Major Restructuring! GAC Group Relocates Its Headquarters

On October 25, Guangzhou Automobile Group Co., Ltd. (hereinafter referred to as "GAC Group") issued an announcement stating that to transform the management model of its self-owned brands from strategic control to operational control and improve management efficiency, the Group will relocate to a new office address starting from November 2. The former address was No.23 Xingguo Road, Zhujiang New Town, Tianhe District, Guangzhou, Guangdong Province, and the new address is No.668 East Jinshan Avenue, Panyu District, Guangzhou, Guangdong Province. GAC Group indicated that this move is mainly to respond to the profound changes in the market pattern of the automotive industry, boost the growth and strength of self-owned brands, accelerate the Group’s transformation and restructuring, and achieve sustained, healthy and high-quality development. Feng Xingya, General Manager of GAC Group, noted that the competitive landscape of Chinese automotive brands has undergone a dramatic shift, with the market share of self-owned brands exceeding 60%. Both domestic and joint venture enterprises are facing challenges in the transition from traditional fuel vehicles to new energy vehicles (NEVs), and joint venture brands are also accelerating their intelligent and electrified transformation. In response, GAC Group has launched reforms to increase investment in the development of self-owned brands. Relocating from the urban core to the suburban area is not for comfort, but for fighting in the fierce market competition—and this inevitably leads to a discussion of GAC Group’s financial performance. According to its interim financial report, GAC Group achieved an operating revenue of 45.808 billion RMB in the first half of the year, a year-on-year decrease of 25.62%; the net profit attributable to shareholders of the listed company was 1.516 billion RMB, a year-on-year drop of 48.88%; the decline in non-recurring profit and loss net profit was even more pronounced, with a non-recurring net loss of 338 million RMB, a year-on-year plummet of 112.51%. As China’s NEV market undergoes a rapid transformation, the NEV-related predicaments plaguing traditional automakers have become increasingly prominent, putting GAC Group under greater pressure than ever before. The Group stated that the performance decline is mainly due to the impact of the price war in the domestic automotive industry and increased investment in commercial and government businesses. However, the price war is an industry-wide issue, and other major automakers have not seen such a sharp decline. Ultimately, the root cause lies in the enterprise’s development strategy. GAC Honda and GAC Toyota have long been the undisputed sales pillars of the Group, but they are now struggling to sustain performance. Data shows that in the first three quarters of 2024, GAC Group’s cumulative sales volume reached 1.3351 million vehicles, a year-on-year decrease of 25.59%. Among them, GAC Honda’s sales fell 29.06% year-on-year to 309,200 vehicles, and GAC Toyota’s sales dropped 24.49% year-on-year to 517,900 vehicles. The two joint ventures account for 62% of the Group’s total sales, and their sharp sales decline has directly impacted the Group’s revenue and profit performance. Despite the two major joint ventures continuously offering terminal discounts to boost sales, they have failed to achieve significant results. Since the first half of the year, the decline rate of the two joint ventures has not improved but has accelerated significantly. China’s NEV industry chain has reshaped the industrial pattern. The once prominent advantages of Japanese-brand vehicles in fuel economy and hybrid technology are no longer obvious; they have even been surpassed by brands such as BYD and new car manufacturers, and their brand influence is not what it used to be. Although Honda and Toyota are global leaders in hybrid technology, they have gradually lost their advantages in China’s NEV development and have not yet launched competitive electrified products to this day. This slow pace has left them far behind a host of domestic brands. In addition to joint venture brands, GAC’s self-owned brands are also facing tough times, especially GAC AION. As the core self-owned brand of GAC Group, GAC AION’s poor performance has added enormous pressure to the Group. Data shows that in the first three quarters, GAC AION’s cumulative sales volume was 226,700 vehicles, a year-on-year decrease of 35.40%, making it the brand with the steepest decline in the Group. As of the end of September this year, based on the planned annual sales target of 700,000 vehicles, GAC AION’s completion rate was only 32%. The main reasons for GAC AION’s sales decline are the saturation of the online car-hailing market, intensified industry competition, and the continuous price cuts of self-owned brands such as BYD, Geely and Chery. The AION S has no obvious market advantages, while the higher-priced AION V and AION LX models are even more difficult to sell in large volumes. In addition, GAC AION once launched the Hyper brand, including three models: Hyper SSR, Hyper HT and Hyper GT, but they also failed to make a splash in the market. Currently, GAC Group is under enormous pressure. In the past, joint venture brands dominated by Toyota and Honda were the backbone of the Group, but with the intensified competition in the automotive market, its two major joint ventures are facing a huge crisis. They have not yet launched competitive electrified products, and their fuel vehicle market share is declining continuously, which directly affects the Group’s overall performance. As for self-owned brands, GAC AION, which was highly anticipated, mainly relies on the online car-hailing market for sales, and this market is gradually becoming saturated, leading to a continuous decline in GAC AION’s sales. GAC Trumpchi has performed fairly well, but this cannot solve the Group’s current problems. In the increasingly fierce market competition, GAC Group has few opportunities for trial and error left. Its previous joint ventures such as GAC FCA and GAC Mitsubishi have successively withdrawn from the market. With the shrinkage of joint venture brands and sluggish NEV transformation, GAC Group is indeed lacking a sufficiently strong growth driver. How can it find a foothold and get back on track for development? Returning to the headquarters relocation, there will be short-term impacts: the former office was in the city center, while the new location in Panyu District brings inconvenient transportation, longer commuting times and incomplete supporting facilities. In the long run, the headquarters relocation is indeed conducive to the Group’s development: it will enable better management of Trumpchi and AION, and simultaneously strengthen the management of the two Toyota and Honda joint ventures. IACA Club focuses on the development of China’s automotive supply chain in terms of strategy, process, quality, lean management and Industry 4.0. It integrates automotive supply chain management resources and provides the latest and fastest management information for the sustainable development of China’s automotive supply chain enterprises.