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Sales of joint venture brands have declined collectively, and Dongfeng Group expects half-year net profit to plummet by 80% compared with the same period last year.

2024-03-03 Update From: AutoBeta autobeta NAV: AutoBeta > News >

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AutoBeta(AutoBeta.net)08/15 Report--

On August 14, Dongfeng Group shares issued an announcement on the Hong Kong Stock Exchange. According to the announcement, it is expected that the net profit of homecoming in the first half of 2023 will fall 75% and 80% compared with the same period last year.

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For the substantial changes in performance, Dongfeng Group shares said in an announcement, mainly due to the impact of increased investment in new energy transformation, the continuous decline in the market share of industry joint venture non-luxury passenger car brands, the slow recovery of the commercial vehicle market, the current foreign exchange gains and losses and equity investment compared with the same period.

According to the official website, Dongfeng Automobile Group Co., Ltd. is a super-large automobile enterprise under the direct management of the central government, the predecessor of which was founded in the second automobile factory in 1969. In September 1992, it changed its name to Dongfeng Motor Company. In September 2003, the headquarters moved from Shiyan, Hubei to Wuhan. In November 2017, it changed its name to Dongfeng Automobile Group Co., Ltd. At present, most of the Dongfeng Automobile Group Co., Ltd. are joint venture brands, the main joint venture brands include Dongfeng Nissan, Dongfeng Honda, Dongfeng Infiniti, Shenlong Automobile, in which the joint venture brand is the main source of Dongfeng automobile sales; independent brands include Dongfeng Lantu, Dongfeng Fengshen, Dongfeng New Energy, Dongfeng Hong, and so on.

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In March this year, Hubei Province launched the strongest car purchase subsidy policy in history, and many brands of Dongfeng Group participated in the event. Including Dongfeng Honda, Dongfeng Nissan, Dongfeng Citroen, Dongfeng Peugeot, Dongfeng Fengshen, Dongfeng Lantu, Dongfeng Fukang, a total of 7 major brands 58 models participated in the car purchase subsidy, among which Dongfeng Citroen reduced prices particularly rapidly. The original guidance price of 211900 yuan and 226800 yuan for Citroen C6 co-creation model and C6 comfort model dropped by 90, 000 yuan, plus purchase tax, license fee and insurance, the price of Citroen C6 entry naked car is only about 120000, huge subsidies have also attracted many consumers to snap up the car.

However, surprisingly, the huge car purchase subsidy did not bring growth to Dongfeng Motor sales, but a number of joint venture brands showed a year-on-year decline. Among them, Dongfeng Honda and Dongfeng Nissan, as the main sources of sales of Dongfeng Automobile Group, declined by double digits in the first half of the year. Data show that in the first half of this year, Dongfeng Motor Group Co., Ltd. accumulated sales of 945500 vehicles, down 23.4% from the same period last year; parent company Dongfeng Automobile Group Co., Ltd. accumulated car sales of 1.0732 million vehicles, down 26.1% from the same period last year; subsidiary Dongfeng Motor Co., Ltd. accumulated car sales of 69800 units, down 2.9% from the same period last year.

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In terms of brand segmentation, the cumulative sales of Dongfeng Nissan (including Dongfeng Infiniti) in the first half of the year were 335200, down 28.02% from the same period last year, while the sales of another Japanese joint venture brand Dongfeng Honda was 227000, down 32.80% from the same period last year. The decline even exceeds the overall downward trend of Dongfeng Group. Dongfeng Nissan passenger cars are mainly composed of three major brands: Nissan, Infiniti and Qichen. The models on sale include Xuanyi, Teana, Qijun, Xiaoke, Bluebird, Tuda, Jinke, Loulan, etc., but the main selling models are only Xuanyi, Teana and Xiaoke, but at present, these traditional fuel vehicles have lost their advantage in the Chinese market. As for Dongfeng Honda, it faces the same difficulties, including the lack of product power after Huanxin and the slow progress of electrification.

In addition to these two major brands, the performance of DPCA is not optimistic, with cumulative sales of only 44200 vehicles in the first half of the year, down 21.56 per cent from a year earlier. "Automotive Industry concern" believes that the decline in sales of Dongfeng Group's brands is not only due to the sharp decline in domestic traditional fuel vehicle market share, but also due to the slow promotion of new energy vehicle products.

The decline of joint venture brands has also forced Dongfeng Motor to think about the breakthrough in the context of new energy. In April this year, Dongfeng Motor proposed a "three-year action of transformation and upgrading" to the electrification process. According to the plan, by 2024, Dongfeng's main independent brands will be 100% electric; by 2025, the annual sales of its own brands and joint venture brands will each reach 2 million, when the sales of new energy vehicles of independent brands will account for 50% of their own brands and 70% of their own passenger car brands. To this end, Dongfeng plans to invest 50 billion yuan over three years to speed up the landing of the above project.

However, combined with Dongfeng Motor's performance of new energy sales in the first half of 2023, the strategy still has a long way to go. Data show that in the first half of this year, cumulative sales of Lantu cars increased 118.54 per cent to 15000 vehicles compared with the same period last year, while easyJet New Energy increased 35.47 per cent to 50200 vehicles. Although Lantu Automobile has increased significantly compared with the same period last year, it is still a far cry from the new car-building forces in the mainstream of the car market, and this growth is tantamount to a drop in the bucket for the decline in sales of the entire Dongfeng Group.

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On July 21, Dongfeng announced that its new small pure electric car brand, Dongfeng Nano, will be officially launched in the second half of this year, and the first new car will also be released within the year. It is understood that this is the third independent brand of Dongfeng Automobile New Energy car, which will fill the gap in the layout of Dongfeng Automobile in the field of small pure electricity and inject new vitality into the small pure electricity market. According to the plan, the Nano brand will launch 1-2 new models a year and sell 400000 vehicles by 2025.

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"fuel vehicle sales decline, slow electric transformation" is not only a difficult problem faced by traditional car companies, but also an urgent problem to be solved by Dongfeng Group shares. For Dongfeng, in the environment of fierce competition, we should reduce our dependence on joint venture brands as soon as possible and catch up with the opportunity of the rapid development of domestic new energy or the key to its transformation and breakthrough. However, some people in the industry believe that in the highly competitive pure electricity market, Dongfeng still has a long way to go to rely on new energy to achieve growth.

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