Author | Yuan Fang

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Recently, Skyworth Group released its strongest financial report yet.

According to Skyworth Group's 2024 financial report, total revenue reached RMB 50.2 billion, with a net profit of RMB 1.8 billion. Notably, the automotive business contributed over 15% of total revenue, achieving its first profitable turnaround with a net profit of approximately RMB 200 million. Skyworth has gradually formed a dual-wheel drive model of "home appliances + automobiles", demonstrating a strong ambition for cross-border expansion. By partnering with industry giants such as CATL and Huawei, it has continuously strengthened its battery and intelligent driving technology.

Especially in the Middle East market, Skyworth Automobile has achieved astonishing results. In 2024, sales of Skyworth Automobile in the Middle East surpassed 35,000 units, with a year-on-year growth rate of 230%, making it the fastest-growing Chinese brand in the new energy vehicle markets of Saudi Arabia and the United Arab Emirates. This achievement has not only laid a solid foundation for Skyworth Automobile in overseas markets but also injected strong momentum into the overall business development of Skyworth Group.

Behind this cross-border move, there are not only complex strategic considerations but also unique reflections in the financial statements.

1. Skyworth Automobile is Selling Hot in the Middle East

To the market's great surprise, in 2024, Skyworth Group's automotive business shone brightly in the Middle East market, with sales soaring to 35,000 units. Among them, the EV6 Plus model performed most prominently, accounting for over 60% of total sales. In Saudi Arabia, Skyworth Automobile's market share has risen rapidly, ranking among the top three in the local new energy vehicle market.

In terms of technology adaptation, the hot climate in the Middle East poses a great challenge to the performance of automotive batteries. Skyworth Automobile has collaborated with CATL to specifically develop "high-temperature batteries". This battery adopts special materials and technological processes that can effectively adapt to high-temperature environments. In practical use, its driving range can be increased to 600 kilometers, and the decay rate in high-temperature environments is less than 10%. During Saudi Arabia's summer, when temperatures often exceed 40 degrees Celsius, Skyworth Automobile's "high-temperature batteries" can still maintain stable performance.

Localized services are also a highlight of Skyworth Automobile. Skyworth Automobile has closely cooperated with Saudi Aramco to vigorously build a charging network. As a globally renowned oil giant, Saudi Aramco has abundant resources and strong capabilities in the energy sector. The cooperation between the two parties has resulted in the construction of numerous charging piles in major Saudi cities and along major traffic routes, effectively solving the charging problem for new energy vehicle users.

At the same time, Skyworth Automobile has launched a "desert rescue" service tailored to the special geographical and climatic conditions of the Middle East region. In extreme weather conditions such as sandstorms, it can ensure a response to rescue requests within 4 hours. Once, a user encountered a vehicle malfunction while driving in the desert with poor signals around. After sending a distress signal through Skyworth Automobile's emergency rescue system, the rescue team quickly located and arrived at the scene within the specified time, helping the user resolve the issue. This service has won high praise from users.

Skyworth Automobile has also cleverly leveraged its brand advantage in the home appliance sector. In the Middle East, Skyworth TVs have a market share of 18%, with high advertising exposure. Leveraging this advantage, Skyworth Automobile has vigorously promoted automotive products through home appliance channels in the Middle East. For example, automotive product promotions are conducted during the boot-up screen and TV advertisement periods of Skyworth TVs, greatly reducing marketing costs. At the same time, car display areas are set up in home appliance stores, allowing consumers to closely understand the product features and advantages of Skyworth Automobile while purchasing home appliances, realizing the coordinated development of home appliance and automotive businesses.

2. Why Did Skyworth Decide to Make Cars?

In 2021, Skyworth Group made a seemingly puzzling decision to transfer the trademark usage rights of "Skyworth" to King Long New Energy Automobile Group for RMB 28 million. Subsequently, King Long Group officially renamed its Tianmei Automobile as Skyworth Automobile.

As a leading enterprise in China's new energy bus sector, King Long Group has a profound foundation in the industry. In 2023, its sales of new energy vehicles exceeded 100,000 units, with a mature manufacturing system covering the entire industry chain from research and development, production to sales.

Huang Hongsheng is not only the soul of Skyworth Group but also the actual controller of King Long Group. As early as 2010, Huang Hongsheng had a forward-looking layout in the field of new energy commercial vehicles. After years of in-depth cultivation, King Long Group has achieved remarkable results in the commercial vehicle sector, with its Nanjing Golden Dragon pure electric buses occupying a stable top-three position in the domestic market. In 2024, its exports increased by 50% year-on-year, and it received a large number of orders in overseas markets such as the Middle East and Southeast Asia, becoming a stable source of profit for King Long Group.

Skyworth Group chose a shortcut by cooperating with King Long Group, entering the automotive industry through a light-asset model of brand licensing and technology export. The Skyworth brand has widespread recognition globally, especially in the home appliance sector, and extending this brand to the automotive sector can quickly attract consumer attention.

The technology accumulated by Skyworth Group in the home appliance sector has been effectively transferred and synergized in the automotive business. In terms of intelligent system collaboration, Skyworth Automobile's in-vehicle system is deeply interconnected with smart homes. Users can easily control Skyworth smart home appliances such as air conditioners and lighting brightness through the in-vehicle voice control system. Conversely, they can also remotely view the vehicle's status, such as battery level and location, through smart terminals at home and set the interior temperature in advance. This scenario linkage between cars and homes greatly enhances users' living convenience and technological experience.

In recent years, the home appliance industry has faced severe development bottlenecks. In 2024, global shipments of smart TVs decreased by 8% year-on-year, and the gross margin of Skyworth Group's smart TV business also dropped to 18%. Although this figure is still higher than the industry average of 15%, it also indicates a trend of sluggish growth in the home appliance business. The market is becoming saturated, product homogenization is severe, and price wars are frequent, all of which have severely compressed the profit margins of the home appliance business.

However, the new energy automobile industry is showing a booming trend. China actively promotes the "Belt and Road" Initiative, providing numerous subsidy policies for the export of new energy vehicles. In the Middle East market, various countries have introduced policies to encourage the development of new energy vehicles, such as Saudi Arabia reducing the tariff on electric vehicles to 5% in 2024. Skyworth Group keenly captured the development opportunities in the new energy automobile industry, regarding it as the second growth curve for the company's development. By entering the new energy automobile sector, Skyworth Group can not only explore new market spaces but also drive related technology research and innovation through the development of the automotive business, benefiting the home appliance business in return.

3. Has Diversified Development Been Successful?

From the revenue structure of Skyworth Group's 2024 financial report, it shows a trend of diversification with rapid growth in the automotive business. As Skyworth Group's traditional strength, the smart appliance business achieved revenue of RMB 32.6 billion in 2024, a year-on-year increase of 5%. However, due to factors such as falling panel prices, the gross margin of this business dropped to 19%. Despite the revenue growth, profit margins have been squeezed to a certain extent. In terms of smart TV products, due to fierce market competition and large fluctuations in panel prices, Skyworth Group faces challenges in cost control. Although it has achieved revenue growth by launching high-end products such as wallpaper TVs and MiniLED TVs and expanding sales channels for smart appliances such as air conditioners and washing machines, gross margins have still been affected.

The new energy automobile business has become the core driving force for Skyworth Group's revenue growth in 2024. This business generated revenue of RMB 7.5 billion, a year-on-year increase of 230%, with a gross margin of 12%, an increase of 5 percentage points from the previous year, indicating the initial emergence of scale effects. With the explosive growth in sales of Skyworth Automobile in overseas markets such as the Middle East and the gradual expansion of the domestic market, production scale has continued to expand, reducing production costs per unit. At the same time, through in-depth cooperation with suppliers such as CATL, battery procurement costs have been optimized, further improving gross margins.

The smart system technology business generated revenue of RMB 10.1 billion in 2024, a year-on-year increase of 18%. This growth is mainly due to the increase in shipments of in-vehicle chips and display modules. With the development of Skyworth's automotive business, the demand for in-vehicle chips and display modules has increased, and Skyworth Group's R&D and production capabilities in smart system technology have been fully utilized. It not only meets the needs of its own automotive business but also provides related products and technical services to other enterprises, achieving revenue growth.

Let's focus on the automotive business again. Skyworth Automobile achieved a profit inflection point in 2024, effectively reducing costs through measures such as large-scale procurement and localized production. In terms of large-scale procurement, cooperating with CATL, as the procurement volume has increased significantly, battery costs have decreased by 15%. This has enabled Skyworth Automobile to effectively control the largest expenditure in the vehicle cost structure. In terms of localized production, the commissioning of the factory in the United Arab Emirates is of great significance. Localized production not only reduces transportation costs but also better adapts to local market demand, improving product competitiveness in the market. Through these measures, the cost per vehicle has been reduced by RMB 20,000, laying a solid foundation for achieving profitability.

However, Skyworth Automobile also faces many risks in the development of its automotive business. In terms of the supply chain, consumers in the Middle East market have an increasing demand for "long range + high safety" in new energy vehicles, prompting Skyworth Automobile to continuously increase R&D investment. In 2024, the proportion of automotive R&D expenses reached 15%, and the surge in R&D expenses has put a certain pressure on the company's cash flow.

At the same time, intensifying market competition is also an issue that cannot be ignored. Chinese new energy automobile brands such as BYD and NIO are accelerating their layout in the Middle East market, and Skyworth Automobile will face intense price war pressure in 2025. These competitors have strong advantages in brand awareness, technical strength, and market share, and Skyworth Automobile needs to continuously enhance its product competitiveness and brand influence to cope with fierce market competition.

To transition from "hot sales" to "long-term success" in the fierce global market competition, Skyworth Automobile still has a long way to go, requiring continuous in-depth cultivation in R&D, branding, and supply chain management. It needs to continuously improve technological innovation capabilities and launch more competitive products; strengthen brand building and enhance brand premium capabilities; and optimize supply chain management to reduce supply chain risks.

Nevertheless, Skyworth Automobile has provided valuable experience for domestic new forces in the automotive industry to go abroad.

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