The Dongfeng Anxiety Behind the ＂Super Subsidy＂

　　A few days ago, it was reported that Dongfeng Motor Group, including Dongfeng Honda, Dongfeng Fengshen, Dongfeng Nissan, Landmap, Dongfeng Peugeot, Dongfeng Citroen and other 7 car brands, 56 models "limited-time promotion", the highest drop 90,000.

　　The joint venture B-class car can be won 120,000, so favorable, triggered a local rush to buy, and even attracted many foreign consumers to buy cars, sales call "busy". Affected by this, on March 7, A shares of Dongfeng Motor (600006.SH) opened a straight line after the opening of the limit; on March 8, its share price opened red, but then fell into a slump, as of press time, the share price fell slightly 0.29% to 6.78 yuan/share.

　　However, although the scene is prosperous, the automaker may be "making money at a loss". A staff member of Wuhan 4S store revealed to Times Finance: "There is basically no profit in the model store participating in the big promotion."

　　Who will come up with this expensive subsidy? In the face of declining sales and sluggish transformation, can this "super subsidy" ease Dongfeng Motor Group’s transformation anxiety?

　　Dongfeng Motor’s daily limit? It’s really an oolong

　　On March 7, A shares of Dongfeng Motor rose by the limit, with a market value of 13.50 billion yuan per share at 6.8 yuan. However, class A shares of Dongfeng Motor refers to Dongfeng Motor Group.

　　Dongfeng Motor’s board secretary told the media on the 7th that the car purchase subsidy in Hubei Province does not involve the company’s products. "The increase in the limit may be because there is a car purchase subsidy in Hubei recently, which will stimulate consumers to buy cars, but the object of this subsidy does not involve our company’s products. We are making commercial vehicles, and the subsidy is for passenger cars."

　　Times Finance called the customer hotline of Dongfeng Motor’s joint stock company and got a similar answer. "We are Dongfeng Motor Co., Ltd., and we mainly do commercial vehicles and light trucks. Regarding the subsidies for passenger cars in Wuhan and other places, it is recommended to consult the dealer for details."

　　According to public information, the full name of Dongfeng Motor listed on Class A shares is Dongfeng Motor Joint Stock Company, which is a subsidiary of Dongfeng Motor Group Joint Stock Company. The company’s January production and sales announcement shows that the models produced and sold are all commercial vehicles, namely light trucks, passenger cars and bus incomplete vehicles. In January 2023, the company produced a total of 9,511 vehicles, a year-on-year decrease of 50.58%, and sold 5,468 vehicles, a year-on-year decrease of 68.17%.

　　Dongfeng Motor Group is listed on the Hong Kong stock market, the stock name is Dongfeng Group (00489.HK), through Dongfeng Motor Co., Ltd., Dongfeng Honda Automobile Co., Ltd., Shenlong Automobile Co., Ltd. and other subsidiaries for automobile sales and after-sales services, both commercial vehicles and passenger cars. The announcement shows that in January 2023, Dongfeng Group produced 103,466 passenger cars and sold 92,826 passenger cars.

　　On the same day that A-share Dongfeng Motor rose by the limit, the performance of Hong Kong stock Dongfeng Group shares was not good, falling slightly by 0.47% to close at HK $4.28/share, with a total market value of 36.76 billion HK dollars.

　　Shenlong Automobile has a difficult transformation

　　Just a few days before this "epic promotion", on March 3, DONGFENG MOTOR CORPORATION announced that Zhu Yanfeng, the chairperson and party secretary of the group, will officially step down. Zhu Yanfeng has been in charge of Dongfeng Motor Group for about eight years.

　　Mr. Zhu, 62, was born in March 1961 and became FAW’s chairperson at the age of 38, according to public records. He became the youngest head of the four state-owned automakers, known in the industry as the "Young Marshal".

　　Zhu Yanfeng began to take the helm of Dongfeng Automobile Group in 2015. In 2016, Dongfeng Automobile Group’s sales reached a record high of 4.2767 million vehicles, and then declined all the way. By 2022, there were only 2.4607 million vehicles left, a decrease of 42.46% compared with the peak. Since 2018, Dongfeng has suffered many setbacks. The sales of Shenlong Automobile have declined, the sales of its own brand cars have not performed well, and the withdrawal of Dongfeng Renault from the market has followed.

　　In 2021, Dongfeng Motor Group released the "Dongfeng Rise" plan, which was seen as a comprehensive transformation of Dongfeng towards electrification and intelligence. Zhu Yanfeng set a goal: "By 2025, Dongfeng Motor’s sales of commercial vehicles, autonomous passenger vehicles and new energy vehicles will reach 1 million respectively, and Dongfeng’s independent brand scale will enter the top three in the industry."

　　In 2018, Dongfeng Motor established the Lantu brand to compete with a group of new car-making forces. In 2021, Lantu operated independently. In November 2022, Lantu completed a round of financing of nearly 5 billion yuan, with a valuation of nearly 30 billion yuan. However, the sales volume is hardly optimistic. In 2022, the Lantu brand sold 19,409 vehicles, with an average of less than 2,000 vehicles per month, which was far behind the ideals, NIO, and Dengshi of the same level.

　　Zhu Yanfeng once said that in 2022, Dongfeng will accelerate the construction of luxury, high-end, mainstream, and entry-level brand development patterns. After the Lantu brand, the luxury electric off-road brand Warrior came into being. But Lantu has not improved, and the market performance of Warrior has yet to be checked.

　　"Young Marshal" is about to retreat, but Dongfeng’s predicament still exists. The joint ventures that helped Dongfeng sell well have all shown a downward trend, and the performance of Shenlong Automobile in recent years has become the epitome of Dongfeng Group’s transformation difficulties.

　　Recently, a source in Wuhan told Times Finance that "the local factory of Dongfeng Citroen has stopped production, and Dongfeng Honda has remained normal." Times Finance asked Shenlong Automobile for confirmation and has not received a reply as of press time.

　　Shenlong Automobile had four production bases in China, of which the first, second and third factories are located in Wuhan, and the four factories established in 2015 are located in Chengdu. The planned annual production capacity of the four factories at that time was 300,000, 150,000, 300,000 and 360,000, with a total planned annual production capacity of 1.11 million vehicles.

　　These factories were prepared for the sales of Shenlong cars that once exceeded 700,000, but in the second year of the construction of the four factories, the sales of Shenlong cars fell below 600,000 cars, and then went down all the way. In 2020, the sales of Shenlong cars fell to the bottom and only 50,000 cars were left.

　　In order to reduce costs and increase efficiency, Shenlong Automobile has carried out a series of production capacity "slimming". In July 2019, Shenlong launched the F99 project – by optimizing the production capacity layout, the production capacity of the first and second plants in Wuhan will be concentrated in the three plants. According to the annual reports of Shenlong Automobile in 2020 and 2021, the production capacity of Shenlong Automobile is 360,000.

　　After a series of adjustments, the sales volume of Shenlong Automobile increased to 127,000 in 2022, but the capacity utilization rate of the factory is only one-third, which needs to be continued to improve.

　　Another media report said that Shenlong Automobile transferred the original second factory to Dongfeng Honda, which converted the factory into a new factory specializing in the production of pure electric vehicles. Wuhan Economic Development Zone issued a document on March 7, saying, "Dongfeng Honda New Energy Factory Stamping, Welding, Painting, Final Assembly and other major workshops are entering the field one after another for equipment and installation. After completion early next year, Dongfeng Honda will build a million vehicle production and sales system."

　　When Dongfeng Honda, a Japanese joint venture, accelerated its electrification process, the transformation of Shenlong Automobile seemed a little slow. As early as the beginning of May 2019, Shenlong Automobile has obtained access to new energy vehicle manufacturers and PHEV model production access, but currently Shenlong Automobile does not have a competitive pure electric product. Shenlong Automobile has also kept the sales of its Dongfeng Fukang ES500, Dongfeng Fukang ES600, e Elysee, Dongfeng Peugeot e2008 and other new energy models secret.

　　At the Shenlong Automobile Cultural Festival held in February 2023, Chen Bin, general manager of Shenlong Automobile, introduced the future product transformation plan: "In the first half of next year, Shenlong Automobile’s first smart electric SUV for C-end customers will be launched; in the next five years, Shenlong Automobile will intensively launch 9 new models and a variety of modified models, 8 of which are new energy models."

　　Shenlong Automobile has finally begun to "swing the tail of Shenlong", but with 8 new energy models in 5 years, such a transformation is difficult to say quickly. As a comparison, the data of the Passenger Association shows that the penetration rate of domestic new energy vehicles has reached 25.7% in 2022, an increase of 8.7% year-on-year. Can the belated Shenlong Automobile still compete for a place?

　　Boosting sales with subsidies?

　　A change in senior management personnel at a time when the most urgent need to stabilize military morale is not good news for Dongfeng Motor Group, which is still in the downward channel. In the context of promoting consumption in various places, promoting sales through subsidies is a win-win choice for Wuhan and Dongfeng Motor.

　　On February 5, the Wuhan Municipal People’s Government issued the "Policies and Measures to Stimulate the Vitality of Market Entities and Promote High-quality Economic Development", proposing to seize the opportunity to postpone the special project to promote automobile consumption in the province, and support the joint automobile production enterprises and sales enterprises in Wuhan Economic Development Zone and Jiangxia District to carry out car purchase subsidy activities. The activity time will continue until March 31, 2023.

　　"This promotion is an activity led by the Wuhan Economic Development Zone, because Dongfeng Motor Group is headquartered in the Economic Development Zone, so it is done in cooperation with car companies."

　　On March 6, the Wuhan Economic Development Zone held a symposium on stabilizing large-scale consumption. Data show that a total of 56 models from seven brands participated in the subsidy this time. Since March 1, Dongfeng Honda’s 25 special stores in Hubei Province have reached a total of 1,469 orders in five days, with an average of 294 vehicles per day, an increase of 359% over February. The average daily order volume of Shenlong Automobile increased by 984%, and the sales volume increased significantly.

　　At the meeting, Liu Ziqing, secretary of the Wuhan Economic Development Zone Working Committee, said: "Relevant departments and car companies should pressure themselves, continue to work hard, set targets and tasks for the whole year, pay close attention to the scheduling of automobile production and sales, and strive to maintain and continuously strengthen the recovery trend. We must carefully organize and carry out a series of online and offline automobile promotions such as automobile exhibitions and sales, automobile entry into enterprises, government agencies, and automobiles going to the countryside. We must do a good job in creating an atmosphere, tell a good brand story, and become a hot automobile consumer market."

　　A Wuhan 4S store sales told Times Finance that this promotion is different from car companies making profits. It is a government and enterprise subsidy in Hubei Province. Consumers must purchase cars internally in Hubei Province and have a Hubei license plate to enjoy. In other words, this discount may be regarded as a "bailout" by local governments for local enterprises.

　　Previously, similar policies have been introduced in many places to promote automobile consumption. According to public reports, in 2022, Shanghai Jiading District launched a subsidy policy. Users who buy products from local car companies such as SAIC, Volvo, and NIO can enjoy subsidies of 10,000 yuan or 20,000 yuan according to the price of the products. Jilin Province has also introduced a similar policy to promote the development of local car companies. The subsidy scope covers all self-owned and joint venture brand passenger cars and light trucks under China FAW. The total subsidy amount reaches 150 million yuan, and the bicycle subsidy amount can reach 37,000 yuan.

　　Can’t you enjoy the promotion if you don’t go to Hubei? Times Finance learned from many 4S stores in Guangzhou that many mainstream brands in the market have recently launched preferential policies. FAW-Volkswagen launched any brand replacement tour and tour, and can enjoy 16,000 yuan replacement support, and regular customers can enjoy an additional 4,000-8,000 yuan; GAC Toyota launched a landing price of 308,800 yuan for Highlander models, and then enjoyed 5,000 yuan during the pre-sale period. Car purchase gift; GAC Honda launched a replacement subsidy that can enjoy 4,000-6,000 yuan.

　　In the face of fierce market competition, many models without official price cuts also have discounts. Extreme Fox α coefficient T, α coefficient S all end point discounts 40,000 – 50,000 yuan, consumers can also choose less 10,000 cash discounts in exchange for a 5-year car purchase package.

　　There are also some car companies that choose to reduce prices by changing models, such as zero-run cars. On March 1, zero-run cars were all new 2023 models, and all three main models were reduced in price. C01 decreased by 34,000 – 50,200 yuan, C11 decreased by 16,000 – 30,000 yuan, T03 (except 200km new version) decreased by 9,600 – 12,600 yuan.

　　This is also the largest price reduction since the establishment of Zero Run Car. In the words of Zero Run Car President Zhu Jiangming: "With the configuration experience of the past 300,000 – 400,000, redefine the value standard of 150,000 – 200,000 meta-level cars."

　　Regarding the recent trend of price cuts in the car market, many netizens joked, "There is no car that cannot be sold, only the price that cannot be sold." In front of orders, how many car companies will choose to exchange price for quantity, and the smoke of the price war in the car market in 2023 may be even more diffuse.