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Customer LoginsBYD profit rises 384% in H1, increases for Great Wall, Geely, JAC, GAC, declines for Jiangling, Dongfeng
Chinese automotive brands offering SUV models and strong new energy vehicle products report solid growth in the first half of 2016.
- Significance:Chinese brands have been the main beneficiaries of strong automotive revenue growth in the first six months of the year in China.
- Implications:Despite the strong surge in revenues, Chinese brands will face more pressure to maintain volume growth in the domestic market as international brands begin major product and price offensives.
- Outlook:Chinese-brand SUVs, which are generally at a lower price point than those from international brands, continue to be the models representing the main sales of the local brands. However, as greater variety is added to the market, Chinese brands are beginning to witness a slowdown in growth of market share.
Chinese brands have been the main beneficiaries of strong automotive revenue growth in China in the first six months of the year. The main automakers gaining from the revenue growth in the Chinese market have been the ones selling local-brand sport utility vehicles (SUVs) and those with strong new energy vehicle (NEV) products. BYD has reported a profit rise of 384% in the first half, while Great Wall, Geely, JAC, and GAC have also reported increases, and Jiangling and Dongfeng have reported declines.
BYD Auto has reported revenue of CNY43.75 billion (USD6.5 billion) in the first half, marking an increase of 43.74% year on year (y/y). Meanwhile, the automaker's profit surged 384% y/y to CNY2.26 billion in January−June. Most of the surge in BYD's revenue and profit is attributed to the strong growth of the new energy vehicle (NEV) market in China in the first half.
Of BYD's total revenue for the first six months, 35% is attributed to NEV business, the China Daily reports. BYD's NEV revenue hit CNY15.31 billion in January−June 2016, around 1.61 times more than NEV business revenue in the same period of last year. Sales of NEVs hit 49,000 units in the first six months of 2016, up 130% y/y. BYD targets annual NEV sales of 120,000 units for 2016.
Great Wall Motor has reported total revenue of CNY41.67 billion in the first six months of 2016, an increase of 12.19% y/y. In a statement filed with the Hong Kong Stock Exchange (HKSE), the company states that net profit attributable to shareholders, after extraordinary gains and losses, was CNY4.8 billion in January−June, a 4.85% y/y increase from CNY4.6 billion in the same period last year.
The main reason for the increase in revenue and profit in January−June was sales of Great Wall's SUVs. The company states, "By optimising the product mix, focusing on SUV category and manufacturing high price-performance products, the Group was committed to gaining the satisfaction of customers. During the reporting period, the increase in sales volume of automobiles and SUVs facilitated a growth in operating revenue of the Company, leading to a stable growth in the net profit attributable to shareholders of the Company and earnings per share as compared with the corresponding period of last year."
Of Great Wall's total revenue of CNY41.67 billion in the first half, sales of automobiles accounted for CNY39.957 billion, up 12.42% y/y, while sales of automotive parts and components were CNY1.64 billion, up 4.44% y/y. Meanwhile, sales to overseas customers accounted for just 1.12% of the total.
Great Wall's overall sales in China totalled CNY41.2 billion in the first half, up from CNY36.4 billion in the same six-month period of 2015. The company's second most important market is Chile, which generated sales of CNY129 million in January−July, up from CNY116.7 million in the same period last year. This was followed by Iraq, which generated sales of CNY48.09 million, up from just CNY787,502 in the first half of 2015. Sales in Russia also brought in an increase in revenue, with sales in the first six months generating CNY34.85 million, up from just CNY5.93 million in the same period last year. However, the automaker's sales in Peru and Ecuador witnessed a contraction. Meanwhile, sales in the remaining overseas markets together witnessed a heavy decline to just CNY192 million in the first half, down from CNY537 million in the same period last year.
Great Wall sold a total of 454,813 units in the first half of 2016, up 8.84% y/y, of which China accounted for 448,063 units, up 10.43% y/y, while exports hit just 6,750 units, down 44.41% y/y. Of the product mix, SUV sales were 380,868 units in the first half, up 13.20% y/y, while pick-up truck and sedan sales declined. Sedan sales plummeted 20.4% y/y in the period. Great Wall plans to bring in a NEV sedan to try to counter the major drop in its sedan sales.
Meanwhile, the Haval H6 continues to be the best selling model for the automaker. The company stated, "Driven by strong demand, the sales volume of the Group's flagship product, Haval H6, maintained a notable growth momentum and increased by 35.66% when compared to that of the corresponding period in 2015. Haval H6 Coupe, launched in 2015, was popular among consumers. A new version with a 1.5T engine was launched during the period, driving up sales of Haval H6 Coupe."
Great Wall plans to bring in more SUV variants in the second half of the year, as well as an electric sedan. The company will also continue to complete construction of its plant in Tula Oblast, Russia, with the intention to begin SUV production there in 2018.
Geely Automobile has reported revenue of CNY18 billion in the first six months of 2016, up from CNY13.8 billion in the same period last year. The company's gross profit hit CNY3.2 billion in January−July, up from CNY2.43 billion in the same period last year. After taxes, profit hit CNY1.9 billion, up from CNY1.4 billion in the same six-month period last year.
In the statement issued to the HKSE, the automaker highlights that revenue from sales of completely built-up units hit CNY10.529 billion in the first half, up from CNY6.37 billion in the same period last year. Meanwhile, Geely states that sales of its Zhejiang Geely Automobile Company's completely knocked down kits and sedan tool kits came in at CNY10.29 billion in January−July, up from CNY6.03 billion in the same six-month period of 2015, while purchase of completely built-up units came in at CNY10.529 billion, up from CNY6.37 billion.
Overall the automaker states that its performance has exceeded expectations in the first half of the year, "helped by the continued good domestic demand for its sedan models like 'New Emgrand', 'New Vision', 'Kingkong' and 'Geely GC9', as well as strong market response to its new sport utility vehicle ('SUV') model 'Geely Boyue' and new crossover model 'Emgrand GS', more than offsetting the continued weak export sales during the same period".
Geely sold a total of 269,669 units in the first half in China, up 15% y/y, but export sales volume slid 40% y/y to 10,668 units. The automaker states that it is now taking a more conservative approach to contain risks in export markets.
In the first half of the year, the automaker launched two new products, the Boyue SUV and the Emgrand GS crossover utility vehicle. In the second half of 2016, Geely will launch the Emgrand GL sedan, the Vision SUV − a new compact SUV − and a hybrid electric Emgrand sedan.
Meanwhile, the most important export destinations for the company in terms of sales volume were Saudi Arabia, Sri Lanka, Belarus, Cuba, and Egypt, which together accounted for over 81% of the group's total exports volume in the first half of 2016. In addition to exports of vehicles from China, the group also assembles some models sold overseas using contract manufacturing arrangements with local partners in Belarus, Russia, Sri Lanka, Ethiopia, Uruguay, and Egypt.
Other automakers have also reported their financial results for the first half of the year, with Anhui Jianghuai Automobile Company (JAC) reporting a 7.5% y/y increase in net profit to CNY577.5 million. Guangzhou Automobile Corporation (GAC) has reported net profits of CNY3.98 billion, a "2.3 fold increase from a year earlier" or a 127.49% y/y increase, on the back of strong SUV sales. Overall revenue jumped 87% y/y to CNY21.42 billion for GAC, with 731,900 new cars sold in the period, up 29% y/y.
However, Jiangling Motors Corporation hit revenue of CNY10.8 billion in the first half, down 9.38% y/y, while net profit dropped 34.86% to CNY705 million, SinoCast reports.Meanwhile, Dongfeng Automobile declared operating revenue of CNY6.886 billion in the first half, down 11.73% y/y, and net profit of CNY222.4 million, down 5.68% y/y, Sinocast reports.
Outlook and implications
The Chinese vehicle market has risen in the first half of the year, but the main gainers from the growth have been the local brands selling SUVs and those with strong NEV products. Both these segments have witnessed strong growth in the period, bringing in greater revenues for those with products meeting local consumer demands.
A number of Chinese automakers have reported strong growth in sales in the first half of the year, although as competition in the SUV sector increases with lower-cost models from international brands also expected, the battle for market share between the local and international brands will increase. For example, Ford has already begun cutting prices of its SUVs in China to try to reduce its increasing inventory.
Chinese brands have witnessed a surge in sales in the first half of the year, and now account for 33.5% of the local passenger vehicle market, up from 29.4% in the first half of 2015, IHS Automotive data show.
About this article
The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.