Recently, according to statistics from the China Association of Automobile Manufacturers, Chinese brand passenger vehicle sales reached 7.419 million units in the first half of this year, an increase of 23.9% year-on-year; market share was 61.9%, an increase of 8.8 percentage points from the same period last year. Faced with the rise of new energy vehicles, joint venture brands with advantages in the field of fuel vehicles have begun to struggle with sales. GAC Group (601238.SH) is therefore facing dual pressures on performance and sales.

Stockstar notes that the joint venture brands GAC Honda and GAC Toyota, which are the mainstay of GAC Group, have fallen into a situation of sluggish sales growth and continuously shrinking market share. Under this situation, GAC Group has had to embark on an electric transformation.

In terms of independent brands, GAC Group's two core products have yet to shoulder the burden. GAC Aion's sales declined by nearly 40% in the first half of the year, leading the decline among the four subsidiaries. GAC Trumpchi, on the other hand, drove a slight year-on-year increase of 0.44% in sales through the strategy of "trading price for volume." Additionally, GAC Aion, which focuses on pure electric vehicles, plans to launch plug-in hybrid models, which means it will compete with GAC Trumpchi in the same market segment. It is worth mentioning that GAC Group aims to achieve an annual sales target of 2.75 million vehicles this year, but progress in the first half was only 30%.

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Joint Venture Brands Face Challenges

The performance of the domestic automobile market in the first half of the year has been revealed. BYD (002594.SZ) sold 1.607 million new energy passenger vehicles, an increase of 28.8% year-on-year. In the first half of this year, Chinese brands collectively advanced, occupying 6 of the top 10 positions.

Stockstar notes that GAC Toyota ranked 9th with sales of 336,000 vehicles, and GAC Honda ranked 18th with sales of 207,000 vehicles. It is worth mentioning that sales of GAC Toyota and GAC Honda declined by 25.8% and 28.28% respectively in the first half of the year compared to the same period last year.

According to data from the China Passenger Car Association, mainstream joint venture brands sold 480,000 vehicles in June, a year-on-year decrease of 27% and a month-on-month decrease of 1%. Sales of GAC Honda and GAC Toyota in June were 34,400 and 70,100 vehicles respectively, with declines of 43.34% and 19.64% respectively. Behind these sales figures is the increasingly apparent challenge of sales growth for joint venture brands.

According to information, GAC Group's current main businesses include R&D, complete vehicles (automobiles, motorcycles), components, trade and travel, energy and ecology, internationalization, investment and finance, forming a complete closed-loop automobile industry chain. In the complete vehicle business, passenger vehicles are mainly produced through subsidiaries GAC Motor, GAC Aion, and joint ventures GAC Honda and GAC Toyota.

From the perspective of sales share, joint venture brands are currently the main source of sales for GAC Group. In the first half of this year, "the two Hondas" accounted for 63.03% of GAC Group's total sales, but with the continuous expansion of the independent segment, this share has been gradually shrinking. Over the longer term, from 2021 to 2023, the sales share of joint venture brands was 75%, 71.77%, and 63.49% respectively.

As GAC Group's main sales and profits come from G