Wuling Motors (00305.HK) Announces 2022 Interim Results
In the first half of 2022, Wuling Motors achieved an operating income of 6.275 billion yuan, a year-on-year decrease of 12.4%; a net loss of 139 million yuan, a substantial increase over the same period 2021. During the period, affected by the international situation and the frequent outbreak of the epidemic, the Chinese auto market was still in an adjusted recovery period. The revenue of each segment of the company declined to various degrees, because of the continued high price of raw materials and shortage of auto chips.
In terms of revenue structure, Wuling Motors’ revenue comes from four departments: the automotive power system, auto parts & other industrial services, commercial vehicles (including new energy vehicles), and others. The auto parts department is still the company’s largest source of income. In the first half of the year, apart from SAIC-GM-Wuling, the auto parts department promoted products to other customers, such as Great Wall Motor, Foton Motor, Chery Automobile, Dongfeng Xiaokang, etc. During the period, sales increased slightly compared with the same period of 2021, and sales to these customers accounted for approximately 32.6% of the total revenue of the department. Wuling Motors continuously improved the single structure of customers and realized business diversification.
During the period, the automotive power system department sold approximately 109,000 engines in the first half of 2022, a slight increase of approximately 3.9% over the same period of 2021; sales to the core customer SAIC-GM-Wuling increased by 25% over the same period in 2021. However, due to the tough business environment, the selling price of the engine was low and the sales revenue decreased.
In terms of commercial vehicle business, in addition to new energy vehicles, Wuling Motors continued to deepen the market segment of modified vehicles and non-road vehicles. In 2022 H1, the sales volume of conventional modified vehicles was 28,519 units, which made Wulin Motors continue to be one of the leading suppliers in the micro-cargo modified market segment; the sales volume of non-road vehicle business reached 1,974 units. It is worth mentioning that the pure electric logistics vehicle independently developed by Wuling Motors has been rapidly increasing since its launch in 2020. In the first year, the sales volume was about 4,700 units. In 2021, the annual the sales volume has exceeded 10,000 units. In the first half of 2022, domestic sales of new energy vehicles reached 7,896 units, a year-on-year increase of 57%. The pure electric logistics vehicle has been recognized by the market, which also verifies that Wuling Motors can manufacture complete vehicles. In addition, Wuling Motors has the manufacturing experience of auto parts, the ability to control the supply chain, and the ability of lean production. In the future, Wuling Motors may make overall arrangement on the entire industry chain of new energy.
According to the announcement, the Hubei Jingmen production base built by Wuling Motors for in-depth cooperation with Great Wall Motors will be put into production in the second half of 2022. Meanwhile, Wuling Motors’ auto parts division department has successfully manufactured new products such as front & rear axles of Chery Automobile and SAIC Maxus, and actively approached new business opportunities with other target customers, providing new growth drivers for the company.
What is more worth mentioning is that Wuling Motors strategically participates in the restructuring of Wuling New Energy to accelerate the expansion of the new energy vehicle industry and meets the powerful opportunities in the new energy vehicle market segment. Wuling Industry will sell the original patented technology of new energy vehicles to Wuling New Energy, and the relevant R&D expenses will be transferred to Wuling New Energy after the completion of the reorganization, which can effectively reduce subsequent R&D expenses and increase profits. Meanwhile, Wuling Industry, as a strategic supplier of Wuling New Energy, will continuously bring stable growth points for the company’s performance as Wuling New Energy develops.
According to public information, since August, Liuzhou and Wuling Industry, Shandong Branch have linked multiple production lines to keep producing, seize the time to ensure production, and support several new energy vehicle models from many car companies. The monthly output continues to rise and is expected to exceed 70,000 units. It is expected that the company’s profitability will grow in the second half of the year.
In addition, Wuling Motors stated that the increase in R&D expenses of new business projects related to new energy vehicles and components also adversely affected the company’s earnings performance. In 2022 H1, the company’s R&D investment is 191 million yuan, a significant increase of 61.9% year on year. The company will continue to increase investment in research and development, enrich product lines, and enhance brand influence to increase sales of new energy power systems, auto parts, and commercial vehicles.
Overall, although the operating performance of Wuling Auto’s semi-annual report has declined, the logic is very clear. Wuling Motors invested a large number of funds in the product research and development of new energy components and new energy vehicles, and actively deployed the new energy vehicle field to seize the opportunities for rapid development of the industry. Wuling Motors is moving forward with energy. After Wuling Motors having gone through a painful period of transformation, the company’s future can be expected.
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