Summary: GAC Group’s overall sales performance in 2016

Guangzhou-based automobile juggernaut GAC Group sold a total of 1.65 million automobiles in 2016, representing total year-on-year growth of 26.96%. Despite the strong overall annual performance, GAC Group’s sales for the month of December alone were below par, adding up to only 168,597 units. To put that figure into perspective, GAC Group sold 4% more vehicles the previous month and 8% more in December of last year. Based on this performance, Morgan Stanley’s ranking for GAC Group this year did not change.

Guangqi Honda remained the Group’s most successful operation, with its 2016 sales totaling 638,791 units, up 10.12% year-on-year and surpassing its sales target for the year. However the JV’s sales for the month of December fell 28% year-on-year, with only 99,598 units sold. Guangqi Honda explained that since they fulfilled their annual sales target so early this year, many dealerships chose to hide their sales figures to pad out future performance reports.

Sales of the Honda Accord in December totaled 12,824 units, marking the seventh consecutive month that the model ranked as China’s best-selling Japanese premium sedan. The marketing release of a new hybrid version of the Accord means that Honda will also have access to a whole new market for this popular model.

Annual sales of the Honda Vezel SUV (pictured above) had already exceeded the 150,000 mark in November of last year, while sales of the Honda Fit were also very strong. However, the all new Avancier midsize SUV, which was released in late last September, has yet to make a major splash in the market. Guangqi Honda has plans to release a new turbocharged 1.5L version which can help keep the model’s price more competitive.

Guangqi Honda’s sales goal for 2017 is set at 690,000 units, representing an increase of around 9% from last year.

Fellow JV GAC Toyota sold a total of 32,665 vehicles in December, down 8.71% year-on-year. However, GAC Toyota, like Guangqi Honda, achieved positive year-on-year sales growth in its annual sales, with its total 2016 sales volume of 421,800 units representing year-on-year growth of 4.64%. The Highlander, Camry, Levin and Yaris L remain the JV’s most popular models. To further boost sales performance, GAC Toyota has plans to further diversify its product line by finishing construction on its third vehicle assembly line and introduction of new models like the CH-R compact SUV.

GAC Chrysler Fiat, despite being a relatively new venture, has been impressing many in the industry with its strong performance. The three Jeep models all released by the young JV in the span of one year have managed to help it achieve a total of 146,439 sales, representing astounding year-on-year growth of 270.84%. Among them the Jeep Cherokee (pictured above) has been especially successful, with its monthly sales constantly above the 10,000 units level. However, sales of the Jeep Renegade and Jeep Compass have yet to reach the same levels. With competition in the SUV market growing especially fierce as more and more new models are being introduced, GAC Chrysler Fiat requires intense vigilance to ensure that all of its products perform strongly.

Despite getting off to a sluggish start in 2016, GAC Mitsubishi managed to make a nice recovery with the release of the domestically produced Outlander (pictured above). The JV’s sales in December grew 29.93%, while its total 2016 sales volume of 55,888 was on par with 2015 sales figures.

Although GAC Motors’ sales in 2016 grew 90%, it had to make major adjustments to its own brand model strategy. Only the Trumpchi brand, which sold a total of 372,034 units over the course of the year, performed strongly. Its Gonow brand was cancelled, while the Hangzhou site was redesigned into a production site for Trumpchi vehicles. At least the Trumpchi brand has been living up to expectations, with the GS4 being one of the most popular SUV models in the country, while the GS8 shows that it possesses remarkable potential, especially with the growing importance of foreign markets in the Middle East and Africa.

However, the Trumpchi brand does risk overreliance on specific segments and insufficient diversification, with 92.5% of its sales volume coming from SUV sales, and nearly 90% of that from just the GS4 alone, according to figures collected by iAuto. Furthermore, GAC has provided major subsidies and other benefits for the GS4, GA6 and GA3S, which Morgan Stanley pointed out have influenced overall returns.

Obviously, an overreliance on SUV models is not something limited to just the Trumpchi brand, but something pervasive through all of GAC’s own brand operations. Beginning in October, SUV sales overtook sedan sales to become GAC’s most popular vehicle type. The gap between SUV sales and sales of other GAC vehicle types only grew over the following months. GAC’s 2016 production and sales volumes of SUVs grew 95.6% and 88.2% year-on-year, respectively. Among them, demand for the Toyota Highlander, Trumpchi GS4 and Trumpchi GS8 still outpace supply.