GAC Group strives to seize the "straw" for going global

Author | Wang Xiaojuan

Editor | Zhou Zhiyu

Going global has now become a compulsory course for all car companies. For GAC Group, which can no longer make money by lying on joint venture brands, going global has become the key to pulling itself back from the cliff.

At the Paris Motor Show, the second-generation AION V, a global strategic model under GAC, was unveiled. GAC Group also officially announced the "European Market Plan": establishing a technical center in Europe, building a local ecosystem, and striving to become a trusted brand for European consumers.

With this plan, GAC has already established a design center in Milan, Italy, and set up its European headquarters in the Netherlands. Furthermore, GAC plans to preliminarily introduce its products to some European countries within the year and achieve full coverage of the European market by 2028.

Although everyone sees going global as a new path with lofty goals, it is not an easy task.

Accompanying Chinese car companies going global are punitive tariffs imposed by various countries on Chinese-made electric vehicles. For example, the European Commission recently received support from EU member states to impose tariffs of up to 45% on electric vehicles imported from China.

For many Chinese car companies, this has led to a new mode of going global - building factories. Recently, there have been reports that GAC Group is planning to establish car assembly factories in Europe and South America by 2026.

This information comes from Wang Shunsheng, Senior Vice President of International Business at GAC Group. He mentioned during the ASEAN Business and Investment Summit in Laos that the company is in communication with potential partners. Despite the significant impact of tariffs on the industry, GAC is still advancing its global expansion strategy. He further revealed that Brazil is the preferred choice in South America, but did not specify which European countries the company is considering.

Since last year, GAC has stated that it is mobilizing the entire company to plan its global expansion. An international business leadership group has been established, with GAC Group's Chairman Zeng Qinghong and General Manager Feng Xingya serving as the leader and deputy leader respectively.

Specifically, Aion has taken on the responsibility of being the vanguard of GAC's global expansion.

Since last year, Aion has entered the Thai market first. By this year, Aion has entered markets such as Singapore, Malaysia, Indonesia, Myanmar, Vietnam, Cambodia, Nepal, and others.

In Southeast Asia, GAC is also building factories. In May this year, GAC Aion's factory in Rayong, Thailand obtained an operating license for a bonded zone, becoming Aion's first bonded factory overseas.

So far, GAC Group has entered nine ASEAN countries, with approximately 54 sales and service outlets. By 2027, GAC expects to have around 230 sales and service centers in the region, selling about 100,000 vehicles locally.

GAC is heavily betting on overseas markets because its sales volume has declined compared to previous years. Not only has the sales volume of joint venture brands decreased, but the sales volume of independent brands is also facing fierce competition in the domestic market, with even the first negative non-GAAP net profit in the first half of this year since its listing 12 years ago.

Firstly, in terms of sales volume, GAC's September production and sales report showed that the group's cumulative sales for the first nine months were 1.3351 million vehicles, a year-on-year decrease of 25.59% A more serious situation is that the sales of GAC's four major brands are declining. Among them, GAC Honda's sales decreased by 29.06% year-on-year; GAC Toyota decreased by 24.49%. The two independent brands saw even larger declines, with GAC Trumpchi dropping by 35.4% year-on-year; GAC Aion sold 226,700 vehicles, a 35.4% year-on-year decrease.

The decline of joint venture brands seems to be a major trend, and the decline of GAC's joint venture brands is understandable, but the decline of independent brands puts GAC at a disadvantage in the fierce competition in the domestic new energy market.

Once, relying on Aion, GAC became the first traditional manufacturer to successfully transition to new energy.

In 2022, Aion's valuation once reached billions, considered an unmissable unicorn in the capital market for new forces.

But now, it is more regrettable to talk about it. After reaching a peak of 480,000 vehicles last year, it has been declining for nine consecutive months this year. The high-end brand Haobo, which has put in a lot of effort, has been struggling to perform well.

After poor performance, Aion's IPO has been hopeless. Although Aion claims not to lack money and is not in a hurry to raise funds, it is hard to conceal Aion's current decline.

Furthermore, the decline in sales directly affects financial performance.

For a long time, GAC has relied on GAC Toyota and GAC Honda, two major joint venture brands, to make money effortlessly. However, this kind of easy money-making days are coming to an end.

This year marks the 12th year of GAC's listing. In the past 12 years, GAC has been profitable in every reporting period, with positive non-GAAP net profits.

However, the financial performance in the first half of 2024 broke this record. The financial report for the first half of the year shows that the group achieved revenue of 45.808 billion yuan, a decrease of 25.62% compared to the same period in 2023; among them, the non-GAAP net profit was -338 million yuan, the first negative value in the 12 years since listing.

As a result, GAC Chairman Zeng Qinghong couldn't sit still. He directly "fired" at the internal chaos in the new energy transformation at this year's Chongqing Auto Forum, and also called for "equal rights for oil and electricity".

However, it is apparent that the industry's direction change is difficult to reverse solely by the ability of a specific individual. Moreover, for an automotive giant to improve its situation, specific strategies are needed. Going global has become an important strategy for GAC to deal with the changing domestic market landscape.

However, besides facing pressure on tariffs when going global, Chinese auto companies are all planning their international expansion. For GAC, even after going global, they will still face old rivals.

For example, in the ASEAN market where GAC has already entered, especially in Thailand, BYD's factory has entered the production stage and has become the best-selling new energy vehicle locally. Other Chinese auto companies such as Great Wall, Changan, etc., are also present in the local market. GAC needs to leverage its own strengths to get a share of the market.

The good news is that for most Chinese manufacturers at present, going global is still in the early stages, and GAC still has many opportunities to break through the waves together with industry peers