Company history and management

BAIC Motor (北京汽车股份有限公司01958: HKEX) is the platform of the Beijing Automotive Group Co., Ltd (BAIC Group). The company is a car manufacturer and service provider in China and one of the leading passenger car enterprises within the industry.

Founded in September 2010 and headquartered in Beijing, BAIC is one of the enterprises to which the Beijing municipal government offers focused support. BAIC Motor completed its Initial Public Offering (IPO) of H Shares on 19 December 2014 and went public on the Main Board of the Stock Exchange of Hong Kong Limited (SEHK) with the code: 1958: HKEX.

From the manufacturing side, the company produces a wide range of brands, from JV luxury passenger cars, JV luxury commercial vehicles, JV middle-end and high-end passenger cars, to passenger cars of self-owned brands. In this way, the company is trying to address different consumer needs from diverse users. Additionally, BAIC Motor has a diverse range of business operations, from R&D, manufacturing, sales and after-sales services for passenger cars, production of passenger car core components to automotive finance and other related businesses.

The company runs its passenger car business through four complete vehicle sectors – BJ Brand, Beijing Benz, Beijing Hyundai and Fujian Benz. Furthermore, the company is also a big player in China’s electric vehicle (EV) industry, producing pure electric passenger cars.

BAIC Motor is managed under its board of supervisors, which includes Mr. Xu Heyi – the Chairman and Non-executive Director of the company – and Mr. Chen Hongliang, Executive Director and President of the company.

Current market situation and key financial indicators

The company started producing EVs in the late 2010s and benefitted largely from the subsidies provided by the government to the EV industry.

Since 2014, the Chinese EV market has been propped up by huge government subsidies as part of the government’s policy to build global leadership in cleaner driving and reduction of air pollution.

While the supply side subsidies include loans and financial aid, the demand side subsidies include tax cuts, rebates and easy provision of car plates. These subsidies will eventually make EV prices cheaper. To illustrate, for a representative, midsize car, the amount is approximately 23 percent of the total EV price, according to a McKinsey report.

Therefore, the country has spent billions of dollars on subsidies to help companies, including BAIC Motor, to achieve large-scale production of plug-in vehicles, which are gaining traction among urban drivers as well as taxi fleets and government agencies.

However, the government has been slowly rolling back its subsidies since last year. In June 2019, China cut its subsidies by about half and completely eliminated subsidies for vehicles with ranges under 250 km. The subsidy cut announcement prompted consumers considering an EV purchase to head to the showrooms in anticipation of what was effectively a price increase for EVs after June. The market felt the effect of the subsidy changes almost immediately, with monthly sales of EVs in July 2019 declining 4.7 percent from July 2018.