The billion-dollar giant failed to survive the price war - China Grand Automobile

On July 16, China Grand Automobile’s closing price has been below 1 yuan for 19 consecutive days, and the closing price on that day was 0.87 yuan. Even if the price limit was raised the next day, the stock price would be difficult to return to 1 yuan. At this point, China Grand Automobile triggered the delisting requirement of "the stock price is less than 1 yuan for 20 consecutive trading days". Therefore, delisting was locked in advance and became the stock with the largest market value at the time of delisting in the history of A-shares, with 72 A huge amount of billions.
However, according to the financial report, China Grand Automobile's revenue in 2023 will still reach 137.998 billion yuan, with total vehicle sales of 713,000 vehicles. It is still China's largest automobile dealership group in terms of total passenger vehicle sales and second in revenue scale. In the capital market, after backdooring Metro Pharmaceuticals to go public in 2015, China Grand Automobile's stock price soared to a maximum of 32.12 yuan per share, and its market value once reached the 100 billion mark, making it an unparalleled success.
How did this former billionaire giant fall to this level?
1. Behind the ups and downs of Guanghui Automobile is Sun Guangxin, the richest man in Xinjiang.
On March 26, 1999, Guangqi Honda opened a 4S store in Baiyun District, Guangzhou. This is the first 4S store in China’s automotive history, pioneering the “four-in-one” sales and service model. A few months later, Sun Guangxin established China Grand Automobile in Urumqi.
In the following ten years, China Grand Automobile emerged with the continued prosperity of China's automobile industry - accelerating its expansion in China's first- and second-tier cities through new construction, mergers and acquisitions, joint ventures, etc., forming a nationwide 4S distribution network.
On June 24, 2015, China Grand Automobile successfully went public through a backdoor merger with Luomei Pharmaceutical. It was at its peak when it debuted, with a closing market value of 84.6 billion yuan that day. In the following years (2015-2017), China Grand Automobile performed well - revenue increased from 93.7 billion to 160.7 billion, and net profit attributable to the parent increased from 2 billion to 3.9 billion.
The hot automobile market and brilliant performance make Sun Guangxin confident in the company's future prospects and increase leverage to deploy luxury brand distribution business. In 2016, Guanghui spent tens of billions to acquire Baoxin Automobile, the world's largest BMW dealer.
After the merger and acquisition was completed, it did not take long to surpass the American AutoNation company and become the world's largest car dealer. But what Sun Guangxin didn't expect was that Guanghui began to turn from prosperity to decline in 2018, with revenue growth basically stagnating and profits attributable to the parent company continuing to decline. By 2021, it would only be 1.6 billion yuan.
During this period, Guanghui Group had interactions with Evergrande Group. The latter planned to make a strategic investment of 14.5 billion yuan and became the former’s “second largest shareholder”, which once caused a sensation in the capital market. For Sun Guangxin, 2022 may be the most difficult year. China Grand Automobile's revenue plummeted by 25 billion to 133.5 billion, with a huge profit loss of 2.7 billion. This was the company's first loss since its listing, and its 11-year streak of being No. 1 in the industry came to an abrupt end. Zhongsheng Group overtook it and ranked second.
In 2023, the epidemic has been fully relaxed, and China Grand Automobile has turned losses into profits, but its profits are as thin as paper - the gross profit margin is only just over 6%, and the net profit margin is less than 0.5%. In the first quarter of this year, performance continued to deteriorate, with revenue falling 12% and profits plummeting nearly 90%. As operations shrink and profitability deteriorates, the capital market naturally votes with its feet.
In the first half of this year, Guanghui’s stock price fell by 60%, and it was on the verge of delisting. It has been struggling to this day.
Perhaps it can be said that the start, growth, rise and decline of China Grand Automobile are a microcosm of China's automobile dealership industry.
2. Why is this? "All these problems have always been there, everywhere, but they will be covered up when the market is good. Now the dealers are not making money. Price wars are fought every day in the automobile market, and Guanghui is being dragged to death." An industry insider commented. .
Does this statement make sense?
A fact that cannot be ignored is that China Grand Automobile’s operating performance in recent years has been very pessimistic.
Once upon a time, China Grand Automobile, which started out by selling joint venture brands of fuel vehicles such as Toyota, Honda, General Motors, and Volkswagen, also had its moments of glory. In an era when foreign brands are making money on their own, China Grand Automobile Co., Ltd. is also making a lot of money. However, with the rise of new energy vehicles and domestic independent brands, China Grand Automobile, which did not turn around in time, began to go downhill.
According to the financial report, China Grand Automobile suffered its first loss since its listing in 2022, reaching nearly 3 billion yuan. Even if it turns a profit in 2023, compared with the revenue of 138 billion yuan, the net profit of 392 million yuan still seems a bit thin.
Among the car brands sold by China Grand Automobile in the past, 30% were luxury car brands and 70% were mass-market brands. This makes it possible that even in the peak year of 2018, China Grand Automobile's bicycle revenue ranked last among the top ten car dealers in China, at about 140,000 yuan, which was nearly 10 years behind Zhongsheng Group, which ranked second. 10,000 yuan, which is nearly 200,000 yuan lower than the third-placed Lei Shing Hong.
The lower unit price means that the company’s ability to resist risks is also much worse. As the price war between car companies began, China Grand Automobile's profits suffered a heavy setback.
After nearly two years of adjustments, as of December 31, 2023, China Grand Automobile operates a total of 735 business outlets, of which luxury car stores have increased to 1/3 of the total stores. However, what makes Sun Guangxin depressed is that as the price war between car companies intensifies, not only Volkswagen brand cars are reducing prices, but even luxury car brands such as Mercedes-Benz, BMW, Audi, Land Rover, Cadillac, and Porsche have also joined promotions in recent months. The war has doubled the pressure on the dealers.
中国グランド汽車も競争激化を受けて発表 2024年上半期の上場企業の株主に帰属する純利益損失は5億8,300万～6億9,900万元に達すると予想される。
さらに、値下げより恐ろしいのは、値下げしても誰も買わないことです。新エネルギー車の台頭により、現在の新エネルギー乗用車の国内普及率は48.4％に達し、中国自動車における国内独立ブランドの市場シェアは50％を超えた。中国グランド汽車は現在、燃料車の合弁ブランドを主に展開しており、新エネルギーと自社ブランドの店舗は全体の10分の1にも満たない。
中国グランドオートモービルも新エネルギー車への変革への取り組みを強化しています。今年6月末の時点で、光匯は70の新エネルギー貯蔵施設の認可を申請している。しかし、現在の市場環境は楽観的ではなく、新エネルギー車の価格も上昇しており、従来の自動車ディーラーの変革のジレンマは依然として解決が困難です。
ディーラーグループにとって、規模が大きくなるほどキャッシュフローの重要性は高まり、中国グランドオートモービルの経営困難はグループの資本チェーンに影響を与えている。
Phoenix.comの「Eye of the Storm」レポートによると、チャイナ・グランド・オートモービルは現在、全国の多くの都市の店舗で賃金の滞納があり、たとえ賃金が支払われていたとしても、基本的には50％割引となっている。
中国グランド汽車は給与削減に加えて、実際に過去1年間に人員削減や店舗閉鎖などのコスト削減と効率向上のための措置を実施してきた。財務報告書によると、2023年の中国グランド汽車の従業員数は3万5750人となり、2022年の4万2741人から6991人減少する。さらに、中国グランドオートモービルは2023年に、開発計画と運営戦略の調整により収益性の低い50店舗を削減し、17店舗のブランド転換を完了する予定である。
巣が覆われているとき、どうして卵が残らないのでしょうか？中国グランド汽車だけでなく、中国のほとんどの自動車ディーラーも苦境に立たされている。
中国自動車ディーラー協会のデータによると、2023年のディーラー損失の割合は、かつては「4Sストアの王」であった全国の約1,500～2,000社がネットワークから撤退するとのこと。ヒュージ・グループは上場廃止と上場廃止の窮地に陥っている。

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