GAC Group: Joint venture dependence is decreasing

Recently, listed automobile companies have entered an intensive annual report release period. Under the influence of chip shortages, rising raw material prices, the epidemic and other factors, the market pressure facing the automotive industry has further increased. Overall, the decline in profits of domestic car companies is still the main theme, and even the phenomenon of "increasing revenue without increasing profits" has emerged. However, GAC Group has become one of the few car companies to achieve both revenue and net profit growth.

According to the 2021 annual report recently released by GAC Group, the annual revenue was 75.676 billion yuan, an increase of 19.82% year-on-year; the net profit attributable to the shareholders of the parent company was 7.335 billion yuan, an increase of 22.95% year-on-year; and the net profit attributable to the mother after deducting non-profit was 5.977 billion yuan, an increase of 24.33% year-on-year, achieving a double growth in revenue and net profit.

Although this year's financial report shows that GAC Group's operating income and net profit have maintained double-digit growth, such an "answer sheet" makes many car companies very envious, but it actually has its own troubles, such as a sharp rise in operating costs, a sharp decline in operating cash flow, etc., but also faces various challenges. Putting aside the literal data, how did GAC Group perform last year? In the uncertain year of 2022, what are the opportunities and risks for GAC Group?

Got rid of joint venture dependency? The growth rate of independent revenue is stronger than that of joint ventures

According to GAC Group's 2021 annual report, its production and sales last year were 2.1381 million units and 2.1444 million units, respectively, an increase of 5.08% and 4.92% year-on-year. Sales of new energy vehicles reached 142,900 units, up 77.35% year-on-year, accounting for 6.7%. Looking closely at the specific sales data of GAC Group, the performance of GAC Honda and GAC Toyota has played a key role in pulling.

Of the GAC Group's annual sales of 2.14 million, GAC Honda and GAC Toyota sold more than 1.6 million vehicles, accounting for more than 74% of the group's total sales. Among them, GAC Toyota sold 828,000 new vehicles in the whole year, an increase of 8.23% year-on-year, becoming one of the few joint venture brands to achieve positive growth. Although GUANGQI Honda was plagued by the shortage of chips, its sales fell by about 3% year-on-year, but it still brought 114.810 billion yuan of operating income; while GAC Toyota's operating income was 129.464 billion yuan, an increase of about 16.89% year-on-year, which also confirmed the "earning power" of "Two Fields".

In addition to the "two fields" acting as the top pillar of performance, the sales volume and revenue growth rate of the two independent business subsidiaries are better than those of the joint venture, which is a highlight of THE GAC Group in 2021. According to the annual report, GAC Trumpchi's annual sales reached 324,200 vehicles, an increase of 10.35% year-on-year, and achieved operating income of 52.885 billion yuan, an increase of about 26.02% year-on-year; GAC Aean completed the sales target of 100,000 vehicles ahead of schedule in November 2021, with a total sales volume of 120,200 vehicles, a year-on-year increase of 101.8%, and achieved operating income of 17.265 billion yuan, an increase of about 84.27% year-on-year.

Continuing to increase investment in R&D and innovation is also the main tone of GAC Group in 2021. In terms of research and development, GAC Group invested more than 516,500 yuan in R&D last year, adding 2,580 new patents, including 1,108 invention patents. At this stage, the technical achievements released or landed include ADiGO intelligent driving interconnection system, Xingling architecture, sponge silicon anode chip battery technology, magazine battery, fast charging technology, etc.

To create "Ai Xiaowei", A-an A round or rong 50 billion yuan investment in research and development

At the performance exchange meeting, GAC Aean's mixed reform and future development direction became the focus of attention. Since last year, GAC Group has completed the internal asset restructuring of GAC Aeon through cash capital increase and asset injection. In March, GAC Aeon also introduced three investors with state-owned asset backgrounds and implemented an employee equity incentive plan through a non-public agreement to increase capital, raising a total of 2.566 billion yuan. Next, GAC Aeg will further introduce strategic investors and sprint IPO listings.

Zeng Qinghong, chairman of GAC Group, revealed that there are currently more than 250 potential investors and institutions, and it is expected to choose 30 companies and exchange 30% of the equity for 50 billion yuan of financing, or will all be invested in research and development. Feng Xingya, general manager of GAC Group, mentioned that one of the purposes of mixed reform is to change "Wei Xiaoli" into "Ai Xiaowei". From the perspective of sales alone, GAC Aean's recent sales performance has indeed surpassed "Wei Xiaoli".

According to the March sales data released by GAC Ae-An, GAC Ae-on sold 20,317 new vehicles in March, an increase of 189% year-on-year. So far, GAC Aeon has sold a total of 44,874 vehicles in the first quarter of this year. In the face of growing orders, GAC Aeon also carried out the expansion and upgrading of the production capacity of the new plant. In February this year, GAC's Aean First Plant was expanded to increase its annual production capacity to 200,000 units. According to the plan, the second 200,000-year production capacity plant will also be completed and put into operation at the end of this year, and will have a capacity of 400,000 yuan in 2023.

What are the long- and short-term challenges facing GAC Group?

Gac Motor Group's excellent achievements in 2021 have impressed the market at the same time, and everyone's expectations for it have once again increased. Gac Motor Group has set a target of challenging the annual car sales growth rate of 15% in 2022, which means that this year's sales will reach more than 2.46 million vehicles, and it will face a lot of pressure to achieve this sales target.

As we all know, the crisis caused by chip shortages and rising raw material costs is further emerging in the automobile industry, and car companies generally delay the vehicle delivery cycle, which in turn leads to a decline in production and sales of car companies. At the media communication meeting of gac group annual report, Feng Xingya also admitted that the problems of chip shortage and raw material price increase in the entire automotive industry have hit GAC group hard. Whether it is the joint venture OFC Honda or the independent GAC Trumpchi, sales are subject to chip shortages, which has disrupted the growth rate.

In addition, although GAC Group has a strong growth momentum of GAC Aeon, its sales of new energy vehicles in 2021 still account for less than 7% of GAC Group, which is still quite far from the goal of GAC Group. It is reported that GAC Group's goal is to achieve 50% of the sales of its own brand new energy vehicles in 2025 and 50% of new energy vehicles in 2030. This means that GAC Group needs to continue to exert efforts in the intelligent electrification automobile market with many masters.

It is worth mentioning that 2022 is a big year for GAC Group's products, and it plans to launch more than 15 new, replacement or mid-term remodeled models this year. In the joint venture brand part, GAC Honda launched its own new electric brand Ji Pan, and at the press conference, it also launched the first model of Ji Pan 1; GAC Toyota will usher in a new electric vehicle - bZ4X; GAC Mitsubishi will launch a new electric SUV - Atuka AIRTREK. There are also many new cars of independent brands, and the models to be launched include: Aean LX PLUS, the new Aeon Y, the new GS4, M8 hybrid version and Shadow Leopard hybrid version. In addition, GAC Group also announced that it will develop a pure electric supercar model, which will accelerate from 0-100km/h in only 1.9 seconds, and the car can be delivered at the end of the year or early next year. The listing of these new vehicles also gives GAC Group the confidence to achieve sales targets.

Overall, the performance of GAC Group in 2021 is indeed remarkable. In particular, the excellent performance of the joint venture brand and the rise of its own brand have laid a solid foundation for the performance of GAC Group. Although this year will face the challenge of uncertain factors such as chip shortage and the impact of the epidemic, GAC Group has high-quality assets such as "Two Fields" and actively invests in research and development to improve itself. It can be seen that the future sales performance of GAC Group is still very promising.