Lantu Automobile, a new energy passenger car brand under Dongfeng Motor Group, announced a strategic cooperation with Huawei on smart car solutions. The cooperation aims to accelerate the large-scale commercialization of intelligent technology through innovative exploration in multiple fields. This week’s leverage game will talk about Lantu and Dongfeng Motor Group. 1. Weird stock price surge The listed company Dongfeng Motor is actually a commercial vehicle company. According to its official website, Dongfeng Automobile Co., Ltd., initiated exclusively by Dongfeng Corporation, is a large state-owned enterprise with the responsibility of developing and expanding the light vehicle business of Dongfeng, and is a leading provider of overall light vehicle operation solutions in China. The company was founded on July 15, 1999, and listed on the Shanghai Stock Exchange on July 27, 1999.
For more than 20 years since its listing, Dongfeng Motor Corporation’s business layout has expanded from Xiangyang to Wuhan, Shiyan, and then to Shouguang, Shandong. Its main business of light vehicles has seen significant development, from a single light truck platform to light trucks, buses, engineering vehicles, VANs, and other product platforms. The cooperation between LanTu and Huawei, signed this time, is the high-end electric passenger car brand under Dongfeng Motor Group. Although all are under Dongfeng Motor Group, their respective business sectors are completely different. The cooperation between LanTu and Huawei was previewed last weekend. On Saturday, January 20th, Huawei’s Intelligent Automotive Solution and LanTu Automotive both posted on Weibo: “Few words, big things, see you on Monday!” Both companies’ related Weibo accounts also reposted the information. In fact, besides the listed commercial vehicle company Dongfeng Motor, Dongfeng Group, which is listed on the Hong Kong Stock Exchange and includes both passenger and commercial vehicles, is also under Dongfeng Motor Group. Moreover, Dongfeng Group’s scale, which includes most of Dongfeng Motor Group’s complete vehicle business sectors, is much larger than that of the commercial vehicle company Dongfeng Motor. Interestingly, Dongfeng Motor, the commercial vehicle company, hit the limit up on January 22nd. To a large extent, many investors cannot distinguish between the listed commercial vehicle company Dongfeng Motor and Dongfeng Motor Group, as well as the other listed company Dongfeng Group. So, many investors just pushed Dongfeng Motor to the limit up without considering the differences.
On January 22, the official WeChat account of the Lantu Automobile announced that recently, Dongfeng Lantu and Huawei have officially signed a strategic cooperation agreement. The two parties will jointly create the ultimate intelligent travel experience based on their respective advantages and user needs. This cooperation will accelerate the large-scale commercialization of intelligent technology through innovative exploration in multiple fields. Notably, the leaders attending from Dongfeng are: You Zheng, member of the Party Committee and Deputy General Manager of Dongfeng Motor Corporation, Lu Fang, CEO of Lantu Automobile, and Jiang Tao, COO of Lantu Automobile. From Huawei, attendees include: Xu Zhijun, Vice Chairman and Rotating Chairman of Huawei, Jin Yuzhi, CEO of Huawei’s Intelligent Car Solution BU, and Chi Linchun, Vice President of Huawei’s Intelligent Car Solution BU. Lantu Automobile, a high-end electric passenger car brand under the Dongfeng Group, is one of its business units. Even after the official signing on January 22, some friends and shareholders have been explaining the difference between Dongfeng Automobile and Dongfeng Group’s shares. However, the stock price of Dongfeng Group’s shares on January 22 still did not receive a positive boost, but instead fell by 2.9%.
Of course, perhaps Dongfeng Group shares are listed on the Hong Kong Stock Exchange, so many investors cannot participate. Even so, Dongfeng Automobile has risen to the limit, and Dongfeng Group’s drop is not small, which is really too humorous in contrast. Perhaps this on the one hand represents that our A-share market is sometimes more emotional than fundamental; it also indicates some attitudes of Hong Kong market investors. According to the information released by Lantu: At the signing site, the two parties had in-depth exchanges around the development trend of intelligent connected vehicles. The two parties will give full play to their respective advantages and jointly promote the high-quality development of the automotive industry. Dongfeng Lantu relies on the 55 years of car-making experience of the central enterprise Dongfeng Company, and has a number of globally pioneering new energy vehicle technologies, in the field of vehicle safety, driving control performance, etc. are at the industry-leading level. Huawei’s deep accumulation in ICT technology and continuous breakthroughs in the field of intelligence will also help Dongfeng Lantu to further upgrade and iterate in the field of intelligent new energy vehicles. From the statement, it should not be the Hongmeng Smart Travel cooperation model, and Huawei Terminal, and Hongmeng Smart Travel’s Yu Chengdong did not attend. 2. How is Lantu’s performance as the first to lead the investment in the car BU? East Wind Group’s December 2023 production and sales report revealed that 10,756 Lantu cars were produced in December 2023, compared to only 1,882 in the same period of 2022. The total production for the whole year of 2023 was 52,599 cars, compared to 23,471 in 2022, an increase of up to 124.10%. In terms of sales, 10,017 Lantu cars were sold in December 2023, compared to only 1,729 in the same period of 2022. The total sales for the whole year of 2023 was 50,285 cars, compared to 19,409 in 2022, an increase of 159.08%. In terms of delivery, 50,600 Lantu cars were delivered in 2023, an increase of 160% compared to the previous year. It is worth mentioning that this number exceeded the annual sales target of 50,000 cars, and in December 2023, the monthly sales of Lantu cars exceeded 10,000 for the first time, achieving positive growth for seven consecutive months compared to the previous month. According to the data released by the China Passenger Car Association, in December 2023, the sales of narrow electric passenger cars in China reached 945,000, an increase of 47.3% compared to the same period last year and an increase of 12.4% compared to the previous month; the cumulative sales reached 7.74 million, an increase of 36.3% compared to the same period last year. In other words, the performance of Lantu Automobile in 2023 far exceeds the market growth rate, of course, this is based on a lower base.
At the same time, the sales performance of exceeding 10,000 units per month, can it continue, the leveraged game believes it is very worthy of attention. Lan Tu CEO Lu Fang recently publicly stated, “In 2024, Lan Tu will challenge a higher goal on the basis of an annual production and sales of 50,000 vehicles, promoting brand volume and product sales to double.” The company officially announced that it is expected to challenge the goal of 100,000 units in annual sales in 2024. This goal, probably doubling on the basis of 2023, can it be achieved and how can it be achieved? From the media reports and the information of this signing, the leveraged game basically believes that Huawei’s cooperation with Lan Tu is the “HI mode”, that is, Huawei provides a full-stack integrated solution. Previously, Changan Automobile’s Avita cooperated with Huawei in the HI mode. Relatively speaking, the cooperation of the HI mode is not as in-depth as Smart Selection, which is more in line with the interests of Dongfeng Motor’s cooperation with Huawei and is expected to make up for Lan Tu’s shortcomings in intelligence. Therefore, Lan Tu’s cooperation with Huawei is a clear sign, hoping to leverage Huawei’s advantages in automatic driving, intelligent cockpit, and other aspects into product strength. Changan Automobile Chairman Zhu Huarong recently stated that choosing the HI mode conforms to the laws of the industry, meets the requirements of industrial policies, and can fundamentally guarantee the interests of users. Changan and Huawei’s innovative model, a strong alliance and complementary advantages, maximize their respective strengths, and form bundled interests. However, Avita’s performance in 2023 was not very good overall, of course, the price is relatively high. The effect of Lan Tu’s leveraging of Huawei remains to be seen. In any case, another, and it is the central enterprise Dongfeng Motor Group’s Lan Tu’s cooperation with Huawei, is at least welcome to Huawei’s BU. On November 25, 2023, Changan Automobile and Huawei signed a “Memorandum of Investment Cooperation”. On January 16, 2024, Changan Automobile Chairman Zhu Huarong revealed, “The two parties will jointly establish a new company, mainly engaged in the research and development, design, production, sales, and service of automotive intelligent systems and component solutions, including automotive intelligent driving solutions, automotive intelligent cockpit, intelligent automotive digital platform, intelligent vehicle cloud, AR-HUD, and intelligent vehicle lights.” It is reported that Huawei has promised not to engage in the whole vehicle business. It is reported that the name of the new company established by Huawei and Changan is tentatively called “New Cool.” It is a public resource platform company for the entire industry. Initially, Changan and Huawei will land and scale products, and then open up to other complete vehicle companies and the community. As LanTu joins Huawei, the possibility of Dongfeng Motor Corporation investing in this platform company is at least increasing. Dongfeng Motor Corporation’s production and sales report for December 2023 revealed that the cumulative car sales for the year were 2,088,185, a decrease of approximately 15.27% compared to the previous year. The parent company of Dongfeng Motor Corporation, Dongfeng Motor Group, had a cumulative car sales of 2,421,227 in 2023, a decrease of about 17% compared to the previous year. In December 2023, Dongfeng Motor Corporation’s passenger car company sold 150,951 cars, a decrease from 181,682 in the same period in 2022. The performance in December was poor. In 2023, the company’s passenger car sales were 1,744,751, a 19.0% decrease compared to 2022. Data from the China Association of Automobile Manufacturers shows that in December 2023, the retail sales of narrow passenger cars in the domestic market reached 2.353 million, an 8.5% increase year-on-year and a 13.1% increase month-on-month. The cumulative sales from January to December were 21.703 million, a 5.6% increase year-on-year. In other words, regardless of the month or the whole year, Dongfeng Motor Corporation’s passenger cars are lagging behind the national growth. In fact, the industry is growing, but Dongfeng Motor Corporation’s passenger cars are declining. This also reflects the necessity of the company’s transformation, and LanTu’s reliance on Huawei is very necessary. In terms of commercial vehicles, Dongfeng Motor Corporation’s sales in December 2023 were 20,707, a decrease from 29,962 in the same period in 2022. The performance in December was also not very good. For the whole year of 2023, the company’s commercial vehicle sales were 343,434, a 10.33% increase compared to 311,284 in 2022. In any case, this performance is better than that of passenger cars. Unfortunately, the total sales of commercial vehicles are limited and cannot drive the entire company’s sales to become positive. 3) In December 2023, the total sales of new energy vehicles of the entire Dongfeng Group’s shares were 29,347, a poor performance compared to 38,477 in the same period in 2022. For the entire year of 2023, the sales were 348,044, just a 0.5% increase from 2022. Specifically, the sales of new energy passenger cars of Dongfeng Group’s shares in December 2023 were 24,120, a significant decline from 35,461 in December 2022. For the whole year of 2023, the total sales of new energy passenger cars were 303,929, a 5.1% decrease from 2022. According to data released by the China Passenger Car Association, in December 2023, the sales of new energy narrow passenger cars in China were 945,000, a 47.3% year-on-year increase. Despite the good performance of LanTu cars, the overall performance of new energy passenger cars of Dongfeng Group’s shares was extremely poor. For example, the sales of Yijiete New Energy, a subsidiary of Dongfeng Group’s shares, were 1,076 in December 2023, a drastic decrease from 12,914 in December 2022. For the entire year of 2023, the sales were 74,508, a 25.08% decline from 2022. The performance of new energy commercial vehicles of Dongfeng Group’s shares was relatively good, with 5,227 sold in December 2023, compared to 3,016 in December 2022. For the whole year of 2023, the sales were 44,115, a 71.3% increase from 2022. 4) After discussing the sales performance of 2023, let’s talk about the sales performance of Dongfeng Group’s shares in 2022 and previous years. According to the December 2022 production and sales report, the company sold 211,600 cars in December 2022, a decrease from 257,900 in the same period in 2021. Monthly factors can be understood, such as when many people in the country were infected with Omicron in December, affecting car purchases and deliveries. Looking at the entire year of 2022, Dongfeng Group sold 2.4645 million cars, compared to 2.7751 million in 2021, a decrease of 11.19%. The passenger car segment did relatively well, with sales of 2.1532 million cars in 2022, a decrease of only 4.4% from 2021’s 2.2525 million. According to the China Association of Automobile Manufacturers, the cumulative sales of passenger cars in China in 2022 were approximately 20.543 million, an increase of 1.9% compared to the previous year. It can be said that although Dongfeng’s passenger cars underperformed the market, it was not very serious if only the 2022 data is considered. However, if the timeline is extended, the conclusion may be different. In 2021, Dongfeng Group’s total sales were 2.7751 million, compared to 2.8683 million in 2020, a decrease of 3.25%. In the same year, the sales of passenger cars were 2.2525 million, compared to 2.3135 million in 2020, a decrease of 2.6%. Furthermore, in recent years, the sales of Dongfeng Group’s passenger cars have been declining since 2018. For instance, in 2019, 2.4636 million passenger cars were sold, a decrease of 6.09% from 2020. In 2018, 2.6116 million passenger cars were sold, a decrease of 5.67% from 2019. In 2017, 2.8292 million passenger cars were sold, a decrease of 7.69% from 2018. And in 2016, 2.7878 million passenger cars were sold, showing a modest increase of 1.49% from 2017. In 2015, 2.5218 million passenger cars were sold, showing a significant increase of 10.55% from 2016. In recent years, the passenger car segment of Dongfeng Group has been declining since 2018. After talking about passenger cars, let’s talk about the leveraged game in the commercial vehicle segment. In 2022, the company achieved sales of over 310,000 vehicles, but in 2021 this number was over 520,000, a decrease of 40.43%, which is quite significant. As shown in the figure above, both freight and passenger vehicles have experienced a decrease of about 45%. In terms of finance, in the first half of 2023, Dongfeng Group recorded a revenue of 45.7 billion yuan, an increase of 2.89% year-on-year – which seems good, but if you look at the same period in 2022, the decline was 36.74%. During the same period, the gross profit was 4.986 billion yuan, a decrease of 4.34% year-on-year. In fact, this is nothing, as the gross profit during the same period in 2022 was 5.212 billion yuan, a decrease of over 49% year-on-year at that time. It can be said that both the revenue and gross profit of Dongfeng Group’s shares are very dismal compared to the same period in 2021; the gross profit index is even worse than in the same period in 2022. If we look at the net profit attributable to the parent company, the leveraged game is even more speechless. In the first half of 2023, this figure was 1.27 billion yuan, while in the first half of 2022 it was at least around 5.5 billion yuan, a decrease of 35.81% year-on-year and a decrease of 76.91% compared to the same period. In 2022, the net profit attributable to the parent company of Dongfeng Group was close to 10.3 billion yuan, a decrease of 9.90% year-on-year at that time. Looking back over the past few years, Dongfeng Group’s revenue, starting in 2015, the year when Zhu Yanfeng took over, exceeded 120 billion yuan, but after so many years, it was only over 90 billion yuan in 2022. In recent years, it has been hovering in this range for a long time, sometimes falling a little, sometimes rising a little, but it has never reached the peak of 2015. The situation with gross profit and net profit attributable to the parent company is similar, both fluctuating without any significant increase overall. To a large extent, the leveraged game believes that Dongfeng Group’s financial performance in recent years has not been very good. However, it is still able to maintain a certain level of profit, at least it has not incurred losses, which is considered commendable. Of course, Dongfeng Group and the entire Dongfeng Motor Group are still different, with the latter having a larger scale. However, as the most important car listing platform, we can still see that the entire Dongfeng series is under considerable pressure through the performance of Dongfeng Group’s shares. Dongfeng Group will have a new leader in 2023, hoping that the Dongfeng series can regain its former glory, hoping for good luck for the Lantu car, and hoping for good luck for the entire Dongfeng Automotive Group.