Wall Motors announced that it will pay 1 billion red packets to subsidize Haval series car buyers. The amount of a single red envelope will range from 38 yuan to 4,999 yuan. The event started on June 1st, from which the previous purchase of the car was changed into a cash discount, and a discount was added.

"The new Haval H6 model has a cash discount of 3,000 yuan, and the old H6 has a discount of 10,000 yuan." Recently, a sales person at a Great Wall Auto 4S store in Beijing expressed to the NBD.

It is understood that in terms of marketing and marketing expenses growth, Great Wall Motor's sales expenses (including advertising and product promotion expenses, etc.) have been increasing year by year since 2012. In 2016, the expenditure was 3.175 billion yuan, an increase of 11.75% over the same period of last year. %.

According to the annual report of the NBD Automobile Review Company, in 2015, Great Wall Motor R&D investment was approximately 2.76 billion yuan, an increase of 7.35% over the same period of the previous year. In 2016, this investment was 3.18 billion yuan, an increase of 15.2% over the same period of last year, and it also showed a growth trend. . Wei Jianjun, the head of the Great Wall, publicly stated that by 2020, Great Wall Motor will invest 30 billion yuan to create a global R&D system.

In fact, last year, Great Wall Motor’s total revenue was 98.616 billion yuan, a year-on-year increase of 29.7%; net profit was 10.054 billion yuan, a year-on-year ratio of 30.94%. From this point of view, Great Wall Motor continued to achieve revenue and net profit growth in the context of rising R&D expenses and sales expenses last year. However, this situation has changed in the first half of this year.

SUVs will "reach top" in 2020

While Great Wall Motor’s net profit fell by nearly 50% in the first half of the year, its overall sales growth also slowed.

According to official data from Great Wall Motor, in the first half of the year, the cumulative sales of Great Wall Motors totaled 460,000 units, an increase of 2.33% over the same period of last year. In the first half of 2016, its sales volume was 0.45200 units, an increase of 8.41% over the previous year. From this point of view, the sales growth of Great Wall Motors in the first half of this year is narrowing.

At the same time, it is worth noting that Great Wall Motor’s best-selling model, the Haval H6, had a cumulative sales volume of 227,000 units in the first half of this year. Although it still accounted for nearly half of the total sales of the Great Wall, it continued to lead the market, but it was 240,000 units over the same period of last year. Compared to sales, there has been a 5.7% year-on-year decline.

In this regard, Cao He, chairman of Zhongrong Venture Capital Management (Beijing) Co., Ltd., pointed out in an interview with NBD Automobiles: “As the competition in the SUV market in China has increased, the price of joint-venture brands at the same level has dropped, resulting in a worsening advantage for Great Wall Motors. In the meantime, at the same time, the gradual exit of the car business has also affected the growth of Great Wall Motor’s profit in the first half of the year.”

According to the data, the cumulative sales volume of the Great Wall C30 model in the first half of the year was 5,789, a year-on-year decline of 63.03%, which only accounted for 1.3% of the total sales of Great Wall Motors.

It is understood that Great Wall Motor sold 1.07 million vehicles last year, exceeding the annual sales target of 13.1%, and successfully entered the "millions of clubs." In this case, Great Wall Motors set its sales target at 1.25 million units this year, an increase of 14.4% year-on-year. However, NBD Motors learned that Great Wall Motors, which sold less than 500,000 vehicles in the first half of the year, currently completed only 36.8% of sales this year, and it was 790,000 vehicles from its final sales target.

This means that in the next six months, Great Wall Motor's monthly sales volume will need to exceed 130,000 units before it is expected to complete the sales target set at the beginning of the year.

"From the current performance point of view, Great Wall Motor has made it difficult to complete the 1.25 million sales target set at the beginning of the year." Cao He said, "Although the SUV segment still leads the domestic passenger car market, its upside is already very high." Limited, it is expected that this segment will touch the 'ceiling' by 2020, and its overall growth in the future will also be difficult to compare with the previous, plus the 'focus strategy' of Great Wall Motor, which makes the market adjustment, The pressure and risks faced by the company will be further increased."

Data show that in 2016, the cumulative sales volume of China's SUV market was 9.047 million units, an increase of 44.59% year-on-year. In the first half of this year, the cumulative sales volume of SUVs was 4.5266 million units, a year-on-year increase of only 16.83%. Among them, Great Wall Motor's SUV models accounted for 10.2% of the overall SUV market.

In spite of this, there are still some brokers who are optimistic about Great Wall Motor’s performance in the second half of the year and give “recommended” ratings.

According to a research report released on July 12 by Xingye Securities, the destocking of Great Wall Motors in the first half of the year was nearing its end and the product structure was also improved in the first half of the year. It is estimated that by the fourth quarter of this year, the combined monthly sales volume of WEY VV7 and VV5 models (supplied in September) will be more than 10,000 units. By the end of the year, WEY branded 4S stores will be able to reach 150 to 200, so the “overweight” rating is given. . In addition, research reports released recently by Haitong Securities, Ping An Securities and other institutions also expressed positive views on Great Wall Motor’s performance in the second half of the year.

Great Wall Motors believes that the new Haval H6, the first model of the luxury SUV brand “WEY” VV7 and the new products that will be launched in the future will all become new growth drivers for the future development of the Great Wall. Through the above products, Great Wall Motors' brand layout is expected to achieve a breakthrough from low to high, and profitability of bicycles may also bottom out.