Great Wall stock expected to fall, may be overtaken by Changan

Gasgoo.com (Shanghai May 27) - Great Wall Motors, once heralded as China's most promising own brand manufacturer, has recently attracted doubt concerning its future prospects. Instead, many in the country are looking towards Changan Automobile to become the country's new leading own brand manufacturer. The information comes from a new report from the Gasgoo Automotive Research Institute, one of the country's most authoritative sources on the automotive industry.

According to data, the Chinese passenger automobile market maintained stable growth over the first four months of this year, with year-on-year growth exceeding 10 percent. Among them, own brands' passenger automobile sales are slightly lagging behind, with cumulative sales totaling 1.98 million units, representing year-on-year growth of 7.6 percent. Among them, the industry's so-called 'dark horse' last year, Great Wall, has seen its sales fall in three of the four months. It only managed to sell a total of 203,300 units over the four month period, equivalent to negative year-on-year growth of 1 percent.

Its recent setbacks in the capital market have also attracted the attention of Great Wall's naysayers. Following an announcement made in January that it would delay its listing on the market, Great Wall announced earlier this month that it will completely overhaul its breakthrough Haval H8 and that, due to quality issues, it would once again delay its market listing.

These pieces of news have done their part in affecting the performance of Great Wall's stock. After trading for Great Wall stock resumed on May 9, the company's H shares fell a total of 20.43 percent, equivalent to a loss of HK$16.8 billion ($2.17b). The company's A shares suffered a similar fate, falling from a high of over 50 RMB ($8.11) per share to just around 27 RMB ($4.38).

Having analyzed Great Wall's market trends, the Gasgoo Automotive Research Institute has arrived at a few conclusions. First, Great Wall Motors lacks a clear sustainable development plan, with its prior development due to being in the right place at the right time. With more and more manufacturers entering the SUV market and the market growing increasingly fierce, Great Wall's competitive advantage isn't nearly as clear as before. As other competitors in the SUV market are prepared for this level of competition, Great Wall still holds on to its previous passive strategy, which excessively relies on a single segment.

Furthermore, Great Wall Motors' independent R&D capability also has problems. The reason why the Haval H8, which uses highly-specific autoparts, is encountering issues despite continuous modification has to do with a lack of high-quality R&D. Without long-term experience and accumulated data, it is very difficult to ensure the reliability and stability of its products.

By comparison, Changan, a renowned brand with a long-standing military history, has begun to finally show some successes. Over the first four months of the year, Changan's sales totaled 245,219 units, 37.9 percent higher than the 177,807 units sold a year ago. With SAIC-GM-Wuling officially classified as a joint venture, Changan is officially the country's best performing own brand manufacturer.

Following 2013, which is the first year that its own brand business achieved a profit, Changan's own brand business reported a profit of approximately 200 million RMB ($32.52m) in the first quarter of this year. It seems only a matter of time before Changan usurps Great Wall as China's leading own brand manufacturer.

"[The fact that] Changan Automobile's own brand is able to achieve success despite pressure from all aspects is due to technology," Changan President Zhang Baolin stated previously in an interview. Statistics show that Changan's cost and fixed capital investments in its own brand business totaled 12 billion RMB ($1.95b).

The Gasgoo Automotive Research Institute believes that Changan, after years of going under the radar, possesses considerable advantages when it comes to product structuring, R&D capability, network construction and even how much attention its management team places on own brand sales. Changan is also making noticeable strides when it comes to consumer recognition. "However whether or not Changan is able maintain its leading position still needs to be seen," the institute's report adds.