Written by / Hong Hanqi
Edited / Mao Shiyang
New car companies such as Wei Xiaoli can "burn money", which is more attractive to research and development talents and capital, and can also obtain several times the market value of traditional car companies with a lower revenue scale, which makes a number of car companies indignant. As a result, a race to split its new energy business into "new cars" for separate financing and listing began among traditional car companies such as SAIC, Changan, Dongfeng, and GAC, of which GAC Aean was the fastest. But can everything really go as expected?
Gazc Motor Group, a veteran car company, is trying to package its electric vehicle brand Aeon as a "new car" company.
As an independent brand of GAC Group that began to operate independently in 2020, GAC Aeon's sales volume exceeded 120,000 units in 2021, an increase of 119% year-on-year. According to the plan, GAC Aeon will challenge the sales target of 240,000 units in 2022. Compared with byd byd new energy vehicle companies such as BYD, GAC Aean's volume is still very small, but if the object of comparison is changed to "Wei Xiaoli" and other new cars, E-An is far ahead in scale.
As a result, GAC Aean began a series of "packaging", saying that it would change Wei Xiaoli into "EXiaowei" and planned to let GAC Aean go public separately in 2023. GAC Aeon, which is moving toward independence, is still losing money, but GAC Group hopes that the capital market will accept E-An as it does with "Wei Xiaoli" and give it a high valuation.
But for new cars, the test is not only the scale of sales, but the competitiveness of the layout in the future. The challenge for GAC Aean is still enormous.
GAC Aean squeezed into "Wei Xiaoli"
GAC Aeon started in December 2015, formerly known as GAC Passenger Vehicle New Energy Branch, is the "grandson company" of GAC Group, established by GAC Passenger Vehicle, a subsidiary of the Group responsible for its own brand passenger cars. Until July 2017, GAC BJEV became independent and became a subsidiary alongside GAC Passenger Vehicles. In 2020, GAC Group transformed GAC New Energy into "GAC Aeon".
On April 8, GAC Group released its March production and sales report. According to the data, GAC Ae's monthly sales of 20,137 vehicles, an increase of nearly 190% year-on-year, is the company's first monthly sales of more than 20,000 vehicles.
On April 11, including the automobile industry information statistics agencies such as the Association of Automobile Manufacturers, released statistics one after another, and GAC Aian began to be listed in the list of "new cars", and surpassed Xiaopeng Automobile, Nezha Automobile, Ideal Automobile, Zero Run Automobile and Niolai Automobile in one fell swoop, becoming the champion, and the delivery volume in the last few months in March was between 10,000 and 15,400 vehicles.
The change in statistical method stems from the intention of GAC's Eian executives. On April 1, at the 2021 earnings conference of GAC Group, Feng Xingya, general manager of GAC Group, said: "We must at least achieve the current 'Wei Xiaoli' into 'Ai Xiaowei'. ”
Gac Group's purpose in shaping GAC Aean as a new car is obvious. "Aehan's valuation is equivalent to the valuation of the new forces now." On the earnings call, Feng Xingya told Caijing Weekly that "as the valuation of a subsidiary rises, the parent company will also rise." ”
According to the target announced by GAC Group in early April, Aian plans to start a series A financing this year, releasing 30% equity financing of 50 billion yuan. According to this target, the valuation of GAC A-An after the Series A financing is more than 166 billion yuan. In contrast, although GAC Group currently holds a 93% stake in GAC A-An, as of April 13, the total market value of GAC Group's A-shares was only about 100 billion yuan.
Feng Xingya said that the annual production and sales of GAC Group's vehicles reached the level of 2 million vehicles, on the contrary, the company's profits and sales scale are not as good as GAC's enterprises, but they have higher valuations in the capital market. This is the embarrassment that traditional OEMs generally face in the capital market.
In addition to market capitalization, GAC Group also hopes to use the concept of "new car manufacturing" to solve the passive situation in terms of funds and R&D talents. The latter two are considered to be the "ammunition" that must be stockpiled to conquer the new energy market.
"Many of our excellent technical talents have been poached by the Xiaopeng Car next door." Zeng Qinghong, chairman of GAC Group, said that because Xiaopeng and GAC are both in Guangzhou, many technicians have been lost to Xiaopeng with better treatment and incentive schemes.
According to the timetable announced by GAC Group, GAC AE plans to complete the A round of financing and joint-stock system reform by the third quarter of this year, and to split and list in 2023.
If the IPO goes well, GAC Aean will be the first company under the state-owned car company to go public after the mixed ownership reform.
However, in addition to GAC Ean, the group's new energy vehicle business sector is closer to the new car-making forces at least at the marketing level, which is almost a common practice for traditional car companies to exert new energy.
However, in order to complete the three goals of improving valuation, improving financing capabilities and attracting technical talents through mixed reform and listing, it still seems that there are still many challenges, and it is difficult to say that it is a good start to forcibly compare "Wei Xiaoli".
Image source/Visual China
Solving the "Money Problem" for Aeon
"GAC Aean took the initiative to choose mixed reform and plans to introduce strategic investors in the follow-up, in order to achieve equity diversification and thus promote listing," Cao He, president of Allianz Auto Investment Management (Beijing) Co., Ltd., told Caijing Tianxia Weekly.
It is worth noting that after independence from GAC Group, GAC Aean has a high probability of becoming a loss-making enterprise.
Judging from the 2021 financial report, although the performance of GAC Group has grown steadily, the financial performance of its own brands is difficult to be unsatisfactory. According to statistics, in 2021, the total operating income of GAC Group was about 75.676 billion yuan, an increase of about 19.82% year-on-year, and the net profit exceeded 7.3 billion yuan, an increase of nearly 23% year-on-year. Among them, the loss of GAC Group's autonomous sector and GAC Eian reached 4.48 billion yuan, and it is estimated that the loss of AVIC in 2021 will be about 1 billion yuan.
The more serious problem is that once independent, GAC Aean's loss margin is likely to be further magnified.
"Finance and Economics" Weekly learned that the previous GAC Aeon was more independent of the brand and marketing level, research and development was unified under the GAC Research Institute, and the production and manufacturing was responsible for GAC Passenger Cars.
In November last year, GAC Group reorganized the internal assets of GAC Aean, began to divest the group's new energy-related assets, and integrated them into the GAC Aean system, hoping to build GAC Aeon into an independent company integrating "research, production and marketing". At the R&D level, GAC Ae-An undertakes the R&D personnel in the field of pure electric new energy from the GAC Research Institute; on the production side, GAC Ae-An purchases the assets of GAC Passenger Vehicles in the field of pure electric new energy.
After the merger of "R&D, Production and Marketing", GAC Aeon will independently maintain R&D investment, which means greater capital demand.
Some insiders told "Finance and Economics" that becoming "Ai Xiaowei" is more like a radical expression at the marketing level, and GAC Aean, which is eager to go public, actually wants to give the company a new story and a larger imagination space.
"In the first stage of the development of the new energy automobile industry, the traditional car companies took a bit of a biased path, mostly driven by policies, and did not really make efforts to invest in research and development." Cao He believes that although the new car-making forces rely on the financing route to survive, the means to re-invest in catalytic research and development are not available to traditional car companies.
GAC Aean has shown its determination to "re-research and development". Zeng Qinghong revealed that the A round of financing "at least raised 50 billion yuan", "50 billion yuan will all be invested in the research and development base".
But funding alone is not enough. Although ATV has been on par with the new car-making forces at the sales level, or even performed better, it still faces the hidden worry that the "gold content" of the sales structure is not high, and has not shown differentiated technical advantages.
In the past two years, with the improvement of the product matrix, GAC Aeon has embarked on a rapid growth model. In 2021, GAC Aeon sold 123,700 units, an increase of 119% year-on-year. Last year, none of the new car-making enterprises had an annual sales volume of more than 100,000 vehicles. In the first quarter of this year, GAC AE delivered a total of 44,874 vehicles, an increase of 154.26% year-on-year.
It should be reminded that in terms of sales structure, GAC Aeon is different from the price band of 300,000-400,000 yuan of Weilai and weilai, which is basically based on sales of 100,000-200,000 yuan of products.
At present, GAC Aeon's models on sale include AEAN S, Aegean Y, Aegean LX and Eian V. Among them, the pricing range of Ian S and Y Y is 100,000 yuan to 170,000 yuan, and the Ian LX is a flagship model, which is priced at about 230,000 yuan after subsidies. In 2020, GAC Aeon's cumulative sales volume was 60,000 vehicles, of which the annual sales of Aion S, priced at more than 100,000 yuan, reached 45,000 vehicles, accounting for nearly 80%. In 2021, Aian S and Ian Y are also the main sales force. In contrast, Aean LX, which is in the high-end market, has a weak sense of market presence.
Obviously, GAC Aean needs greater investment to enter the high-end market, and packaging it into a "new car" and financing it alone has become the best way to solve the problem.
Image source/Visual China
Capital cures all diseases?
For gac aviation Aian's mixed reform and IPO, GAC Group has high hopes. "The general manager of [GAC Ae'an] invested 20 million yuan and mortgaged the house." Zeng Qinghong has publicly revealed.
In March this year, the Board of Directors of GAC Group deliberated and passed the "Proposal on the Implementation of Employee Equity Incentives and Related Matters by GAC Aeon", and agreed that GAC Aeon would adopt a non-public agreement to increase the capital. GAC Group liberalized about 7% of its stake, and its shareholding fell to 93%. This is regarded as a key step in the mixed reform of GAC E-An, and most of the first batch of equity opened up is used for employee equity incentives. It is reported that 679 EMPLOYEES OF GAC AEAN and 115 scientific and technological personnel of GAC Research Institute have obtained 4.55% of the equity of GAC Ae-An.
At this point, the mixed reform of GAC Aean, which has lasted for more than a year with a state-owned background, has finally landed, paving the way for future financing.
GAC hopes to use capitalization operations to help Aian accelerate its technical layout in the field of intelligence and electrification, so as to enhance the added value of products and brands, and compete with new cars such as "Wei Xiaoli" in terms of technical strength. But the ideal is very full, and the reality is very bone. Not only GAC Eian, in the past few years, Chery, Changan and so on have begun to mixed reforms, the effect is generally not outstanding and there is a lot of resistance.
Some GAC E'an insiders told Caijing Tianxia Weekly that although the name is hoping to retain R& D talents through mixed reform, it is still mainly middle and senior managers who have obtained equity.
"(At this stage) it should be said that the work of mixed reform is basically completed, and the next stage will begin to introduce strategic investors, including the start of the A round of financing." Feng Xingya, general manager of GAC Group, said in an interview with the media that it will introduce strategic investors to provide comprehensive support for the company's brand, technology and marketization.
In addition to equity open to internal employees. According to the announcement released earlier by GAC Group, in the capital increase and share expansion in mid-March, GAC Aean introduced Chengtong Group, Nanwang Kinetic Energy and Guangzhou Ai'an as shareholders, and the total shareholding of the three parties was 2.0%.
Among them, Chengtong Group will participate in the mixed reform on behalf of the China State-owned Enterprise Structural Adjustment Fund and the China State-owned Enterprise Mixed Ownership Reform Fund to help GAC Aean link the resources of state-owned enterprises; SouthNet Kinetic Energy will cooperate with GAC Aean in charging pile construction and other businesses; Guangzhou Ai'an is a fund platform led by Guangzhou Production and Investment. It is worth noting that all three are state-owned asset backgrounds.
Even if the equity has been liberalized, the strategic investors who currently control the core resources of the new energy automobile industry have not yet entered GAC Aean. In contrast, Changan Avita Technology, which was undergoing mixed reform work at the same time, appeared more "bold", introducing the power battery supplier Ningde Era and becoming the company's second largest shareholder.
Auto analyst Zhong Shi told the "Finance and Economics" Weekly: "Large state-owned enterprises to cooperate with external private enterprises, in terms of concept, institutional mechanism, discourse power, etc., both sides need a long period of running-in." ”
GAC Group said that at present, the capital market has a positive attitude towards the mixed reform and listing of Aeon. "There are 250 companies to vote for Eian now, and I may choose at most about 30. Aehan's valuation they quoted high. Zeng Qinghong, chairman of GAC Group, believes that the spin-off and listing of Aean may create two GAC groups in the future according to the market value of the existing new car-making forces.
"In addition to the four major assemblies of electric vehicles, traditional automobile layout new energy vehicle business, other sectors can adopt the existing supply chain system, in the above areas, traditional car companies still have system strength." Cao He believes that for the new energy business sector of traditional OEMs, there are essentially two development paths for new car-making forces, but it is true that we should learn from the above-mentioned enterprises at the marketing level, distinguish the marketing business from the fuel vehicle sector, and create a new brand image.
Image source/Visual China
IPO is a long road
A source close to Dongfeng Motor Group told Caijing Tianxia Weekly that Dongfeng Motor is discussing the independent financing of its electric vehicle brand Lantu.
At the beginning of this year, Changan New Energy, a subsidiary of Changan Automobile, completed the B round of financing, raising 4.9773 billion yuan. After the completion of the capital increase, Changan Automobile's shareholding ratio was diluted from 48.95% to 40.66%. Another entity undertaking the group's new energy vehicle business, Avita Technology, completed the first round of strategic financing at the end of March, changan automobile's shareholding ratio was diluted from 95.38% to 39.02%, and CATL became the company's second largest shareholder with a shareholding ratio of 23.99%.
The new energy vehicle brand Zhiji, a joint venture between SAIC Motor and Alibaba and Zhangjiang Hi-Tech, has entered the stage of product market launch. In the past year, SAIC Motor has implemented equity and option incentives for 10 of its subsidiaries, and has successively financed its travel business sector "Xiangdao Travel" and fuel cell company "Jie Hydrogen Technology", and spun off and listed.
GAC Group also said that marketization and openness will be the overall direction of the group's reform. In the capital market, in addition to GAC Aean, its Ruqi Travel and Juwan Technology Research Institute will also provide financing to the outside world.
But the road to an IPO is clearly long and difficult. Even private enterprises with more flexible institutional mechanisms have made slow progress in the capital market. Taking Geely Holding Group's new energy vehicle sector "Extreme Krypton" as an example, after announcing the acquisition of a $500 million Pre-A round of financing in August last year, there has been no new financing news.
Even after the completion of the listing, achieving profitability is still a barrier. As of now, the three leading car companies of the new car-making forces are still in the process of loss.
According to the financial report, in 2021, Xiaopeng Automobile had the highest sales volume in the camp of new car-making forces, but it also lost the most for the whole year, expanding by 78% year-on-year to 4.86 billion yuan. In the same period, WEILAI's annual net loss narrowed, but it still reached the level of 4 billion yuan. The ideal loss was the smallest of $322 million, but it expanded by 111.9% year-on-year.
More importantly, if the loss continues, it is not good news for new energy vehicle companies with high financing needs. In particular, after the subsidy decline, technological strength began to become the dominant in the field of new energy vehicles, and the desire for funds was increasing day by day.
Li Bin, founder of Weilai, said earlier that the company will continue to increase investment in research and development of key technologies in the next few years, especially in key areas such as full-stack autonomous driving technology and power batteries. It is expected that INTECH's R&D investment in 2022 will increase by more than 1 times compared with 2021, that is, at least reach the level of 8 billion yuan. Xiaomi Auto announced that the current R&D team of the automotive business has been expanded to 1,000 people.
However, please note that at present, the capital market has gradually shown a more calm attitude towards the concept of new energy vehicles.
Some fund managers believe that the superposition of factors such as the decline of subsidies for new energy vehicles in 2022, the continuous rise in raw material prices in the upstream supply chain and the shortage of supply has affected the correction of the new energy vehicle sector.
According to flush data, in March this year, the new energy vehicle sector fell by nearly 10%, and more than 80% of the individual stocks in the sector fell during the period. On April 11, Hong Kong auto stocks fell collectively, with Weilai down nearly 8 percent, Ideal Auto down nearly 7 percent, Xiaopeng Motors more than 6 percent, Geely Cars down more than 5 percent, and GAC Group down more than 3 percent.
The "burning of money" continues, and the lack of money continues. Whether it can absorb more funds to help business growth may be a common problem that domestic new energy vehicle companies will face in the future.