Auto Industry Performance Divergence Accelerates

In the recent financial whirlwind, the automotive landscape has witnessed a series of quarterly reports released by major automobile manufacturers. This year, the industry has continued to roll out new vehicles, spurred on by favorable policies like the "trade-in for new" initiative, which has fueled growth in both production and sales. According to data from the China Association of Automobile Manufacturers, the first three quarters of this year saw production and sales reach 21.47 million and 21.57 million units, respectively, marking year-on-year increases of 1.9% and 2.4%.

However, the performance of automakers varies significantly: while some companies have seen their figures skyrocket, others are grappling with plummeting results. With just a month left before 2024 wraps up, the pressing question for most firms is how to ramp up their numbers swiftly to achieve annual targets.

Among the standout performers is BYD, which recently reported third-quarter revenue of 201.125 billion yuan, reflecting a robust growth of 24.04% year-on-year. Notably, during the same period, Tesla recorded approximately 25.182 billion USD (about 17.94 billion yuan) in revenue, only a modest rise of 8%. This marks the first quarter where BYD's revenue has eclipsed that of Tesla, a feat attributed primarily to its impressive sales growth. In September alone, BYD sold 419,400 new energy vehicles, soaring by 45.91% from the previous year. Over the entire third quarter, BYD's cumulative sales reached 1.1349 million vehicles, in stark contrast to Tesla's global deliveries of roughly 463,000 units, which grew by a mere 6.4% in the same time frame.

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Other companies faring well include Great Wall Motors and Geely. Great Wall Motors reported third-quarter revenues of 142.254 billion yuan, up 19.04% year-on-year, with a net profit attributable to shareholders soaring by 108.78% to 10.428 billion yuan. Meanwhile, Geely's revenue for the same period rose by 36% to 167.684 billion yuan, while profits attributable to equity holders skyrocketed 358% to 13.053 billion yuan.

On the flip side of this growth, some manufacturers have seen a dramatic downturn. Changan Automotive and Seres, for example, have experienced an operational "reversal," while SAIC Motor and GAC Group recorded declines in both revenue and profits. BAIC Blue Valley remains entrenched in its loss-making situation.

Located in Chongqing, where both Seres and Changan Automotive have their headquarters, Seres has increasingly overshadowed Changan. This year has seen Seres not only surpass Changan in market valuation but also outperform in third-quarter results. Specifically, Seres, having aligned its business closely with Huawei, has dramatically improved its earnings capacity, reporting revenue of 106.627 billion yuan in the first three quarters, a staggering year-on-year increase of 539.24%, with a net profit of 4.038 billion yuan. In contrast, Changan faced an unsettling year with a 63.78% drop in net profit, at just 3.58 billion yuan.

Furthermore, both SAIC and GAC reported declines in revenues and net profits during the first three quarters. SAIC's revenue fell to 419.646 billion yuan, down 17.39% year-on-year, with net profit plummeting to 6.907 billion yuan, down 39.45%. The third quarter alone saw revenue drop by 25.58% to 142.56 billion yuan, with net profit collapsing by 93.53% to merely 280 million yuan. Similarly, GAC saw a 24.18% decline in revenue to 74.04 billion yuan, with a staggering 97.34% drop in net profit to just 12 million yuan; third-quarter numbers reflect a worrying trend with a revenue fall of 21.73% and a loss of 1.396 billion yuan.

BAIC Blue Valley continued to face distress in the third quarter, posting a revenue of only 6.077 billion yuan against a net loss of 1.92 billion yuan.

Looking towards the international market, multiple multinational car manufacturers have reported catastrophic drops in their third-quarter earnings, with declines noted in both revenue and net income across the board.

Toyota's recent financial report indicates a decline in global sales to 4.556 million units from July to September, down 4% year-on-year, while net profits plunged to 573.7 billion yen, down 55%, with operating profits dropping by 20%. Honda, another major player in the Japanese auto market, found itself caught in a paradox of rising revenue without profitability. Their third-quarter earnings reached 5.4 trillion yen, an 8.2% increase, but operating profits slid by 14.6% to 257.9 billion yen, and net profits crumbled to about 100 billion yen, down 62% from last year.

German automakers have also encountered severe downturns, particularly the luxury trio known as BBA (Benz, BMW, Audi), which has seen halving of their net profits.

Mercedes-Benz's third-quarter report mentioned revenues of 34.5 billion euros, representing a 6.7% fall, while net profits dropped sharply by 54% to 1.719 billion euros. Volkswagen reported a 42% decrease in operating profits to 2.86 billion euros, with its operating profit margin decreasing by 2.8 percentage points to 3.6%, and a post-tax net profit of 1.576 billion euros, down 64% year-on-year.

The sharpest decline was observed at BMW, which reported revenues of 32.4 billion euros, sliding by 15.7%, and net profits plunging by 84% to just 476 million euros.

A common thread for these multinational automotive players experiencing such draconian slumps has been the sluggish progress in electrification and disappointing sales figures in China, one of the largest automotive markets in the world. Honda acknowledged strong sales figures in North America and Japan for their gasoline and hybrid vehicles; however, these did not override the gloom of their slipping performance in Southeast Asia and China. In the first half of fiscal 2024, Honda’s sales in China hit 381,000 units, a drastic decline of 37.6% year-on-year. This coincided with Volkswagen group's global sales falling by 7.1%, where their Chinese numbers indicated a 15% drop to 711,500 units.

BMW attributed their third-quarter downturns to a massive recall impacting numerous related models triggered by an IBS braking system issue that took effect earlier in the year, along with dismal performance in the Chinese market. BMW's CEO, Oliver Zipse, commented that conditions in China remain particularly challenging for all market participants.

As we advance into the fourth quarter, automotive manufacturers are in a time crunch with their annual KPIs fast approaching deadlines. Many companies are rolling out new models in a race to meet their goals. October has seen the conclusion of the "golden September, silver October" sales period, with data from the Passenger Car Association revealing that retail sales of narrow-bodied passenger vehicles (excluding microbuses, primarily cars, SUVs, and MPVs) reached 2.261 million units, a year-on-year growth of 11.3% and a month-on-month increase of 7.2%.

In late October, during a press conference hosted by the State Council Information Office, a senior official from the Ministry of Industry and Information Technology highlighted the challenges faced by the automotive sector, including insufficient domestic demand and increasing instability in overseas exports. To stimulate the car market, the ministry is working to implement programs focusing on vehicle trade-ins and promoting new energy vehicles across rural areas while countering trade barriers like high tariffs and subsidy investigations.

On November 21, a deputy researcher from the Consumption Promotion Department of the Ministry of Commerce, Song Yingjie, revealed that the ministry is proactively laying plans for next year’s continuation policies regarding vehicle "trade-ins," aimed at stabilizing market expectations.

Finally, this November will see the Guangzhou Auto Show, the last A-class car exhibition of the year, where 78 new models are set to debut, including six from multinational corporations. The total exhibited vehicles will amount to 1,171, with 512 being new energy cars. The trend toward electrification and intelligence in China's new energy vehicles has become a significant driving force for high-quality development in the automotive industry.