Since 2009, China's auto market has been springing up. Sales that have risen steadily have dispelled people's worries about the financial crisis. However, when the major companies reported the first quarter, we can see from the decline in revenue that the financial crisis has not completely left China.
Stimulated by national policies, the overall sales of automobiles in the first quarter of 2009 increased by 3.84% year-on-year, reversing the downward trend since the second half of last year. It is worth noting that there has been a clear differentiation in the sales structure of automobiles, of which the sales volume of passenger cars below 1.6L, which accounted for the largest proportion of sales, has increased by 21.66% year-on-year, which is also the most stimulated by policies. The slightest card maintained steady growth with a year-on-year growth rate of 8.53%, mainly benefiting from the fuel tax reform and the automobile-to-country policy. Sales of medium- and heavy-duty trucks, large passengers, light passengers, and passenger cars above 1.6L all saw a significant decline, with medium and heavy trucks down 29.49%, large and medium-sized passengers down 26.93%, light passengers down 13.53%, and 1.6L or more. 16.01% decline in vehicles. From April's data, there is still no major change in this pattern, and it cannot be said that the auto industry has fully recovered.
Among the above-mentioned car types, passenger cars of 1.6L or less and light cards are not only low in unit price, but also have lower profitability than other products. Changes in the structure of car sales led to a decline in overall sales revenue as sales rose. According to statistics, the operating income of listed companies in the first quarter was 83.6 billion yuan, a year-on-year decrease of 13.76%. From the perspective of the entire industry, the sales revenue in January-February reached 295.2 billion yuan, a year-on-year decrease of 9.74%.
The change in sales structure also led to a year-on-year decline in the overall gross profit margin, as the profit of bicycles for mini-vehicles and small-displacement cars is significantly lower than that for mid- to high-class cars. Compared with 14.38% in the first quarter of 2008, gross margins fell by 0.80 percentage point in the first quarter of this year. The decline in revenue and gross profit margin is the main reason for the decline in net profit. However, relative to the loss in the fourth quarter of last year, the profit in the first quarter of this year has been commendable. From a month-on-month perspective, with the recovery in sales and the decrease in the prices of major raw materials, gross profit margin increased by 1.84 percentage points month-on-month, which is comparable to the second and third quarters of last year.
Another reason that affects net profit is the decline in investment income. Some listed companies hold more foreign investment or hold financial assets. In the case of a poor macro economy, the drop in investment income is inevitable.
Changes in sales structure are also reflected in listed companies. The following is an example of two listed automobile companies to illustrate the relationship between product structure and revenue.
Changan Automobile: Incremental increase
Changan mini vehicle sales are booming, but sales of cars are not optimistic. In the first quarter, the cumulative sales of Changan Automobile Micro-cars and self-owned brand cars totaled 182,100, an increase of 37.34% year-on-year. The joint venture company Chang'an Ford Mazda sold 57,100 units, a year-on-year decrease of 7.93%, Changan Suzuki's sales of 33,200 units, a year-on-year decrease of 17.64%. The two have great contrasts. As the joint venture company is not included in the scope of the consolidated statement, the decline in sales volume will not directly affect the operating income of the listed company. On the contrary, benefiting from the sales of micro-cars, Changan Automobile's operating income for the first quarter of 2009 was 4.876 billion yuan, an increase of 21.41% year-on-year. This growth rate is lower than the sales growth rate is also due to changes in sales structure, while the performance of the independent brand car sales is not as good as micro-car.
Thanks to the increase in sales volume of mini vehicles, the gross profit margin of Changan Automobile's main business increased by 1.30 percentage points year-on-year, mainly due to economies of scale and raw material prices. Finally, the net profit after deduction of investment income in the first quarter achieved profitability, from the value of -405.397 million yuan in the first quarter of last year to 39,985.9 thousand yuan. However, the profit on behalf of the joint venture company such as Changan Ford Mazda declined from 615 million yuan to -0.11 billion yuan. This is mainly due to the poor sales of joint ventures such as Changan Ford Mazda. To sum up, the profit growth brought about by the increase in the sales volume of micro-vehicles has not been able to compensate for the decline in the sales of cars, especially mid- to high-class cars. Therefore, the overall performance is a decline in profits.
Foton Motor: Light Truck Wins
Foton Motors is the opposite example. Its sales in the first quarter increased by 0.6% year-on-year, which was also affected by changes in the sales structure. Operating income decreased by 5.06% year-on-year. Also benefiting from the decline in raw material prices and relatively stable car prices, the overall gross profit margin of Foton Motor in the first quarter increased by 2.03 percentage points year-on-year. However, the profit structure of Foton Motor is different, with light truck gross profit accounting for more than half, and the growth of light truck business has increased net profit by 11.14%, which is not as engulfed by other businesses as Changan Automobile.
In short, the majority of Foton Motor's profits come from light trucks, and most of Changan’s profits come from joint venture cars, which are also the growth of mini-vehicles and light trucks, which can bring about an increase in profits for both companies. It's different, big is big, small is small. This also caused different performance of the two companies' final profit increase and decrease.
For the industry, profits from the business of cars, heavy trucks, and large and medium-sized passengers occupy the bulk, while micro-vehicles and light trucks are only a small part. In the case of a decline in sales of the former and an increase of the latter, it is not surprising that the overall decline in profits of the industry is not surprising.
However, the trend of falling profits will not last long. With the sales structure re-stabilized, the level of net profit will begin to resume growth. Taking Chang'an Automobile as an example, April's data shows that its mini-vehicle sales continue to be booming, and sales of joint ventures have also begun to improve. In particular, Changan Ford Mazda, the sales volume in the first four months has increased by 1.84% year-on-year, which lays a profit growth. A solid foundation.