Changan Automobile: Expansion suddenly accelerates short-term profits to be filled

Signed a single contract in April, with a capacity of 3 million units in 2012

From May to August this year, along with the high-density travel of Changpu Automobile President Xu Liuping, Beijing, Nanjing, Hefei, Jiangxi, Hebei, and Heilongjiang reached a cooperation agreement with Chang'an in seven places, and Chang’an’s capacity expansion rate suddenly accelerated. The layout of the map also suddenly expanded. "If your product development (and productivity) can keep up, naturally your growth rate and scale will go up. In this sense, Chang'an's (growth) speed is faster than capacity building." Xu Liuping said .

In fact, Xu Liuping has a higher expectation for Chang'an's future. He set Chang'an's sales target at 5 million in 2020. In 2008, Chang'an Automobile had only 834,500 annual sales, and in 2009 it reached 1.86 million units. This year, Changan Automobile sales target is 2.2 million, and 1.39 million vehicles have been completed between January and July. However, behind the expansion of the Chang’an Expressway, there is a real problem that we have to face: the profit margin is too low. Chang'an's profit margin is only higher than that of Huachen among the top ten auto groups in China, and is comparable to that of Jianghuai Automobile, lagging far behind other major auto groups. Profitability is a short board that must be compensated for the rapid expansion of Chang’an.

High speed expansion

On August 26, Changan Automobile and the Shenzhen Municipal Government signed a strategic cooperation agreement to plan the Changan PSA project with an annual output of 200,000 units in the initial stage of local investment and plans to carry out more cooperation with the Shenzhen Municipal Government. "The signing of the cooperation agreement for the PSA Shenzhen Base in China's Changan marks that China Changan Automobile Group has initially completed its industrial layout in South China," said Xu Liuping.

This project is planned to produce 200,000 complete vehicles annually in 2012. The product plan includes two models of passenger vehicles and light commercial vehicles. The Changan brand, Peugeot brand, Citroen brand and joint venture company's own brand will be adopted. In addition to the entire vehicle, Changan Automobile also plans to form an annual production capacity of 200,000 engines and transmissions.

The project is also a strategic cooperation agreement signed by Changan Automobile since May this year with the seventh local government. On May 11, China Chang'an signed a strategic cooperation agreement with Heilongjiang Province. On May 12, Changan signed a strategic cooperation agreement with Jingdezhen, Jiangxi again. In June, Changan Automobile signed strategic cooperation agreements with Nanjing, Hebei, Hefei, and Beijing respectively.

The main content of the above-mentioned strategic agreement is to build or expand automobile factories locally, increase vehicle production, and increase different amounts of investment. According to public information, only Shenzhen, Hefei, and Dingzhou, Hebei, Changan Automobile plans to invest a total of 14.5 billion to 15 billion yuan. Among the above seven cities, Changan Automobile plans to build and expand the total vehicle production capacity of up to 2.4 million vehicles.

“We have determined that we will have 3 million units of capacity by 2012. In addition to some new bases, the other is to carry out technical modifications and additions on existing bases.”

The Changan Automobile, which was once referred to in the industry as "the millennium fourth old man", started to accelerate from last year. In 2009, the State Council promulgated the “Regulations for the Adjustment and Revitalization of the Automotive Industry”, and Chang’an Automobile was listed as the top four automotive groups in China for the first time. At the end of the year, Changan Automobile acquired the new AVIC's Dongan Power, Changhe, Hafei and other automobile assets, and its sales also surged to 1.863 million, which is equivalent to Dongfeng and FAW. Since then, Changan has continued to expand at a high speed in China. It has 9 vehicle production bases and 23 vehicle (engine) factories throughout the country, with a total annual production capacity of 2.2 million vehicles and engines.

In addition, Changan Automobile also plans to add new joint venture partners. In July 2010, Changan Automobile signed a joint venture with French PSA. Changan Automobile executives told this reporter that the company is negotiating with Volkswagen AG of Germany and intends to jointly produce Volkswagen brand commercial vehicles in China.

Short profit

"Changan Automobile is becoming bigger, but it is not yet strong." This is a commentator on the industry's evaluation of Changan Automobile.

The same is true. According to the data from the China Association of Automobile Manufacturers, in 2009, Changan Automobile sold 1.863 million vehicles, but its profit was only 2.383 billion yuan. Although Dongfeng Motor sales were only 34,000 more than that of Changan Automobile, the profit reached 26.258 billion yuan, which is 11 times that of Changan Automobile.

Changan Automobile also stated frankly: “Although the performance is remarkable, compared with FAW, SAIC, and Dongfeng's “big three”, the company has shown a slight lack of strength in the lucrative joint venture brand.”

Compared with Dongfeng Motor, SAIC, and FAW Group, Changan Automobile's profit is mainly due to its nearly half of its sales are low-priced micro-vehicles, while the joint venture's brand strength is relatively weak in China, and its sales and profit contribution are low. .

According to public information, in 2009, of the total sales of 1.863 million Changan automobiles, 700,000 were micro-vehicles, and the total profit was about 1 billion yuan. Among the joint ventures, Changan Ford Mazda sold 316,000 vehicles and had a profit of approximately RMB 1.7 billion. Chang'an Suzuki sold a total of 150,000 cars and had a profit of approximately 90 million yuan. The profit of a joint venture company under the SAIC Group amounted to more than 8 billion yuan.

Xu Liuping also admitted that profits are indeed a manifestation of core competitiveness. “But from the perspective of Chang’an, we must grasp the relationship between current profits and long-term profits.” Chang’s investment in research and development is more focused on the future than necessarily in the short term. The profit reflected in the inside. He said: "We are a joint venture with relatively low profits, but our autonomy is still good. Therefore, we must increase our efforts in joint ventures to generate more profits."

Do you want to be bigger or stronger first? This is an exercise in front of the high-speed development of Changan Automobile. From the current point of view, Xu Liuping chose to grow bigger first. “Automobiles are large-scale talents, big ones are not necessarily strong, and strong ones are big. This is a basic law.” Xu Liuping said that in this sense, the addition of Chang’an is essentially the same as the subtraction of some multinational companies.

"Changan Automobile's newest four major groups, in order to get more support from the country, must have greater momentum." The above commentators believe that Chang'an high-profile expansion is not without reason, the current Chinese auto market is also in a rapid development trend, If you do not staking the opportunity to occupy the market ahead of schedule, then the future opportunities for the automotive companies such as Changan may be more limited.

According to Xu Liuping’s prediction, after 10 years, the Chinese auto market capacity can reach 40 million. In view of this, the rapid development of betting vehicles in the future of China is the biggest internal force for Chang’an expansion.