Due to reaching retirement age, Chen Hong officially ended his 10-year tenure as the helmsman of SAIC Motor.

On the evening of July 10, SAIC Motor (600104. SH) announced that the former chairman Chen Hong had reached retirement age and applied to resign from his positions as chairman of the board, director, and chairman and member of the Strategy and ESG Sustainability Committee of the board.

Meanwhile, Wang Xiaoqiu, the former president of SAIC Motor, took over as the new chairman, and Jia Jianxu, the vice president, became the company's president.

During Chen Hong's 10-year tenure, China's automotive market underwent rapid development towards electrification and intelligence.

The drastic changes in the market environment have brought new challenges from emerging forces and independent brands to SAIC Motor, which boasts many joint ventures. Its market share has continued to narrow, and its position as the number one seller has been threatened, if not already lost.

For successor Wang Xiaoqiu, the burden is not light.

Losing the battle for new energy brands

As the champion of China's auto sales for 18 consecutive years, SAIC Motor, despite consistently ranking first in sales and revenue, has begun to accelerate its decline.

Combining past performance data, SAIC Motor has shown an overall downward trend since 2019, with operating revenue falling from 843.324 billion yuan to 744.705 billion yuan in 2023, and net profit attributable to shareholders decreasing from 25.608 billion yuan to 14.106 billion yuan over the same period.

The decline in performance stems from the continuous decline in SAIC Motor's overall vehicle sales. Also in 2019, SAIC Motor's annual total vehicle sales declined for the first time, falling 11.54% year-on-year to 6.238 million units, and by 2023, its vehicle sales had dropped to 5.0209 million units.

While still occupying the top spot in China's auto sales, the joint venture brands, considered SAIC's "profit cows," have collectively collapsed. Taking 2023 as an example, the annual sales of SAIC Volkswagen, SAIC General Motors, and SAIC-GM-Wuling decreased by 8.01%, 14.45%, and 12.31% year-on-year, respectively.

This sales downturn dealt a heavy blow to SAIC in 2024.

In June 2024, the crown of monthly sales leader was snatched by BYD (002594.SZ), which has "All-in on new energy".

According to June production and sales data, SAIC Motor's total vehicle sales in June decreased by 25.92% year-on-year to 300,600 units, while new energy vehicle sales increased by 8.80% year-on-year to 93,400 units. In comparison, BYD's total new energy vehicle sales in the same period increased by 35.02% year-on-year to 341,700 units.

While SAIC Motor struggled to adapt and experienced a downturn in these years, BYD demonstrated strong growth, with revenue increasing from 127.739 billion yuan in 2019 to 602.315 billion yuan in 2023, a compound annual growth rate of 47.36%. Especially in 2022, when it officially announced the cessation of fuel vehicle production, its revenue grew by an astonishing 96.20% annually.

This high growth is inseparable from the explosive growth of new energy vehicles. According to data from the China Association of Automobile Manufacturers, as of the end of June 2024, the cumulative production and sales of domestic new energy vehicles have exceeded 30 million units. In just four years from 2020 to 2023, BYD's new energy vehicle sales increased from 189,700 units to 3.0244 million units.

In the rapidly evolving era, the secondary market has shown two different attitudes towards SAIC Motor and BYD.

In 2018, when SAIC Motor's annual sales exceeded 7 million units, the company's market value also reached a historical peak of over 400 billion yuan, while BYD's market value was around 180 billion yuan. As of the close on July 12, 2024, SAIC Motor's market value had shrunk to 164.4 billion yuan, while BYD's had reached 764 billion yuan.

It's hard not to marvel at how, in a short period, BYD has surpassed SAIC Motor by nearly 600 billion yuan in market value due to its decision to "All-in on new energy".

So the question is, with a poor start in 2024, can SAIC Motor still hold onto its position as the annual sales leader?

Challenges for the successor

Even though there were mixed voices about new energy vehicles in the past, the transition to new energy has become an undeniable trend in the industry today, and it is imperative for SAIC Motor to increase its investment in R&D, production, and sales of new energy vehicles.

In April 2023, SAIC Motor announced the "Three-Year Action Plan for the Development of SAIC New Energy Vehicles" at the Shanghai Auto Show, aiming to achieve annual sales of 3.5 million new energy vehicles by 2025, a 2.5-fold increase from 2022, with a compound annual growth rate of 50%.

However, according to 2023 annual sales data, SAIC Motor sold 1.1229 million new energy vehicles throughout the year, with a growth rate of only 4.61%. In the first half of 2024, SAIC Motor's new energy vehicle sales increased by 23.90% year-on-year to 461,000 units.

To meet the 3.5 million sales target as scheduled, the current growth rate of SAIC Motor's new energy vehicle sales poses considerable future pressure.

Furthermore, among the 1.1229 million new energy vehicles sold by SAIC Motor in 2023, SAIC-GM-Wuling had the highest sales volume, selling 459,000 units, more than half of which came from the mini-electric car Wuling Hongguang MINIEV, which recently had a starting price as low as 23,800 yuan.

Obviously, relying on joint venture brands to "win easily" will eventually become history. After all, the foreign brands behind these joint ventures, whether Wuling, General Motors, Volkswagen, or even renowned brands like Mercedes-Benz, BMW, and Audi, are not faring well in the new energy sector themselves.

Therefore, a genuine shift towards new energy requires more from independent brands. When formulating the "Three-Year Action Plan," SAIC Motor made it clear that independent brands would account for 70% of overall new energy vehicle sales.

Unfortunately, SAIC Motor's independently developed new energy brands are struggling to stand out amidst the numerous and rapidly emerging brands.

Take IM Motor as an example. Backed by SAIC Motor, Zhangjiang Hi-Tech Park, and Alibaba, it lacks neither technical experience nor financial support, but its performance pales in comparison to leading new energy brands.

In 2022, IM Motor launched its first model, the IM L7, with a total delivery of 5,000 units throughout the year, a number comparable to the monthly delivery volumes of some new automotive forces. Subsequently, IM Motor successively launched the LS7, LS6, and L6, and as the number of models increased, the overall delivery volume of IM Motor also grew, but the results for 2023 were only 38,300 units.

For 2024, IM Motor has set an annual sales target of 120,000 units. Based on sales data for the first half of 2024, only 22,300 units have been delivered, a fraction of the target. This performance does not even rank in the top 20 of new energy brand sales. Compared to GAC Aion, which still has an advantage despite a 16% year-on-year decline in sales to 177,400 units in the first half of the year.

Some netizens even joked that "IM Motor is no match for Xiaomi." Indeed, Xiaomi, which launched in late March with only one model, sold 25,700 units in the first half of the year, more than IM Motor.

SAIC Motor's new energy vehicle brand Feifan Automobile is even more concerning.

Currently, Feifan Automobile only has two models on sale: the R7, launched in 2022, and the F7, launched in 2023, which are respectively comparable to Tesla's Model Y and NIO's ET5.

When Feifan was founded, CEO Wu Bing set a goal: to become a leading enterprise in mid-to-high-end smart electric vehicles by 2025. However, based on the current situation, this seems far-fetched.

In 2022, Feifan Automobile sold a cumulative total of 14,500 units; after launching its second model in 2023, its annual cumulative sales reached 21,000 units. In 2024, Feifan Automobile's sales have declined significantly, with a year-on-year decrease of 46.1% to 3,976 units in the first half, including a 63.6% year-on-year decline to 900 units in June.

Apart from poor sales, Feifan Automobile has also angered car owners by failing to build battery swap stations as promised.

Recently, a car owner sent an open letter to Feifan Automobile. According to the letter, when the Feifan R7 was launched, it promised to build 300 integrated energy service stations with battery swap functions by 2023, but as of July 2024, only 26 stations were in operation, with a completion rate of only 8.67%, 17 of which are in Shanghai. In addition, Feifan car owners need to pay a monthly battery rental fee of 1,260/1,560 yuan, but after paying for two years, they have not received the corresponding service, leading them to feel deceived.

So far, SAIC Feifan has not responded to this matter.

It is worth noting that, amidst the unfavorable sales situation, the prices of the above two brands have both decreased.

IM Motor, which once aimed for the high-end market, has retreated from its goal of breaking through the 400,000 yuan price range to focus on the 200,000 yuan price band. When announcing its December 2023 sales, IM Motor specifically described the IM LS6 as "the monthly sales leader among all-category pure electric Chinese brands priced above 200,000 yuan".

However, the starting price of the IM LS6 has disrupted SAIC Motor's independent brand pricing strategy. After the launch of the IM LS6, IM Motor has virtually covered the 200,000 to 300,000 yuan price range that Feifan Automobile was targeting. With already fierce competition across various price bands, direct competition within the same company would be challenging to say the least. Nevertheless, this also underscores the lack of clarity in SAIC Motor's development and layout plans in the new energy sector from another perspective.

Currently, the starting price of Feifan Automobile's products has fallen below 200,000 yuan. Whether it's Feifan, IM Motor, or even all new energy vehicle brands, engaging in price wars means even fiercer competition.

While trying to break free from its dependence on joint venture brands and actively shaping its independent brands, SAIC Motor is no longer the once-invincible giant, and it faces considerable competition risks. For successor Wang Xiaoqiu, the next step is also the focus of attention for the market and the public.

Looking back to 2003, when Wang Xiaoqiu, who was not yet 40, was appointed as the head of SAIC Motor's independent brand project, the challenge the group has given him now is still how to make independent brands bigger and stronger.

However, two decades have passed, and Wang Xiaoqiu, born in 1964, is only three years younger than Chen Hong. Based on past retirement ages, SAIC Motor may only give Wang Xiaoqiu three years.

At the age of 60, when one should be at peace with oneself, will Wang Xiaoqiu choose to continue implementing the "Three-Year Action Plan for the Development of SAIC New Energy Vehicles" in the next three years? Or will he take a new step and formulate a more feasible and practical development plan? At present, this remains unknown.

As holding onto the number one position will become a "tough battle," perhaps true development requires breaking free from the constraints of numbers, but driving SAIC Motor's transformation is imperative.

We will wait and see how Wang Xiaoqiu steers SAIC Motor.