In the middle of July, FAW Car Co., Ltd. (000800.SZ, hereinafter referred to as "FAW Car") released the "2017 Semi-annual Performance Forecast." According to the announcement, FAW's car sales increased by 37.8% year-on-year, and at the same time it achieved profitability in the first half of the year. It is estimated that the net profit for the first half of the year will be 270 million to 330 million yuan.
Just a few days after FAW Car released the “2017 half-year performance forecastâ€, FAW Car reproduced human resources changes. General Manager Cui Dayong of FAW Car Sales Co., Ltd. recently left for FAW Trade and Trade, and the former general manager of FAW-Volkswagen Sales Company Meng Xiang will take over and lead the sales of FAW Car. Frequent personnel changes coupled with a profitable performance made FAW Car again a focal point.
“At this stage, the company temporarily does not sound out to the outside world.†FAW's public relations office responded to reporters from China Business News. After undergoing a series of changes, has FAW Car's chronic illness been eliminated?
Loss of business performance
FAW Car, which has long been in a loss-making quagmire, has finally “elevated its head†in the first half of this year, achieving a turnaround. FAW Car's "2017 Semi-annual Performance Forecast" released shows that the net profit attributable to shareholders of listed companies in the first half of the year was 270 million to 330 million yuan, compared with a loss of 826 million yuan in the same period of last year.
For the FAW sedan, which has been flat for years of sales, the situation this year is quite optimistic. Regarding the reasons for changes in performance, FAW Car said: “In the first half of 2017, the company achieved sales of 111,200 complete vehicles, an increase of 37.83% over the same period of the previous year. During the reporting period, the company actively promoted the implementation of various operating measures and accelerated the introduction of new products. Speed, successfully launched the new Pentium X40, optimized product layout, improved marketing capabilities, etc., and spared no effort in improving the quality and efficiency of business operations. The operating results turned losses into profits.â€
For the shareholders of FAW Car, this performance can be described as a rare comfort. After all, whether it is a few years ago or since this year, FAW Cars have been "uninterrupted."
The Pentium brand launched in 2008, prior to the advent of SUVs, had no significant effect on the sales of FAW cars. In 2011, FAW Car once again introduced the new brand Oulang, but its development was also not smooth and it was eventually marginalized. In the next few years, FAW Car sales and profits have not diminished. The data shows that in 2016, the cumulative sales volume of FAW cars was only 193,500 units, a year-on-year decrease of 17.97%; operating income also decreased by 14.83% year-on-year, and net profit attributable to shareholders of listed companies was a loss of 954 million yuan.
This situation apparently restricts the development of FAW Cars and, to a certain extent, constrains the overall listing process of FAW shares.
This year, FAW Car finally ushered in a warming trend. FAW Car's first-quarter performance report showed that its cumulative sales of 57,100 units, an increase of 33.42%, operating income of 7.073 billion yuan, an increase of 65.65%. Of which, the net profit attributable to listed companies was 162 million yuan, an increase of 138.22% year-on-year. In other words, FAW Car made a profit in the first quarter.
In the first quarter, turning losses into profits made FAW Car with great confidence in the follow-up development. FAW Car insiders believe that: "FAW cars can overcome difficulties and follow the trend." With the release of FAW Car's "2017 semi-annual performance forecast," FAW sedan has finally "bleeding" to return to normal development.
Leverage joint venture
Despite the frequent success of FAW Car, the industry has not confirmed this. An analyst who declined to be named said: “FAW Cars can turn a profitable turnaround, and sales growth has increased rapidly, thanks in large part to the joint-venture brand FAW Mazda. Its own brand Pentium has not been expected to develop smoothly. If only rely on autonomy, Brands, FAW cars are still difficult to achieve profitability."
In August of last year, Qin Huanming took orders and assumed the chairmanship of the new FAW Car. After taking office, from the divestment of the "Red Flag" brand with serious blood loss to the termination of construction of the China FAW D201 project that has already invested more than 200 million yuan, to the halting of new energy projects, Qin Huanming's reform of FAW Car Dramatic.
“Qin Huan-ming’s reforms are a last resort and a temporary solution.†According to Zhong Shi, a well-known commentator in the automotive industry, “The most fundamental problem with FAW cars is their lack of market competitiveness and their product positioning is not clear. In addition, Relatively lazy in research and development, lack of core technologies, and relatively weak product strength and brand influence.â€
Taking the sales of FAW Car in the first half of the year as an example, the sales volume of its own brand Pentium is 45,600 units, accounting for about 40% of the sales in the first half of the year. The total sales volume of FAW Mazda from January to June reached 58 800 vehicles, an increase of 92% compared with the same period last year. Obviously, it was the rapid growth of FAW Mazda that drove the increase in the sales volume of FAW Cars, and the self-owned brands were still dragging the “back foot†of overall growth to a large extent.
In contrast, Pentium brand sales fell 8.79% year-on-year in the first half of the year. From the perspective of single-month sales in the first half of the year, monthly sales of the Pentium B70, Pentium B30 and other car models were only around 1,000. The cumulative sales of the mid-size car Pentium B90 in the first half of the year were only 11; in the SUV segment, the Pentium that was launched earlier this year was listed. The X40 became the only growth model for the Pentium brand. The sales of the Pentium X80 showed a large decline compared to last year.
New to old diseases
High-level coaching change has become one of the ways in which FAW Cars has changed.
In June of this year, Qin Huanming, former chairman of FAW Car, which had achieved initial success in the reforms, resigned from the post of Chairman of the Board of Directors. FAW sedan executives once again welcomed personnel changes. It is reported that Cui Dayong, general manager of FAW Car Sales Co., Ltd., will leave FAW Car and transfer to the general manager of any steam service trade company. Meng Xianghui, the deputy general manager of the original FAW-Volkswagen sales company, took over the position of Cui Dayong and led the sales of FAW Car.
Prior to this, FAW Car also had a big change. On August 11 last year, many executives including FAW Car Chairman Xu Xianping, Director Teng Tieqi, and Supervisory Board Chairman Wang Yuchun collectively resigned. After Qin Gangming took over, he resigned when his term of office was less than one year. In the industry's view, although Qin Huanming's term of office does well, it has little impact on the long-term development of FAW Car.
“The departure of Qin Huanming left the future development of FAW Car again in an uncertain state, and FAW Car also became a 'hot potato' again.†Zhong Shi believes that “Wang Guoqiang’s incumbent face is still weak in the core competitiveness of FAW Car. Basic dilemma."
From the sales perspective, the above-mentioned insiders said: "Next, FAW Cars is mainly focusing on younger lines; on the channels, FAW Car's plan is to sink all channels to open up the third and fourth tier cities; at the service level, it will also Continue to sink, service is not discounted, solve the customer's problems in all aspects."
The reason why such a choice has been made is that FAW Car has a great shortage of young people. Cui Dayong has publicly stated that the rejuvenation of the Pentium brand is indeed problematic and product changes are slow. This also became one of the reasons for the decline in sales of FAW Cars.
The frequent high-level personnel changes in FAW Car are one of the self-help measures that FAW Car has attempted. However, whether frequent changes will help FAW Car to solve the old illness still needs time verification.
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