The EU's announcement of a 36.3% electric vehicle (EV) tariff on SAIC Motor has placed significant pressure on the automaker. Its revenue for the first half of 2024 was surpassed by competitor BYD, and future profits are likely to be further squeezed by the tariffs.
Recently, during the Chengdu Motor Show, an SAIC executive had a major outburst, harshly criticizing Xiaomi Motors and accusing it of copying Porsche's designs. This emotional response from a SAIC executive likely reflects the intense internal and external pressures faced by joint venture automakers in China.
In the past, joint venture automakers like SAIC, partnered with Volkswagen and General Motors (GM), held the leading position in the Chinese market. However, they are now facing pressure from rapidly rising new players like BYD. On the other hand, the external environment is also becoming increasingly harsh, especially with the EU's recent decision to impose tariffs on Chinese EVs, with SAIC facing the highest rate of 36.6%, putting its future export volumes and profits under pressure.
Following a brutal price war in the first half of 2024, BYD, one of the leading forces of the price cuts, has overtaken SAIC to become the top-earning automaker in China for the first half of the year. Previously, SAIC consistently held the number one position in half-year and yearly revenue rankings.
Riding the wave of the EV boom, BYD has become the market leader in market value and dominated sales and profitability. On the other hand, joint venture giants like SAIC and the GAC Group have seen declines in revenue and net profits.
In the first half of 2024, SAIC's revenue was CNY284.686 billion (approx. US$40.4 billion), a year-on-year decrease of 12.8%, while its net profit was CNY6.628 billion, a 6.45% year-on-year drop. GAC, which primarily sells Japanese cars, performed even worse, with a first-half revenue of CNY45.808 billion, a 25.62% year-on-year decrease, and a net profit of CNY1.516 billion, a significant year-on-year decline of 48.9%.
Despite leading the price war, BYD's profitability remains strong in the first half of 2024. Its net profit for the first half of 2024 was CNY13.631 billion, ranking first and a year-on-year increase of 24.44%. Its gross margin for the first half of 2024 was 20%, indicating that BYD still has the capital and space to continue the price war if it chooses to.
Another surprising standout performer is Seres. During the first half of 2024, the price war resulted in polarized performances among major automakers. The Huawei-backed Seres reported a first-half revenue of CNY65.04 billion, a year-on-year growth of 489.58%, and a net profit of CNY1.62 billion, turning profitable and growing by 220.91% year-on-year. In terms of sales, Seres sold 200,900 vehicles in the first half, a year-on-year growth of 348.55%.
In contrast, joint venture automakers like SAIC and GAC were the most affected by the price war. SAIC's first-half sales were 1.827 million units, down 11.8% year-on-year, while GAC's sales were 863,000 units, down 25.8% year-on-year. Once dominant in the Chinese automobile market, joint venture automakers now face brand image challenges and declining market shares, while domestic Chinese brands are thriving.
After being subjected to the EU's anti-subsidy investigation, SAIC remains optimistic, stating that it expects its sales in Europe in 2024 will not be lower than in 2023. However, besides strengthening its core markets in Western Europe and South America, SAIC must also accelerate its expansion into emerging markets like Eastern Europe.
