Introduction: From the top player with unlimited prospects to the brink of marginalization, it took less than two years for BAIC New Energy. Can the new leader take on the responsibility and eliminate the problems?
What used to be a glorious picture now presents a dismal reality.
BAIC New Energy has fallen from its former position as the champion of pure electric passenger car sales to the bottom in less than two years.
As of early August 2021, BAIC New Energy has not yet announced its sales results for last month, which seems to be embarrassing.
By the time this article was written, some new energy vehicle companies have announced their sales figures for July, but not all of them, so this article will focus on the data from the first half of the year.
In the first half of this year, many new energy vehicle companies presented impressive results that even surprised people.
Even the once-mocked new car maker, NIO, sold over 30,000 vehicles in the first half of this year, achieving a spectacular transformation.
However, BAIC New Energy, which had been sheltered by BAIC Group and enjoyed various benefits, sold less than 7,000 vehicles in the first half of the year, falling from the position of the prided child to the ice-cold point.
From once being the darling of the market to almost being marginalized, BAIC New Energy has dramatized a thought-provoking story in less than two years with a puzzling plot.
Turning Point
The overall situation of China’s new energy passenger car market is good.
According to the China Passenger Car Association, as of June this year, the cumulative sales of new energy passenger cars in China reached 1.07 million, an increase of 220.9% compared to the same period last year.
Looking at the sales rankings of manufacturers, the three leading enterprises in the first-tier, SAIC-GM-Wuling, Tesla, and BYD, had a total sales volume of 502,000 vehicles, accounting for nearly 50% of the market share.
The former “leader” BAIC New Energy has not only been squeezed out of the top tier, but also out of the top nine. Its cumulative sales in the first half of this year were only 6,959 vehicles, which was really embarrassing.
For BAIC New Energy, 2020 was a turning point in destiny.
Before that, Xu Heyi was in charge of BAIC Group.
Xu’s sharp sense of the market, forward-looking strategic vision, and a series of integrations culminated in the glorious era of BAIC New Energy.
Especially during the seven years from 2013 to 2019, BAIC New Energy has always been the champion of domestic pure electric passenger car sales.
In 2018, after the backdoor listing on the A-share market (stock name: BAIC BluePark), BAIC New Energy was once dazzling.
Apart from Xu Heyi, there was another key figure who contributed to BAIC New Energy’s glory – Zheng Gang.# Brief Analysis of Sales and Revenue Changes of BAIC New Energy from 2018 to 2021 H1
BAIC New Energy was established in 2009 and became independent from BAIC Group in 2014.
Zheng Gang served as the third general manager of BAIC New Energy from January 2014 to February 2019.
The author has compiled the sales and revenue data of BAIC New Energy from 2018 to now.
In 2018 and 2019, the sales of BAIC New Energy were 158,000 and 150,600 units respectively. The sales in 2018 increased by 53.11% compared with the previous year, while the sales in 2019 experienced a slight decline. However, the revenue increased by 30.39% to CNY 23.589 billion.
BAIC New Energy attributed the sales growth in 2018 and 2019 to the expansion of business scale.
In 2020, the sales of BAIC New Energy plummeted by nearly 83%, decreasing from 253.89 million units in 2019 to 52.72 million units. The revenue fell by 77.7% to CNY 4.69 billion, excluding the new energy vehicle promotion subsidy of CNY 587 million.
The outbreak of COVID-19 did have a negative impact on automobile sales in 2020, but as a leading player in the field of new energy vehicles, the drastic decline in sales of BAIC New Energy is indeed perplexing.
BAIC New Energy provided three reasons for the sharp drop in sales and performance in the 2020 annual report: subsidy reductions, price cuts and sales impact caused by gasoline vehicles, and stagnation of corporate sales business (ride-hailing and taxi) due to the pandemic.
These three reasons seem to be sufficient, but upon closer analysis, some hidden problems can be found.
Subsidy reductions and price cuts caused by gasoline vehicle sales are external pressures faced by all new energy vehicle companies. Why did other companies not experience such a steep decline, and some even remained stable or even grew?
Undoubtedly, the pandemic did have a certain impact on the entire automotive industry, but why was BAIC New Energy the most affected among leading players?
If we further analyze these two questions, it can be found that BAIC New Energy has not thoroughly reflected on its current situation and fatal weaknesses, or perhaps it did reflect, but did not have the courage to publicize them in the report.
Fatal Weaknesses” The reason of “stagnated sales in the B2B sector due to the pandemic” has exposed the secret of Beijing Automotive New Energy Vehicle Co., Ltd’s (BAIC New Energy) position as the best-selling manufacturer of pure electric passenger vehicles for several years: ride-hailing and taxi companies are the main channels for the company’s sales volume.
According to the annual reports, the top five customers were responsible for a large portion of BAIC New Energy’s sales and revenue.
The contribution of the top five customers to BAIC New Energy’s revenue in 2018, 2019, and 2020 were 8.81 billion yuan, 13.876 billion yuan, and 2.21 billion yuan, respectively, accounting for 47.3%, 58.82%, and 41.91% of the annual revenue.
These monotonic numbers show the downside of BAIC New Energy’s business model: sales heavily rely on ride-hailing, taxi, and other B2B businesses. In the private consumer sector, individual car owners do not have a high recognition of BAIC New Energy and their purchasing power is limited.
In other words, BAIC New Energy’s base is relatively weak.
In recent years, there has been a significant transition in China’s new energy vehicle industry environment: the previously overdependent To B model of the entire industry has changed to the current mainstream model: To C.
BAIC New Energy obviously lacks an effective response mechanism to this change.
In addition, there is a fatal reason.
As the key technologies of new energy vehicles continue to progress and the number of models on the market increases, consumers have become more and more rational while having more choices.
Today, even if a car company’s story is great, it is useless if the product does not attract consumers.
Looking at the reasons for the sharp drop in sales of BAIC New Energy from 2020 to the present, in addition to external factors such as subsidy retreat, fuel-powered car price reductions and sales, and competitors’ market attack, there is a deeper reason: weak product strength!
Yes, it is the weak product strength!
In the To B era, playing the game of the left and right hand and knowing the rules of the game well, a car’s quality issue could easily be overlooked, after all, the bill was paid by large corporations. Even becoming the sales champion could be justified.
But in the To C era, product strength is the core competitiveness of a car company, and services are just icing on the cake. Only quality products can make consumers foot the bill.
BAIC New Energy’s main models on sale are not competitive in terms of appearance design and product performance compared to strong local competitors such as BYD, Geely, Great Wall, and SAIC.
In recent years, competitors have been making extraordinary progress, and there have been many popular models on the market.
What about BAIC New Energy?
Their main products are still based on the To B era.
In that subsidy era, even if the quality of its models was low-end with quality issues and brake failures, BAIC New Energy still became the champion due to favorable policies.
Now, that era has passed, and BAIC New Energy’s mindset has not completely changed.”ARCFOX, a high-end brand of BAIC New Energy, has experienced a fluctuating market performance. Its sales in the first half of this year were less than 1,200 vehicles, failing to carry the banner of BAIC’s transformation to the high-end market.
Over-reliance on B2B business while ignoring the C2C market, and a lack of emphasis on product development have contributed to BAIC New Energy’s current predicament.
In January 2019, Zheng Gang, who served as the general manager for five years, left the company at the height of its success. His departure was followed by frequent changes in the leadership team, including Ma Fanglie, Liu Yu, and the current CEO, Dai Kangwei.
These frequent changes in leadership have brought many unpredictable factors and exposed issues that need to be solved within the company.
The rise of BAIC New Energy is directly linked to the former leader of BAIC Group, Xu Heyi. With Xu’s retirement in July 2020 and his resignation from the position of Chairman of BAIC New Energy in September 2020, the company has faced a turning point between the old and new era.
However, the product strategy and business model developed during Xu’s tenure have not been adapted to the current industrial policies and ecological environment. It has been difficult to eliminate the underlying problems despite the successive changes of leadership.
Dai Kangwei’s biggest challenge during his three-year tenure and one-year probationary period will be addressing the underlying problems, reversing the current slump in sales, revitalizing morale, and leading the company out of the quagmire.
BAIC New Energy needs to seriously consider and work on fundamental measures such as enhancing product development and improving brand recognition in the long run.
Whether it is adjusting the company’s product strategy, reshaping its business model, improving channel construction, or enhancing brand recognition, Dai Kangwei will face pressure from all aspects to address these long-term problems.
This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.