Image source @Visual China
Text｜City Boundaries, Author丨Zheng Li, Editor丨Han Zhongqiang
One of Huawei’s important partners in the field of car manufacturing, Xiaokang shares once again tasted the taste of huge losses. On July 14, Xiaokang shares disclosed that the net profit attributable to the parent in the first half of 2022 will be a pre-loss of 1.6 billion to 1.75 billion yuan.
Since 2020, Xiaokang shares have made great efforts in the field of new energy vehicles, and the company’s losses have expanded sharply. In the past two and a half years, it has lost about 6.4 billion yuan.
On the other hand, the Huawei car story of Xiaokang shares is also sought after by capital, allowing it to raise huge amounts of money to replenish its blood.
On July 15, Xiaokang shares disclosed that the fixed increase of 7.13 billion yuan in operation for half a year has been implemented, and the issuance targets include Nord Fund, GF Securities, Guoxuan Hi-Tech, China Asset Management, Caitong Fund, CCB Fund and many other institutions.
After taking the express train of Huawei, Xiaokang shares embarked on a cycle of “huge losses and huge financing”.
01. Completely jump on the “ship” of Huawei
The road to new energy of Xiaokang shares has twists and turns.
Since 2016, Xiaokang Co. , Ltd. has entered the field of new energy and established a new brand “Sailis”. The first extended-range SUV, the Seris SF5, was released in April 2019. The Seris SF5 began to be delivered in July 2020, and only 1,051 units were sold in 2020.
Due to the huge investment and weak returns in the field of new energy vehicles, as of the end of 2020, Xiaokang shares , which were previously able to make hundreds of millions of profits, suffered huge losses, with a total loss of 2.234 billion yuan that year. The capital market also gave negative feedback. From the release of the Celis SF5 to the delivery, the share price of Xiaokang shares fell by more than 40%.
Xiaokang Co. , Ltd. realized that it is difficult to achieve a double-digit career in the field of new energy vehicles by itself, so it turned around and ran into the arms of Huawei.
In March 2021, Xiaokang officially announced that it had officially reached a partnership with Huawei.
There are three types of cooperation between Huawei and car companies. First, sell soft and hard parts to auto companies; second, Huawei Inside (HI) mode, which is to cooperate in the development of customized and complete autonomous driving and smart cockpits and other overall full-stack solutions. The third is the most in-depth, and is also the cooperation model adopted by Huawei and Xiaokang Co. , Ltd. – “Huawei Smart Car Model”, Huawei is deeply involved in product definition, vehicle design and channel sales. At present, only Xiaokang Co. , Ltd. has adopted the “Huawei Smart Car Model” cooperation.
In this mode, Huawei replicates the smart selection mode in the mobile phone field, highlighting Huawei’s overall dominance in products.
Yu Chengdong, Executive Director of Huawei and CEO of Smart Car Solutions BU, once said, “Huawei Smart Car is designed by myself and our team in terms of industrial design, user experience design, acceptance and grasp of user needs, and so on.”
In other words, at the beginning of the cooperation, Xiaokang shares handed over the dominance to Huawei. As a car company, it is equivalent to handing over its fate to others.
On April 19, 2021, the Celis SF5 (Huawei Smart Choice) was officially released, which was upgraded from the old Celis SF5. As the first smart car jointly bred by Huawei and Xiaokang , the new version of the Celis SF5 has put a lot of effort into the definition of product functions, quality control, and consistent experience.
Sales of the Seris SF5 have also improved slightly. According to data released by the National Passenger Transport Federation, from April to December 2021, the cumulative sales of the Seris SF5 were more than 8,509 units, several times higher than before Huawei joined.
However, both parties were not satisfied with this result, so that Huawei and Xiaokang Co. , Ltd. launched a new high-end new energy vehicle brand, AITO Wenjie, on the basis of Celis.
This time, the two sides have begun to make efforts to launch the first SUV of Wenjie, the Wenjie M5, in December 2021.
Since its launch, Wenjie M5 has become a dark horse in the new energy vehicle market. In the first half of 2022, the cumulative sales volume was 20,200 units. In June, the SUV with the lowest price of 236,800 yuan sold 7,021 units, almost catching up with the annual sales of the Seris SF5 last year.
In terms of sales alone, compared with Tesla, which sells 50,000 units per month, and BYD Han, which sells tens of thousands of units, this data is not good. However, compared to the growth rate, Wenjie M5 rarely met an opponent in the first half of the year. In January 2022, the car sold only 815 units, ranking 308th in the country, but by June, the sales ranking had risen to 87th, ranking 20th in the field of new energy vehicles.
From Celis SF5 to Wenjie M5, Huawei pulled Xiaokang shares out of the quagmire.
In 2020, the operating income of Xiaokang Co. , Ltd. was 14.303 billion yuan. After cooperating with Huawei, at the end of 2021, the company’s revenue was 16.718 billion yuan, a year-on-year increase of 16.89%. According to the announcement on July 15, 2022, Xiaokang Co. , Ltd. is expected to achieve operating income of 12 billion to 12.6 billion yuan in the first half of 2022, a year-on-year increase of at least 60%.
After the release of Celis SF5 (Huawei Smart Selection), the share price of Xiaokang shares rose from the initial 29 yuan to a maximum of 90.5 yuan. As of July 15, 2022, the share price of Xiaokang shares was still 73.94 yuan, and the current total market value was 100.6 billion yuan.
The Zhang family at the helm of Xiaokang shares is also becoming increasingly prominent. On the Hurun Rich List in 2021, Zhang Xinghai and Yan Min, the actual controllers and chairman of Xiaokang shares , ranked 302 with a net worth of 22 billion yuan, up 1,531 places. His two brothers, Zhang Xingli and Zhang Xingming, also had a net worth. into the tens of billions.
In addition, Xiaokang shares also won 2.592 billion yuan in financing in mid-2021, which is mainly used for marketing channel construction projects, supplementary liquidity, SERES intelligent network connection new energy series model development and product technology upgrade projects.
However, Xiaokang shares still can not get rid of the dilemma of huge losses.
The “Competitiveness Analysis Report of Listed Companies in Automobile Manufacturing Industry” jointly launched by Ji’an Jinxin and Shijie shows that the company’s profitability and cash flow in 2021 are already in a hurry.
In 2021, Xiaokang ‘s operating profit loss was 2.885 billion yuan, an increase of 31.43% year-on-year; the gross profit margin was 3.77%, a year-on-year decrease of 0.79 percentage points, and the net profit margin was -15.74%, basically the same as the previous year (-15.62%). The company has been losing money for two consecutive years, and the degree of loss is increasing, and the level of profitability is extremely poor.
In 2021, the net increase of cash and cash equivalents of Xiaokang Co. , Ltd. was 384 million yuan, of which the net cash generated by operating activities was -987 million yuan, the net cash generated by investing activities was -1.563 billion yuan, and the net cash generated by financing activities was 2.936 billion yuan. . What is more noteworthy is that in 2021, the cash flow generated by the company’s operating activities will turn from positive to negative, indicating that it has lost its own hematopoietic ability.
The pre-loss announcement on July 14, 2022 shows that the net profit attributable to the parent company of Xiaokang in the first half of the year is expected to be -1.6 billion yuan to -1.76 billion yuan.
Fortunately, the fixed increase of 7.13 billion yuan in the operation of Xiaokang shares for half a year has been implemented.
As long as the operating income continues to increase and the sales of new cars continue to rise, there is a story of Huawei Auto, even if it continues to suffer huge losses, it can still rely on financing to survive.
The story of the “big gamble” of Xiaokang shares can continue to be told.
02. “Required” Huawei, “Optional” Well-off
Not all car companies are willing to embrace Huawei wholeheartedly.
Chen Hong, chairman of SAIC, once said that car companies apply Huawei’s autonomous driving technology to provide overall solutions. In this way, it has become the soul and SAIC has become the body. For such a result, SAIC could not accept it.
But Xiaokang shares do not care about this, everything is dominated by Huawei, which has become the norm. Zhang Xinghai, the actual controller of Xiaokang Co. , Ltd., said: “The soul of SAIC is actually a circle of friends. This is a mutual choice. We want to use the fastest time window to complete what we want to do and what users want. We only need this judgment evidence. .”
In Zhang Xinghai’s view, Xiaokang shares and Huawei went both ways, creating a world of inquiry. But from the outside world, Xiaokang shares , which are deeply labeled as Huawei, are also worrying.
At present, the new energy vehicle market is crowded. One is the transformation of traditional car companies such as Toyota, Volkswagen, Great Wall, Geely, and BYD, the second is the new car-making forces such as Weilai, Ideal, and Xiaopeng, and the third is Baidu and Huawei. Tech giants with driving technology.
Xiaokang shares put the future on Huawei, which is stronger than itself, but it is not a sure win. First, it is unknown whether the Huawei camp can win. Second, there are not only Xiaokang shares in the Huawei camp.
As the second model of the AITO brand, the M7’s selling point is “more space, a more comfortable cockpit and a more intelligent experience”.
Unsurprisingly, these “soul” selling points are deeply involved by Huawei.
Wenjie M7 is equipped with HUAWEI DriveONE pure electric drive range extension platform, 6 large spaces, AITO zero gravity seats, newly upgraded HarmonyOS smart cockpit and lower prices than other medium and large new energy vehicles, which constitute the advantage of differentiated competition .
The newly upgraded HarmonyOS smart cockpit, the newly added super desktop function allows the car to use a large number of applications on the mobile phone, the voice assistant Xiaoyi can accurately identify multi-sound areas, and the navigation route on the Huawei mobile phone can be easily transferred to the car. In addition, 360° panoramic smart parking, parking floor memory, and mobile phone watch control are equivalent to moving Huawei’s ecology to the car.
On social platforms , most car owners who share their car experience will say “because of Huawei” when they talk about why they choose to ask the world.
In the process of exploring the store in the city, the sales staff of Huawei AITO authorized store will also emphasize and demonstrate the HarmonyOS smart cockpit. When asked what the Jin Consailis at the back of the car represented, the salesperson only hurriedly passed it over with “a car company that cooperates with Huawei to build a car”.
In the eyes of the outside world, every time Xiaokang Co. , Ltd. builds a Wenjie, it is properly labeled as a “Huawei car”, so that it thinks that Xiaokang Co. , Ltd. is just a “Huawei foundry”.
At the investor exchange meeting on May 24, Xiaokang Co. , Ltd. strongly denied the idea of ”foundry”, and made a clear explanation of the rights and interests of both parties: the intellectual property rights of the vehicle belong to Xiaokang Co. , Ltd., and the sales revenue also belongs to Xiaokang Co. , Ltd. . “Huawei stores in the core areas of mainstream business districts, through cooperation, our products are sold through their channels, which will greatly reduce our investment in sales expenses in the early stage. For each car sold, they will withdraw the corresponding sales and service fees. “
Reflected in the statement, the sales expenses of Xiaokang shares increased rapidly. In the first quarter of 2022, the company’s sales expenses reached 518 million yuan, a year-on-year increase of more than 200%.
The life of Xiaokang shares is Huawei Auto, but it is not the only one of Huawei.
In the second half of 2022, in addition to Wenjie, there will be at least three models in cooperation with Huawei. In terms of product layout, it will cover high-end sedan Jihu Alpha S, compact SUV Beiqi Rubik’s Cube, large SUV Avita 11 and other models. From the perspective of power category, it will cover fuel vehicles and pure electric models. In terms of price distribution, it will cover 100,000 to 400,000 low-, mid- and high-end models.
Users are about to have more choices, and the biggest advantage of differentiated competition in the world will be challenged.
In order to expand differentiation and continue to maintain a comparative advantage, Xiaokang Co. , Ltd. needs to show its unique “charm”.
When asked about its core competitiveness, Xiaokang Co. , Ltd. told the market that multiple smart factories with Industry 4.0 standards are one of its advantages. In 2022, the Celis Phoenix Smart Factory will be put into operation, with a planned production capacity of 150,000 units per vehicle. By then, the company’s new energy high-end smart car production capacity will reach 250,000 units per year.
In addition, the annual R&D investment of Xiaokang shares exceeds 10% of sales revenue, and the R&D investment in 2021 is 1.949 billion yuan. In the past 6 years, it has invested nearly 10 billion yuan, and has nearly 3,000 core technology patents and more than 150 invention patents. It has cultivated and formed an industry-leading pure electric drive intelligent range extension platform (DE-i) with independent intellectual property rights, and launched industry-leading smart cars and three-electric products.
However, continuous large-scale R&D investment is a must for participating in the new energy field. BAIC Blue Valley, another listed car company that cooperates with Huawei, has only half of the operating income of Xiaokang shares , but its R&D investment is comparable. In 2021, BAIC Blue Valley’s R&D investment will reach 1.836 billion yuan, accounting for more than 20% of its operating income.
In the current new energy vehicle market, which is already a red sea, with the increase of car companies that cooperate with Huawei, Xiaokang shares must prove itself with product strength.
03. The extended range mode that was “bombed”
The current mainstream new energy vehicles are divided into pure electric, plug-in hybrid, and extended-range hybrid. The extended-range model adopted by the industry has been questioned.
The extended program hybrid is equivalent to adding a “charging treasure” to the car. The car engine cannot directly drive the wheels, but generates electricity and drives the motor through the extended-range engine, while delivering the remaining power to the battery for storage.
After all, the range extension mode is a transitional choice between fuel vehicles and pure electric vehicles.
Since Huawei and Xiaokang signed a cooperation agreement in early 2019, within three years, the two have launched three models (Sales SF5, Wenjie M5, Wenjie M7), and the engines used in the three vehicles are all extended-range engines. This engine is mainly evolved from the engine used in the first Sailis SF5 launched by Sailis.
The main reason is that Huawei has invested most of its time and money in the research and development of smart cockpits and ADAS (generally referred to as advanced driver assistance systems). Celis’ existing platform technology is developed.
Wenjie M5 won the first battle, which gave Yu Chengdong an undisguised confidence in the extended range mode. In addition to promoting the M7, Yu Chengdong also shares his insights on the extended range mode on Weibo from time to time.
On July 6, Yu Chengdong said that “it will take time to improve and popularize charging piles, and the range extension mode is the most suitable new energy mode at present.”
As soon as the remarks came out, they were bombarded by Li Ruifeng, CEO of Great Wall Motor’s Wei brand. “It needs to be hard on its own to strike iron. It is an industry consensus that the extended-range hybrid technology is backward,” and further said, “It’s good to make a fortune by making a muffled sound of the extended-range, so why should you say it out loud.”
Regarding the range extension mode, Li Ruifeng’s bombardment is not unreasonable.
The extended-range mode was abandoned by many mainstream car companies many years ago. Feng Sihan, CEO of Volkswagen China, once said that extended-range electric vehicles are a bad solution; BMW made it clear in 2019 that it would not use extended-range electric vehicles as a plan for electrification transformation; in March of the same year, GM also announced the discontinuation of its extended-range electric vehicles. And there will be no successor models…
Wenjie M5 has a cruising range of 1,100 kilometers when fully charged and full of fuel, but some media pointed out that its pure electric cruising range is only 150 kilometers-200 kilometers. On the one hand, actively charge the battery) The fuel consumption is about 6-7L/100km, and the high-speed fuel consumption will reach 8-9L/100km. The same level of Wei brand Mocha DHT-PHEV feed fuel consumption is 5-6L/100 kilometers, and the high-speed fuel consumption is almost the same level.
The cruising range in pure electric mode is less, and the fuel consumption in feeding mode is high. Although the extended-range mode solves the anxiety of battery life to a certain extent, it will always be accompanied by the abandonment and continuous bombardment of many first-tier car companies.
The range extension mode is a faster and more realistic choice, which is in line with what Zhang Xinghai, the actual controller of Xiaokang , said, “the fastest time window to complete what we want to do and what users want.”
Zhang Xinghai once said that he went from 0 to 1 three times in the process of starting his own business. The first time was when he started making home appliance parts in 1986. .
Now it seems that the new energy vehicle “Salis” brand of Xiaokang Co. , Ltd. has been operating bleakly for several years. Later, it is a no-brainer choice, and it is also the most realistic choice.
On July 11, Xiaokang Co. , Ltd. announced that it plans to change its name to “Sailis”. The purpose is to facilitate investors to accurately understand the current company positioning, make the company name match its business and strategic planning, unify the company’s brand image and enhance brand value.
Zhang Xinghai, who has tasted the sweetness, firmly tied himself to Huawei’s chariot, and wanted to play big on the new energy vehicle.
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