Introducing SAIC Motor (Part 2)

In Part 1 of our SAIC series, we introduced the history, development timeline, and brand portfolio of SAIC Motor (Chinese: 上海汽车集团) (SHA: 600104), China's number one automaker in terms of vehicle sales for over 15 years. This article is the continuation of and final article in the series, which includes a financial overview of SAIC, an examination of the company's auto sales data, and a summary of management's future strategies going forward.


This article is part of our China auto industry series, which includes:

 

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Financial Overview

Revenue and Profit Margins


#1: SAIC Generated Total Revenue of RMB780 Billion In 2021, Down From A Peak of RMB902 Billion in 2018

Over the past ten years, SAIC's revenue grew from RMB481 billion in 2012 to reach a peak of RMB902.2 billion in 2018, before tapering off to reach a level of RMB779.8 billion in 2021. The last fiscal year, SAIC reported operating income of RMB41.4 billion and net income of RMB33.9 billion.


SAIC Motor Revenue and Income
Data Sources: SAIC Motor (click image to enlarge)


#2: SAIC Has An Operating Profit Margin of 5.3% In 2021

SAIC's operating profit margin shows a gradual declining trend over the past decade, from a high of 8.2% in 2012 to the 5% level over the past three years. The small decline is driven by minor increases in research and development expenses, lower income from associates and joint ventures, and lower investment income from the company's financial portfolio towards the latter half of the decade, offset by decreases in selling expenses. We note that since SAIC is structured as a complex group with many integral joint ventures, and that the company's business comprises of a financial and insurance component (see Part 1), SAIC's definition of operating income is thus broader (e.g. incorporating insurance-related items, as well as income from associates and joint ventures) and may not be directly comparable with the reported operating income metrics for other automobile companies.


SAIC Motor Operating Profit Margin
Data Sources: SAIC Motor (click image to enlarge)

We omit gross profit margin figure numbers at the company level, as this metric is arguably irrelevant to the financial component of SAIC's business.


#3: Automotive Manufacturing Accounts For Almost All of SAIC's Revenue Each Year

Although SAIC has six operating business segments (explained in Part 1), the company only has two segments for financial reporting purposes: automotive manufacturing (also known as vehicle and parts), and financing. Breaking down each year's total revenue by accounting segment, we see that automotive manufacturing accounts for almost all of SAIC's revenue each year, with only a slight decline from 99.5% of total revenue in 2012 to 97.4% of total revenue in 2021.


SAIC Motor Revenue Breakdown By Segment
Data Sources: SAIC Motor (click image to enlarge)

#4: The Automotive Manufacturing Segment's Gross Profit Margin Is Declining

Gross profit margin for the automotive manufacturing segment declined from 16.3% in 2012 to 9.6% in 2021, with more substantial year-on-year drops over the past three years.


SAIC Motor Automotive Manufacturing Segment Gross Profit Margin
Data Sources: SAIC Motor (click image to enlarge)

Management reports gross profit margin numbers for the financing segment that fluctuate in the 70% to 80% range. However, no details are given as to how the gross profit margin metric is calculated or can be interpreted, hence our decision to omit these numbers from this article.


#5: The Domestic Chinese Market Accounts For More Than 90% of SAIC's Revenue

SAIC has made some attempts at geographical revenue diversification over the past decade, although 92.7% of the company's revenue still comes from the domestic Chinese market in 2021.


SAIC Motor Revenue Breakdown By Region
Data Sources: SAIC Motor (click image to enlarge)


Vehicle Sales Data


#1: SAIC's Total Vehicle Sales Peaked In 2018

SAIC's total vehicle sales peaked in 2018 with 7,051,734 vehicles sold during the year, after which the company's unit sales continually decreased to 5,463,500 vehicles sold in 2021, lower than the 5,600,482 vehicles sold during the COVID-19 pandemic in 2020. This is in contrast to other mature auto companies such as Great Wall Motor (see here) and BYD (see here), both of which experienced a rebound in 2021 sales as economic normality resumed that year in China.


SAIC Motor Total Vehicle Sales Volume
Data Sources: SAIC Motor (click image to enlarge)

#2: Volkswagen, GM, and Wuling Cars Dominate SAIC Sales

We break down SAIC's auto sales by brand affiliation from 2012 to 1H2022 in the graph below, with each coloured bar indicating (from left to right):

  • SAIC Motor Passenger Vehicle (SMPV) (i.e. self-owned brands Roewe, MG, and Rising Auto, and joint-venture IM Motors) in medium blue

  • Shanghai-Volkswagen in orange

  • SAIC-GM in grey

  • SAIC-GM-Wuling in yellow

  • SAIC Motor Commercial Vehicle (SMCV) (i.e. self-owned Maxus brand) in light blue

  • NAC, Shanghai Sunwin, and SAIC-IVECO-Hongyan (SIH) in green

  • SAIC's operations in Thailand, Indonesia, and India, in dark blue

We recommend reviewing Part 1 for an overview of each brand.


SAIC Motor Total Vehicle Sales Breakdown By Brand
Data Sources: SAIC Motor (click image to enlarge)

SAIC's vehicle sales are dominated by Shanghai Volkswagen, SAIC-GM, and SAIC-GM-Wuling affiliated brands, with SAIC-GM-Wuling generating the highest unit sales in every year except 2019. The three brand affiliations combined accounted for more than 90% of SAIC's vehicle sales by unit during the first half of the decade, before gradually declining to the mid-70% level by the end of the second half as SMPV and, to a lesser extent, SMCV, vehicles started gaining traction. By the end of 2021, the share of SMPV cars sold had risen to 14.7% from a level of 4.4% in 2012, while the share of SMCV vehicles increased from 0.2% to 4.2% over the same time period.


Though interesting, management does not release a breakdown of revenue by automobile brand. This information would be useful as SAIC's vehicles sold do differ substantially in terms of price point and profit margins. For example, SAIC-GM-Wuling accounts for the highest proportion of SAIC's total vehicle sales, although Wuling branded cars are significantly cheaper (and thus generate less revenue and profits) than other cars in SAIC's auto portfolio (e.g. Volkswagen and GM cars).


#3: New Energy Vehicles Accounted For 17.6% of SAIC's Total Vehicle Sales in 1H2022

SAIC started releasing the company's new energy vehicle sales data starting in 2020. Specifically, new energy (including both hybrid and pure electric) vehicles accounted for 5.7%, 13.4%, and 17.6% of SAIC's total number of vehicles sold in 2020, 2021, and 1H2022 respectively.


Future

Management has several goals set for the company to achieve by 2025, including reaching total vehicle sales of 8.5 million cars globally across all brands.


Other goals include...


#1: Promoting Self-Owned Brands

Management hopes to promote self-owned brands for a more mixed sales structure going forward, unlike the status quo where SAIC's sales predominantly comprise of vehicles from joint venture brands (e.g. Shanghai-Volkswagen, SAIC-GM, and SAIC-GM-Wuling). In-house brands are likely to be more lucrative for SAIC without the requirement of joint venture profit-sharing, while we also anticipate that management will try to further tap into higher end automobile markets such as through the launch of premium electric vehicles (e.g. Rising Auto, see Part 1).


SAIC aims to have self-owned brands account for more than 55% of total vehicle sales by 2025, compared with a current level of twenty or so percent.


#2: Boosting New Energy Vehicle Sales

Management plans to shift the company's product sales mix to include a greater share of pure electric and other new energy vehicles. Specifically, management aims for 32% of vehicle sales to be new energy (including hybrid and pure electric) vehicles by 2025 (up from a level of 17.6% in 1H2022), of which 20% would be pure electric vehicles.


#3: International Expansion

Management wants to ramp up the company's international expansion, with a goal of selling 1.5 million vehicle units (i.e. 17.6% of the 8.5 million total sales goal) overseas by 2025. In comparison, 9%, 12.8%, and 17.1% of SAIC's total vehicles sold were exported or made by overseas manufacturing bases in 2020, 2021, and 1H2022 respectively.


#4: Income Diversification

Management intends to diversify SAIC's revenue stream by further focusing on the company's financing and mobility services segments (see Part 1), with a goal of having non-automotive manufacturing businesses comprising at least 12% of total revenue by 2025 (up from 2.6% in 2021).

 

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