news

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

"Lei Jun is so scary! He stimulates me!"

It is hard to imagine that this sentence came from Zhu Huarong, chairman of Changan Automobile. "Lei Jun is capable, handsome, and humble. It's really terrible!" Zhu Huarong told reporters at a recent media conference. He said that this is a real "asymmetric competition" and "dimensionality reduction attack."

Faced with the many uncertainties brought by Lei Jun and Xiaomi Auto, Zhu Huarong believes that only by firmly investing heavily in research and development, with an R&D investment of more than 40 million yuan a day, or about 15 billion yuan a year, can solid support be provided for Changan's development and a counterattack be achieved on the spot, in order to occupy a favorable position in future market competition and bring a sense of security to Changan Automobile.

March 28th was the day when Xiaomi SU7 new car was launched. At that time, many big names in the automotive industry gathered, including Li Bin, chairman of NIO, He Xiaopeng, chairman of Xpeng, Li Xiang, chairman of Ideal, Wei Jianjun, chairman of Great Wall Motors, Zhang Jianyong, chairman of BAIC, Dai Kangwei, general manager of Beijing New Energy Vehicle, etc. There were new forces in car manufacturing and traditional giants. At that time, Zhu Huarong, chairman of Changan Automobile, was unable to attend the event in person due to some reasons, but he watched the live broadcast of Xiaomi's car launch conference through live broadcast.

In Zhu Huarong's opinion, the Xiaomi Auto launch was a success. The first edition was sold out in one minute, and 40,000 orders were placed in 18 minutes, both of which were new records in the automotive industry. It must be this launch that "stimulated" Zhu Huarong.

What Zhu Huarong didn't expect was that Lei Jun, who was very popular on the Internet, humbly asked him for advice after the press conference: "Mr. Zhu, do you think there are any problems with tonight's press conference? Is there anything that needs to be improved?" Zhu Huarong did not think that this was showing off the achievements of Xiaomi Auto, but he saw the reason why Lei Jun became popular.

In Zhu Huarong's view, Xiaomi Auto plus Internet marketing thinking is almost a dimensionality reduction attack on traditional car companies. Xiaomi's advantages itself are already very obvious, and Lei Jun is so humble, Xiaomi Auto may become Changan Automobile's "lifelong enemy."

The day after being inspired by Lei Jun, Zhu Huarong stopped all meetings and began to think deeply about how to break through in the increasingly competitive market. "Returning the favor in their own way" was Zhu Huarong's first step. He began to learn from his opponents. Zhu Huarong, who had previously been somewhat averse to live streaming, started his first live broadcast in his life at the auto show held in Beijing shortly afterwards, and personally endorsed Changan Automobile. All executives of Changan Automobile registered relevant accounts and began to actively embrace the era of traffic.

Zhu Huarong knew that he could not win the Internet marketing competition with Lei Jun, so he started to spend money on R&D and set a target of 15 billion yuan for R&D expenditure per year, which means that Changan Automobile's daily R&D expenditure is as high as 40 million yuan. He used high R&D to counter Lei Jun's "asymmetric competition" and "dimensionality reduction attack".

Obviously, Zhu Huarong learned how to master the "traffic code" from Lei Jun. After he made the above remarks in a recent interview, Changan Automobile's stock price continued to rise, soaring from 13.58 yuan at the beginning of the month to 15.70 yuan at the close of July 17, an increase of 16%, with a total market value of 155.7 billion yuan.

Net profit plummeted by more than 80% in the first quarter

What makes Zhu Huarong anxious is the decline in Changan Automobile's performance.

In the first quarter of 2024, Changan Automobile's revenue increased but its profit did not.The financial report shows that Changan Automobile's revenue in the first quarter was 37.02 billion yuan, an increase of 7.14% from 34.56 billion yuan in the same period last year. Net profit attributable to the parent company plummeted from 6.97 billion yuan in the same period last year to 1.158 billion yuan, a year-on-year decline of 83.39%. In the same period of 2023, Changan Automobile's revenue growth was -0.06%, but its net profit attributable to the parent company increased by 53.65% year-on-year, which is a typical case of increased profits but not increased revenues.

What worries Zhu Huarong is that Changan Automobile's gross profit margin and net profit margin both fell sharply in the first quarter of this year.In the first quarter, Changan Automobile's gross profit margin was 14.41%, down 4.15 percentage points from 18.56% in the same period last year, while its net profit margin plummeted from 19.37% in the same period last year to 2.31%, a drop of 17.06 percentage points, setting a record for the largest decline in the same period. The net profit margin of 2.31% is the lowest record in the same period since 2019. In 2023, Changan Automobile's net profit margin was as high as 6.28%. In fact, Changan Automobile's net profit margin has been declining since the fourth quarter of 2023. The net profit margin in that quarter was only 1.76%, even lower than the net profit margin in the first quarter of this year. The net profit margin rose slightly month-on-month, but plummeted year-on-year.

In 2023, despite poor performance in the fourth quarter, Changan Automobile performed well overall throughout the year.The annual revenue was 151.3 billion yuan, a year-on-year increase of 24.78%, and the net profit attributable to the parent was 11.33 billion yuan, a year-on-year increase of 45.25%. In the previous two years, Changan Automobile's revenue increased by 24.33% and 15.32% respectively, and the net profit attributable to the parent increased by 6.87% and 119.53%. In the fourth quarter of 2023, Changan Automobile's revenue was 43.09 billion yuan, a year-on-year increase of 20.03%, and the net profit attributable to the parent was 1.445 billion yuan, a year-on-year increase of 60.76%. By comparing the above data, Changan Automobile's revenue and net profit growth in the first quarter of this year have declined significantly both year-on-year and month-on-month. Compared with the same period last year, Changan Automobile's performance is obviously difficult to satisfy the market.

In its financial report, Changan Automobile explained that the reason for the sharp drop in net profit was the impact of the investment income recognized from the acquisition of Shenlan Automotive Technology Co., Ltd.

A careful analysis of Changan Automobile's structure shows that Changan Automobile is still mainly engaged in joint venture brand fuel vehicles.winProfit point, using the profits from fuel vehicles to support the losses in the new energy field.After BYD and Ideal opened the curtain on the profitability of new energy vehicles, Changan Automobile has not yet made a profit in the field of new energy vehicles. The financial report shows that in 2023, the net losses of the two major brands of Deep Blue and Avita will reach 6.6 billion yuan in total. The continued losses in the field of new energy vehicles led Zhu Huarong to learn from Lei Jun.

R&D expenses tripled?

In 2023, Changan Automobile's R&D expenses will be 5.98 billion yuan. If, as Zhu Huarong said, 15 billion yuan will be invested in R&D this year, it will almost triple last year's. The financial report shows that from 2019 to 2023, Changan Automobile's R&D expenses were 3.169 billion yuan, 2.889 billion yuan, 3.515 billion yuan, 4.315 billion yuan and 5.980 billion yuan. The year-on-year growth rates were -0.49%, -8.84%, 21.67%, 22.77% and 38.57%, respectively. In other words, Changan Automobile has only begun to increase its R&D efforts in the past three years, which may have a lot to do with the new energy vehicle sector business.

In the previous five years, Changan Automobile's R&D investment accounted for 4.5%, 3.4%, 3.3%, 3.6% and 3.9% of its total revenue respectively. After 2019, the proportion of R&D has been below 4% for four consecutive years.

In the first quarter of 2024, Changan Automobile's R&D expenses were 1.544 billion yuan, a year-on-year increase of 13.32%.However, the year-on-year growth rate of 41.67% in the same period last year showed a significant decline. From the second quarter to the fourth quarter of 2023, the year-on-year growth rates of R&D expenses were 53.42%, 32.99% and 38.57%, respectively, which were all higher than the growth rates of R&D expenses in the first quarter of this year. This is somewhat different from what Zhu Huarong said about increasing R&D efforts. Of course, this year is only halfway through, and the amount of R&D investment in the next few quarters will determine whether what Zhu Huarong said is true or false. In this quarter, Changan Automobile's R&D accounted for 4.2%.

Changan Automobile's R&D expenses and R&D proportion have increased to a certain extent, but it seems far from enough.Taking BYD and Great Wall Motors as examples, BYD's R&D expenses from 2019 to 2023 were 5.629 billion yuan, 7.465 billion yuan, 7.991 billion yuan, 18.65 billion yuan and 39.57 billion yuan, with year-on-year growth rates of 12.83%, 32.61%, 7.05%, 133.44% and 112.15%. BYD's R&D expenses have grown rapidly in the past two years. They are 4.3 times and 6.6 times the R&D expenses of Changan Automobile in the same period, respectively. Great Wall Motors' R&D expenses in the same period were 6.445 billion yuan and 8.054 billion yuan, 1.5 times and 1.3 times that of Changan Automobile. In the first quarter of this year, BYD's R&D expenses were 10.61 billion yuan, a year-on-year increase of 70.1%. Changan Automobile's R&D expenses are less than 1/7 of BYD's. Great Wall Motors' R&D expenses were 1.96 billion yuan, a year-on-year increase of 27.73%. In terms of R&D investment and growth rate, Changan Automobile and BYD have a large gap compared with Great Wall Motors.

From 2019 to 2023, BYD's R&D expenses accounted for 4.4%, 4.8%, 3.7%, 4.4% and 6.6% of its total revenue. It can be seen that except for 2021 when the R&D ratio was lower than 4%, BYD's R&D ratio was higher than 4%, especially in the past two years. Tesla, which has always been known for its high R&D ratio, accounted for 3.8% and 3.7% in the past two years. And the R&D investment in 2023 is not as high as BYD, which is the fundamental reason why BYD can seize the global new energy vehicle sales crown.

Although Zhu Huarong was stimulated by Lei Jun, Changan Automobile's R&D investment in recent years has soared from 5.98 billion yuan to 15 billion yuan, which is a year-on-year increase of 151%. Even BYD, the "R&D maniac", has not been able to achieve this increase. Changan Automobile's investment of 15 billion yuan in R&D this year has also aroused market doubts. Excluding the R&D expenses of 1.544 billion yuan in the first quarter, it means that Changan Automobile will invest 13.456 billion yuan in the next three quarters, with an average daily R&D expense of nearly 50 million yuan.

Based on Changan Automobile's revenue in 2023 and the first quarter of this year, the proportion of R&D will reach about 11%. Currently, all domestic and even global automakers have not achieved such a high R&D proportion. Once Zhu Huarong does what he said, Changan Automobile will become the automaker with the highest R&D proportion in the world.

Learning from Lei Jun is not just about learning the surface

Zhu Huarong felt the pressure from Xiaomi and Lei Jun, and began to learn from Lei Jun intentionally or unintentionally. Being good at learning is a good thing, but if you just imitate others blindly, you may not achieve the desired results. After all, Lei Jun has the genes of the first generation of Internet celebrities and has a strong and advanced Internet thinking. Now many car company leaders are learning from Lei Jun and want to become Internet celebrities, but few have achieved good results.

First, Lei Jun has 23.933 million and 25.486 million fans on Weibo and Douyin respectively (as of 11:00 a.m. on July 17), while Zhu Huarong has 632,000 and 20,000 fans on Weibo during the same period, which is far from Lei Jun’s number of fans. This also indicates that Zhu Huarong’s path to becoming an Internet celebrity is almost impossible. Even Wang Chuanfu and Li Bin, who are often in the spotlight and have higher reputations in the industry, are not able to compete with Lei Jun in terms of Internet traffic. Zhu Huarong’s embrace of the Internet is just another way of marketing, but if he wants to have the same immediate effect as Lei Jun, he may be disappointed.

Not only Zhu Ronghua, but the entire automotive industry has been "driven crazy" by Lei Jun, and many car company leaders have begun to learn from Lei Jun. Wei Jianjun, chairman of Great Wall Motors, also became keen on live broadcasting and shooting short videos after attending Xiaomi's new car launch conference, and asked his subordinates to actively embrace traffic and become Internet celebrities. 17 executives of Great Wall Motors have joined Weibo, and Wei Jianjun even proposed to become a quality Internet celebrity.

Later, Li Xiang of Ideal Auto, He Xiaopeng of Xpeng Auto, Wang Chuanfu, founder of BYD, Zeng Yuqun, chairman of CATL, and Yin Tongyue, chairman of Chery, all appeared to start live broadcasts. Even if they don’t have the popularity of Lei Jun, they can’t be too outdated. Then Feng Xingya, general manager of GAC Group, took the lead in live broadcasting on Video Account, and many senior executives of BYD collectively settled in Douyin. For a time, the live broadcast trend set off in the automotive industry, which may gradually produce aesthetic fatigue while allowing consumers to understand car models more quickly.

Dong Yuhui, a real internet celebrity with tens of millions of fans, actually doesn't like the term "internet celebrity". He even dislikes the word "internet celebrity". He believes that the word "internet celebrity" is translated as "celebrity" in English, which is not a positive word. It usually means doing very stupid things to attract attention. Xiang Zhen, a sales manager of a well-known brand in Beijing, said that it is a double-edged sword for the CEO of a car company to become an internet celebrity. "There is a good side. The CEO's own popularity can bring a certain amount of traffic effect, increase the sales of the car company and the influence of the product. But if the brand is overly dependent on an individual, when the individual's image is damaged, it will have a negative impact on the corporate brand."

Investor Shi Baogang believes that the competition among car company CEOs to become Internet celebrities and compete for online traffic is a reflection of the overly fierce competition in the Chinese auto market. "Traffic is not sales volume, nor is it retention. Not every car company CEO has the influence of Lei Jun. Building a car company's brand is a long-term process and cannot be achieved overnight. The core competitiveness of an auto company is still product strength. Blindly focusing on traffic may even be a case of missing the forest for the trees. Although communication and marketing are important components of auto companies, they still need to distinguish between the primary and the secondary. It still feels a bit like a waste of time for car company CEOs to blindly engage in live broadcasting. After all, the responsibilities of car company CEOs are to formulate the direction of corporate development and manage the company's daily production and operation activities, and they need to focus on major issues. Online live broadcasting is time-consuming and energy-consuming. Considering the age of car company CEOs, it is difficult for them to have the energy to deal with it for a long time."

Yuan Xiaolin, global senior vice president of Volvo Car Group and president and CEO of Volvo Car Asia Pacific, once commented on car company CEOs becoming internet celebrities. He believes that traffic has both positive and harmful sides, and blindly pursuing traffic is not only ineffective but also harmful to the company.

Although many car company CEOs have embraced traffic, many others have implicitly stated that they will not follow suit. Leapmotor founder Zhu Jiangming said bluntly: "I am not Lei Jun, nor Yu Chengdong. I don't have that much traffic and fame. I'd better just focus on my technology." Interestingly, Leapmotor is the only car company listed on the Hong Kong stock market whose stock price has not fallen and has risen slightly this year.

Zhu Huarong has attracted great attention in the automotive industry because Lei Jun is going to invest 15 billion yuan in research and development. However, whether he can really make money and how Changan Automobile will break through in the future has become a topic of concern in the market. After all, the closing price of 15.70 yuan on July 17 is still lower than the opening price of 16.40 yuan on January 3, which means that Changan Automobile's stock price has fallen by 4.3% this year. What kind of changes can Zhu Huarong bring to Changan Automobile this time? What kind of answer can Changan Automobile hand in by the end of the year? It is worth our continued attention.

Author|Meng Xiao