China’s economy in 2016 moved to a ‘new normal’, with an estimated economic growth rate of nearly 6.7%, and stable economic conditions which made for a good start to the 13th Five-year Plan period. 2016 marked the beginning of supply-side structural reforms, and policies of “addressing overcapacity, reducing inventory, deleveraging, lowering costs, and bolstering areas of weaknesses” experienced initial success in increasing economic growth factors.
Markets have generally been concerned with this year’s economic situation. Among industries, the automotive manufacturing industry continues its growth trajectory, extending last year’s upward trend. According to a Chinese Association of Automobile Manufactures (“CAAM”) report last week, China’s automobile sales volume in February came to 1.633 million units, representing an increase of 18.3% over last year, while automobile shares generally recorded gains.
BAIC Motor Group recently announced its 2016 annual results*. The leading passenger car manufacturer in China, BAIC achieved substantial gains across its various business sectors, maintaining its overall position in the industry. Company subsidiaries Beijing Brand**, Beijing Benz, Beijing Hyundai and Fujian Benz recorded combined 2016 sales of 1.929 million units, representing year-on-year growth of 16.4%. Stylish new models were launched across markets, significantly increasing the Company’s business performance, with profitability and increased capacity. At the same time, the Group actively expanded its partnership network, achieving deeper and stronger strategic cooperation, and developing new industry linkages.
Following BAIC’s 35% share acquisition in Fujian Benz, its whole vehicle brands have increased to four. A high level of complementarity between products and brands has been created, and brand synergy and overall competitiveness were further strengthened. In addition, BAIC Hong Kong entered into a Subscription Agreement and Shareholders’ Agreement with IDC, Investment Universe and BAIC Automobile SA, which was a first step and important milestone in the company’s international strategy.
In 2016, BAIC Motor continued its excellent performance and achieved sales of 317 thousand units of vehicles in total, representing a year-on-year growth of 26.7%, which was much higher than that of other joint venture premium branded passenger vehicle manufacturers. BAIC Benz became the second largest premium passenger vehicle manufacturer in terms of wholesale distribution, while maintaining a strong lead in domestic premium passenger vehicle market, with sales several times higher than competing enterprises. BAIC Benz also continued to optimize its product structure, with overall monthly sales exceeding 30 thousand units. New models were well received by the market, achieving rapid growth in sales.
Since the launch of the new generation Mercedes-Benz E-class long-wheelbase sedan, all Beijing Benz models have completed renewal or replacement, as such its competitiveness is further reinforced. Future development will be accelerated through better assemblage and higher production capacity from new factories designed for whole vehicle manufacturing. In 2016, Beijing Benz received the title of “2016 Global Best Operating Factory – Best Large Scale Manufacturer”, becoming the first Chinese auto manufacturer to be recognized with the award, conferred by A.T. Kearney and Produktion, the German Industrial Journal, to recognize enterprises with global best-practices in manufacturing.
Beijing Brand also recorded outstanding overall sales in 2016. Its passenger car sales reached 457 thousand units, representing an increase of 35.6%, and a growth rate far greater than the industry average and overall growth rate for domestic brands. Overall sales showed quarterly growth, especially Beijing Brand’s new energy vehicles which achieved annual sales of 48 thousand units, representing a year-on-year increase of 138.7%. With this, the Beijing Brand continued its leadership in the pure electric new energy vehicle industry.
At the same time, Beijing Hyundai also showed satisfactory performance with passenger car sales of 1.142 million units, representing year-on-year growth of 7.5% and fourth place among joint venture brands. Beijing Hyundai’s product structure was also further optimized. Sales of SUV products increased by 30.1% year-on-year, and the proportion of D+S further increased to 50.3%. Fujian Benz recorded sales of 13 thousand units in 2016, representing a year-on-year increase of 87.5%, achieving great momentum in development.
Looking ahead, BAIC Motor hopes to place among the top three domestic proprietary brands by 2020. Beijing Benz hopes to become first in the domestic premium vehicle market, and Beijing Hyundai plans to enter the top four in the domestic joint venture market. The Pi Plan, with 314 being the keyword, will be the program of action for BAIC Motor over the next five years. In 2017, Beijing Benz will pay close attention to the production-sales linkage, conducting thorough analysis and setting out mid- to long-term development plans, maintaining the market popularity of existing products, and seeking quick entry into the high-end new energy market. Market demand for premium vehicles in China is expected to remain robust, and Beijing Benz will continue its focus on development.
Beijing Brand is taking charge of research & development for its new 2.0 model in order to ensure the model’s success. Beijing Hyundai announced a “NEW” Plan in which the company plans to launch nine new energy models by 2020. Fujian Benz will continue to pursue its goal of becoming the benchmark for high-end passenger vehicles in China, and position itself as an important production base for Mercedes-Benz products in Southern China. In future, the BAIC Motor Group will continue to develop proprietary brands, take the lead in new energy vehicles, deepen international strategies, explore and innovate tirelessly, while leading the auto industry’s development as well.
* BAIC Motor (1958.HK) 2016 Annual Results are available at http://www.baicmotor.com/ir/.
** Beijing Brand currently offers four models, the Senova, BJ, Wevan and New Energy Vehicle.
