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Briefing Sep 27, 2020 11:33 am EqualOcean

Changan Modifies its Logo Aiming to Become a 'Smart Travel Technology Company'

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Oct 16, 2020 09:34 am ·

Changan Auto Expects 1Q-3Q Net Profits as High as CNY 3.8 Billion

On October 14, Changan Auto disclosed its performance forecast for the first three quarters of 2020 on October 14 2020. According to the report, as of September 30 this year, the Chinese state-owned automobile manufacturer is expected to turn losses into profits. In the first three quarters of this year, Changan Automobile's net profit attributable to shareholders is expected to be between CNY 3.20 billion-3.80 billion, a year-on-year increase of 220.23 -242.78%. Basic earnings per share are CNY 0.67 to CNY 0.79, compared with the same period last year, Changan lost CNY 2.66 billion. For 3Q,2020, the firm is expected to achieve a net profit of CNY 598 million to CNY 198 million, up 241.84% to 384.20% year-on-year, compared to a loss of CNY 421 million in the same period last year. The turnaround in the net profit should be mainly thanks to the increase in company's auto sales, the optimization in product structure and the improvement in the profitability of its self-owned and joint-venture businesses, said Changan Auto. The automaker also announced non-recurring items brought nearly CNY 5.6 billion to the 1Q-3Q net profit attributable to shareholders. With 205,543 vehicles sold, Changan Auto reported a 28.65% year-on-year leap in September sales, achieving growth for six consecutive months. Huachuang Securities predicts that Changan Auto's 2020-2022 net profit is expected to be CNY 5.70 billion, 6 billion, and 7.2 billion, respectively, maintaining a strong 'Buy' rating. Pacific Securities reported that in 3Q, the passenger car industry has stabilized and Changan Auto's 2020 and 2021 net profits are expected to be CNY 4 billion and 6 billion, respectively.

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Analysis EO
Sep 7, 2020 09:54 am ·

Changan Auto: on the Bumpy Way to a New Era

Key points ► Changan faces challenges in brand upgrading. Changan’s sales income heavily relies on the sales of Changan-Ford, a car model that saw plummeting sales for a consecutive years, while self-developed economical car brands bring low revenues. ► Changan is conservative in the commercialization of EV and AV technologies. Although Changan has made large investments in relative technologies, its EV and AV products fall behind Chinese domestic leaders like BYD and GAC. Its collaboration with emerging forces has also produced little outcome of importance.   CHANGAN is widely recognized as one of the ‘Big 3’ domestic brands, along with Geely and Great Wall Motor (GMW) in the Chinese automobile market. With annual sales of more than 1,000,000 units each, the big three have a stable market position. During the recent recession of the automobile market and the rise of new tech, many traditional manufacturers and emerging forces have caught up with the opportunities of industrial upgrading and have joined the fast development of Electronic Vehicles (EV) and Autonomous Vehicles (AV). Changan, during this period, acted more like a follower and failed to deliver any remarkable breakthroughs. Changan’s independent brands cannot move away from the economical car market As a traditional Chinese domestic automobile manufacturer, Changan used to heavily rely on joint-venture brands, especially Changan-Ford. In 2016, the number of Changan-Ford cars sold was 943,782, accounting for more than 30% of Changan’s total sales number. Since 2018, Changan-Ford car sales have dropped rapidly. The proportion of Changan-Ford sales in units dropped to 10.5% in 2019. The reduction of Changan’s joint-venture brand sales happened in the same period that Changan’s revenue started to shrink after years of growth. That is, although Changan’s independent brands have witnessed strong growth in recent years and account for more units in Changan’s sales, it is still far from becoming Changan’s mainstay and boosting the company’s sales. According to Changan’s management team, the slow frequency of model updating is the main reason for Changan-Ford's plummet. Changan-Ford fully relies on Ford’s vehicle design. Ford, as an international automobile giant, has a fixed development cycle, which is too slow to catch up to the rapidly changing Chinese automobile market. As a result, Changan-Ford has suffered continuous customer churn. The financial data shows that, although Changan’s sales revenue post-2016 is still fluctuating, its net income dropped dramatically. It is clear that Changan-Ford provides most of the profitability of Changan. Changan has not been able to transform into a high-end automobile manufacturer so far. Its independent brands provide mostly economical car models, which have a low-profit margin. Many Chinese OEMs face a similar dilemma, but Changan shows little improvement compared with its peers. Geely acquired Volvo in 2010 for the rich accumulation of high-end cars to improve its vehicle quality and brand image. GWM has focused on SUV and pickup truck products for 20+ years to build the image of a domestic leader, and launched high-quality vehicles to enter the mid-level SUV/Pickup market thereafter.  More analysis of GWM’s operation and technology innovation here.  Apart from direct operational losses, lacking high-end independent brands further hurts Changan’s brand value. Automobile companies’ brand images are mostly decided by its premium car models due to the mst advanced design concepts and industrial technologies they contain. Consumers in the Chinese car market generally do not recognize automobile companies without premium brands. State-owned Changan acted slowly in EV and AV development During the downward going Chinese automobile market since 2018, most domestic automobile manufacturers have considered product upgrading the remedy. Launching new energy models and autonomous driving systems can add more value to their independent brands, thus improve product quality and spur sales.  Changan has kept investing in EV and AV technologies. It has released EV versions for most of its popular brands. With the effort of the autonomous driving technology R&D team, with more than 1200 employees, Changan was able to equip L2 autonomous driving systems on its latest models.  However, Changan still fell behind its peers. Changan’s characteristics as a state-owned OEM hindered its transformation. Compared with its private-owned competitors, Changan has turned to new energy and intelligent vehicles much slower and less firmly. As a comparison, Geely has invested CNY 30 billion in EV technology and built its independent new energy solution. For autonomous driving, Geely’s cars have the highest rate of L2 system equipment among all domestic brands. The state-owned property forced Changan to be more prudent to transformations, thus inevitably losing more opportunities for occupying the market.  In the EV market, Changan cooperates with emerging force NIO (NIO:NYSE). But the cooperation is quite inefficient if benchmarked by GAC’s similar move. The joint-ventures Changan-NIO and GAC-NIO were both founded in 2018, both aiming to speed up the development and manufacturing of EV models. Now GAC-NIO’s model HYCAN007 is already available for sale, while Changan-NIO hardly has any notable progress. With a similar state-owned background, Changan is less open and pragmatic than GAC, which has a quite robust performance in the EV market in recent years.  More about GAC’s development in EV and AV here. Bottom line In conclusion, Changan is a strong automobile manufacturer with leading sales among independent brand cars. Its relatively conservative investment in new energy power and vehicle intelligence makes it hard for it to stand out amongst its peers when other automobile companies bet heavily on cutting-edge technologies. Changan’s state-owned background also impedes it from flexible transformation. Thus, Changan is scarcely expected to have little outstanding performance in the coming smart car age.

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News EO
Aug 31, 2020 02:35 pm ·

Changan Automobile Posts CNY 2.6 Billion Net Profit for 1H 2020

One of China's veteran car manufacturers, Changan Automobile, disclosed its 2020 semi-annual report on August 30. In the first half of this year, the automaker achieved an operating income of CNY 32.78 billion, a year-on-year increase of 9.73%. The net profit realized a turnaround of VNY 2.6 billion, a year-on-year increase of 216.17%.  In the first half of this year, Changan Automobile's cumulative sales reached 831,000 vehicles, up 1.3% year-on-year, outperforming the general trend, and ranking fifth in China's automotive industry. According to data from the China Automobile Association, in the first half of 2020, the cumulative sales of the Chinese automobile market was 10.25 million, a year-on-year decline of 16.9%. Among the vehicles sold by Changan, Changan Ford accounted for 97,000, a year-on-year increase of 29.7%, Changan Mazda sold 56,000, a year-on-year decrease of 8.37 %, Changan's own brand sold 420,400, up 6.64% year-on-year. In terms of net profit, Changan Ford performed the worst with a loss of CNY 1.14 billion whereas Changan Mazda managed to generate a net profit of CNY 659 million. In terms of expenditures, Changan Automobile’s sales expenses were CNY 1.270 billion, a year-on-year decrease of 11.95%. Management expenses were CNY 1.16 billion, an increase of 38% year-on-year, mainly due to changes in the organization and prepaid wages, etc. The R&D expenses were CNY 1.46 billion, a year-on-year decrease of 14.86%.  

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Aug 7, 2020 05:54 pm · EO Company

Changan Automobile's Sales Increase by 38% YoY in July

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Oct 16, 2020 09:30 am ·

Chinese-made Tesla Model Y Price Expected to Drop

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Oct 14, 2020 01:02 pm ·

Tesla China Reduces Model S Price

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Oct 13, 2020 09:30 am ·

CICC Raises BYD's H-share Target Price by 60%

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