GAC Group reports its first loss in 20 years: Success and failure both stem from Japanese joint ventures

The century-long transformation of the automotive industry is indeed drastic.

GAC's recent financial report is shocking.

Knowing that it's not easy for an elephant to turn around, it was unexpected that GAC, which was leading the transition to new energy a few years ago, has reached an unprecedented urgent moment:

The annual consolidated revenue was 107.8 billion yuan, a year-on-year decrease of 17%; the net profit attributable to the parent company was 824 million yuan, a year-on-year decrease of 81.40%; the net profit attributable to the parent company after deducting non-recurring gains and losses turned from profit to loss, with a loss of 4.35 billion yuan, a year-on-year drop of 221.8%.

In 2024, vehicle deliveries are expected to be 2.0031 million units, a year-on-year decrease of 20%; among them, the once "profit cow" GAC Toyota and Honda both saw double-digit declines in sales in 2024, and the main force of transformation, the "favorite child" Aion, also experienced a significant decline in sales.

Despite this, Feng Xingya, who has just taken over as chairman for more than a month, still provided a positive guidance of a 15% increase in annual sales—about 2.3 million vehicles.

GAC's confidence lies entirely in its heavy investment in an intelligent future.

Joint Venture "Cash Cow" Sales Slow Down, Profits Squeezed

Amidst many car companies submitting their "strongest ever" financial reports, GAC's report seems somewhat "powerless":

In 2024, GAC's consolidated revenue (i.e., self-owned brands) was 107.78 billion yuan, a year-on-year decrease of 16.8%; the aggregated revenue (including joint venture brands) was 401.65 billion yuan, a year-on-year decrease of 20%.

GAC's annual gross profit was 4.152 billion yuan, a year-on-year decrease of 26.72%.

The overall gross profit margin of the group was 3.85%, a decrease of 0.52 percentage points compared to the same period last year; among them, the gross profit margin for the vehicle manufacturing segment was only 2.18%, a year-on-year decrease of 0.52 percentage points, while the gross profit margin for the parts manufacturing industry was 7.83%, a year-on-year increase of 1.04 percentage points.

In terms of profit, the group's annual net profit attributable to the parent company was only 824 million yuan, a year-on-year drop of 81.4%.

This is still under the premise that non-recurring gains and losses contributed a positive income of 5.175 billion yuan, including GAC's transfer of 18.82% equity in Guangzhou JuWan Technology Research, which directly increased net profit by 2.26 billion yuan, etc.

After deducting non-recurring gains and losses, GAC's net profit attributable to the parent company turned into a loss, with a net loss of 4.351 billion yuan for the year, a year-on-year decline of 221.8%, marking GAC's first loss in 20 years

Core indicators have declined across the board. In GAC's view, the sharp decline in sales is directly attributed to price competition.

For joint venture brands, in 2024, GAC Toyota's sales were 738,000 units, a year-on-year decrease of 22.3%; GAC Honda's sales were 471,000 units, a year-on-year decrease of 26.5%, making it the brand with the largest decline at GAC.

Revenue from the two joint venture brands was 177.8 billion yuan, a year-on-year decrease of 27.8%.

On the other hand, GAC's self-owned brands accounted for 40% of total sales in 2024. Among them, the main force in the transformation to new energy vehicles accounted for 22.7% of total annual sales.

GAC's biggest hope for transformation into new energy, Aito, is constrained by a saturated ride-hailing market and struggles to shed its transformation label, with annual deliveries of 375,000 units, a year-on-year decrease of 21.9%.

The high-end brand HaoBo launched by Aito has not opened up the high-end market as expected, with annual sales of only 15,600 units.

Only GAC Trumpchi achieved a sales increase of 2%, with annual deliveries of 415,000 units.

Additionally, the new force Hecang Automobile, in which GAC Aito holds a 25% stake, was officially confirmed to be shut down by GAC at the beginning of this year.

With joint venture cars and self-owned new energy vehicles both stalling, GAC's sales in the domestic market last year can be described as being in a dilemma.

However, the positive aspect is that GAC has made smooth progress in overseas markets, especially with self-owned brands.

In 2024, GAC exported 127,000 vehicles, a year-on-year increase of 67.6%, with self-owned brands breaking through 100,000 units for the first time, a year-on-year increase of 92.3%, accounting for 83% of total exports.

GAC's layout of 490 outlets in 74 countries worldwide brought in 11.74 billion yuan in revenue for GAC in 2024, a year-on-year increase of 112.6%; the overseas gross profit margin reached 14.72%, far exceeding the company's overall 3.85%.

This is because GAC's main models, such as Aito and Trumpchi, have reduced costs through local procurement of low-cost components and direct production in local factories, while simultaneously achieving higher premiums in overseas markets, contributing to this higher level of gross profit margin.

In 2025, GAC plans to introduce 4 new models based on this foundation, expand into 13 countries and 200 outlets, and aim to export 180,000 vehicles annually.

Faced with such a financial report and market pressure, Feng Xingya, who has just taken over from Zeng Qinghong for a little over a month, has provided the annual sales guidance:

GAC plans to deliver 2.3 million vehicles for the year, a 15% increase compared to 2024.

In the incremental market of China's automotive industry, this growth rate is not difficult to achieve, but the premise is that GAC must find a breakthrough for sales growth this year.

Especially in 2024, a year when new force car companies are soaring, GAC has not told a compelling new energy story.

Perhaps the three-year "Panyu Action" is GAC's determination to transform into new energy.

How specifically?

Three-Year "Panyu Action," Embracing Huawei Again

GAC has revealed its trump card.

Specifically, it starts with the "Panyu Action," a three-year transformation plan initiated by GAC at the end of 2024.

The core goal is to reorganize its independent brands, allowing independent brands to achieve a production and sales scale of over one million vehicles, and to advance towards a scale of two million vehicles.

The reason for "Panyu" is that Panyu is the core area for GAC's independent brands, gathering the factories, research institutes, component industry bases of Trumpchi and Aion, as well as the GAC Intelligent Connected New Energy Vehicle Industrial Park.

GAC has even moved its headquarters from Guangzhou CBD to Panyu to ensure that "those who hear the gunfire make decisions."

This year marks the inaugural year of the "Panyu Action." Feng Xingya stated that the group will deepen the "Smart Travel 2027" action plan under the guidance of the "Panyu Action"—

GAC aims to enter the first camp in China for product intelligent driving levels by 2025; by 2027, it aims to enter the global first camp for product intelligent driving levels and R&D capabilities.

This is both GAC's "ambition" for future layout and the result GAC has long anticipated. In fact, from the perspective of the intelligent driving strategy, GAC is fishing for big catches with a long line and has laid the groundwork for a comprehensive path from L2 to L4.

GAC's latest intelligent driving system, "Star Spirit Intelligent Travel," is the foundation for its comprehensive layout.

"Star Spirit Intelligent Travel" is actually the 6.0 version of the previous ADIGO system, and the biggest difference after the update is that the algorithm has shifted from a rule-driven segmented architecture to an end-to-end architecture.

Based on the new intelligent driving system, GAC has divided five major product platforms for L2 to L4, with computing power covering 70-2000 TOPS:

At the L2+ level, this year will focus on achieving the goal of entering China's top tier.

Among the five major platforms, G100, G200, G300, and G700 all provide corresponding solutions. Among them, G100 and G200 support high-speed NOA and urban commuting navigation, which refers to urban NOA on fixed routes.

G300 supports urban NOA, while G700 combines VLM to achieve "parking space to parking space."

The highest level, G1000, is suitable for L3/L4 architecture, with algorithms based on visual language models combined with world models.

At the L3 level, GAC plans to launch the country's first L3 mass-produced autonomous vehicle, HaoBo HL, by the end of this year, which will support urban NDA (Navigation Assisted Driving).

By 2026, GAC will accelerate the mass production of L3 vehicles, covering more high-end models, with plans to first achieve popularization on the ToB side (such as the Qi Mobility platform)*.

At the L4 level, GAC will deliver the first L4 pre-installed mass-produced model this year; GAC itself has experience and a foundation in ride-hailing, and next year it will become the first domestic company to operate L4 vehicles at scale.

Additionally, by 2027, GAC will launch L4 autonomous vehicles aimed at individual users.

The task of catching up with the intelligent process is both urgent and arduous, and relying solely on self-research is no longer sufficient. Therefore, in the past period, GAC's investment and cooperation movements have often been seen:

Some are collaborations with the supply chain, such as adopting NVIDIA, Horizon, and Qualcomm computing solutions to support the computing power needs of the G1000 platform.

Others involve partnerships with tech giants, such as jointly developing a large model foundation with Tencent, co-building a global hybrid cloud platform, and jointly creating an "end-cloud integrated" light map solution for autonomous driving.

There are also deeper collaborations, such as the establishment of a joint venture Xinghe Zhili between GAC and iFlytek in 2020, focusing on smart cockpit research, applied to models like HaoBo GT; and last year, the establishment of a joint venture AnDi Technology with Didi, from which this year's L4 pre-installed mass-produced model will emerge.

Moreover, re-embracing Huawei.

Almost simultaneously with the announcement of the shutdown of Chuangjian Automobile, GAC announced the approval of the cooperation proposal for the Huawei GH project and revealed plans to invest 1.5 billion yuan, with both parties working together, positioning the first vehicle as a luxury smart new energy vehicle priced at 300,000 yuan Not long ago, the newly established company HuaWang Auto with a 1.5 billion investment officially launched. The new models will be equipped with Huawei's intelligent driving software, smart cockpit, intelligent vehicle control, and other solutions, becoming another "believer" in Huawei's car manufacturing lineup.

After all, there have been quite a few successful cases before. Even Changan, which has not become one of Huawei's "worlds," has achieved remarkable transformation results among traditional car manufacturers through equity investment in Wang and cooperation in the HI model, led by technology expert Tao Ji.

GAC's 1.5 billion "tuition fee" may not have been paid too late.

One More Thing

Recently, the long-silent Evergrande Auto saw its stock price suddenly soar by over 230%.

It turns out there were rumors that "GAC and Huawei's project will settle at the original Evergrande Auto Guangzhou factory," and "GAC Group's HuaWang (GH) project will acquire Evergrande Auto's Nansha factory."

However, GAC quickly issued a statement denying the rumors, stating that there were no acquisition negotiations, and Evergrande Auto's stock price, which had surged, immediately fell back.

On the other hand, in stark contrast to this scene, Huawei has just released its 2024 financial report, in which the revenue from its intelligent automotive solutions business reached 26.35 billion, a staggering increase of 474% year-on-year.

Although it only accounts for 3% of Huawei's total revenue, in terms of amount, Huawei, which "does not manufacture cars," earns nearly enough from helping others build cars to match half of a new force's revenue.

Intelligent vehicle reference, original title: "GAC's First Loss in 20 Years: Success and Failure of Japanese Joint Ventures"

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