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Comparison of figures from 2016 H1 financial reports of automobile manufacturers in the Chinese market

With over half of the year already past, the question arises, which automotive manufacturer has achieved the highest net profits so far? A recent report from theNanfang Daily revealed that JVs affiliated with Ford, VW and other foreign brands have posted net profit rates far higher than those of domestic own brand manufacturers. On average, JVs earned an average of 20,000 RMB for each new vehicle sale made. However, own brands have been benefiting from increased SUV sales, which have allowed them to somewhat catch up with their JV competitors. However, this growing competition has also increased the average cost each vehicle sold in the country.

Changan recently announced that its JV partner Ford has been asked by the SEC to release its financial report for the first half of the year at the New York Stock Exchange. According to the report, Changan Ford’s total assets and liabilities totaled 42.22 billion RMB and 30.59 billion RMB, respectively. Changan Ford reported earning a total of 57.39 billion RMB in gross revenue and 9.17 billion RMB in net profits over the first half of the year. Based on the fact that Changan Ford sold a total of 423,520 vehicles over that time period, we can ascertain that the JV earned just over 21,000 RMB for every vehicle it sold.

VW also released its fiscal report for the first half of the year around the same time. The manufacturer reported total global income of 107.93 billion euros, down 0.8% year-on-year, and net profits of 3.579 billion euros, down 36.8% year-on-year. Its profits in China for the first half of the year was 2.36 billion euros, down 13.8% from the figure of 2.74 billion euros reported a year ago.

Analysts comparing VW’s Chinese profits with the 1.85 million new car sales it made in the country calculated that the manufacturer earned approximately 9,400 RMB for each vehicle it sold in China. When considering that VW holds a 50% share in the Shanghai VW JV and a 40% share in the FAW-VW JV, we can double that figure to estimate approximately the total value earned by the JVs as a whole: which also comes out to about 20,000 RMB per vehicle.

Analysts have pointed out to other figures that show that manufacturers earn more in net profit for each vehicle sold in China compared to the global average.

In contrast, own brands, which generally focus on pricing their vehicles on the cheaper end of the spectrum, earn a lot less for each new vehicle they sell.

Great Wall is an example of this. According to the company’s recently released fiscal report, the manufacturer’s gross income and net profit for the first half of the year totaled 41.67 billion RMB and 4.93 billion RMB, representing year-on-year growth of 12.19% and 4.52%, respectively. However, Great Wall only sold 450,000 vehicles over the first half of the year, 84% of which were sales of SUV models.

Fortune 500 magazine last year released a report outlining profit earned by vehicle sold for Chinese own brand manufacturers. According to that report, BYD earned an average of 6,000 RMB for each vehicle sold, Geely an average of 4,000 RMB and Jianghuai an average of 1,500 RMB.

Further worth pointing out is that manufacturers like Great Wall, BYD and Geely represent the upper echelon of Chinese manufacturers. There are many other domestic own brand manufacturers that are struggling to earn even a profit on the vehicles they sell.

One of those manufacturers is Jiangling. According to its recently released financial figures, Jiangling achieved a total income of 10.81 billion RMB over the first half of the year, down 9.83% year-on-year, while its net profit totaled 770 million RMB, down a full 39.2% year-on-year. Jiangling only managed to sell 121,008 vehicles over the first half of this year, down 19.78% year-on-year.

Clearly, the gap between JVs and own brands in the country is still considerable and will not be eroded any time soon.

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