Summary of Key Points
In the first half of 2026, Great Wall Motor saw a double increase in sales (584,000 units, up 2.48% year-on-year) and revenue, but its net profit attributable to the parent company plummeted by nearly 60% (RMB 2.35-2.6 billion, down 58.97%-62.92% year-on-year). Management attributed this to the postponement of overseas subsidies (RMB 2.274 billion in subsidies not recorded last year) and exchange rate losses (RMB 266 million). However, the deeper issues are more concerning: for the first time, overseas sales exceeded domestic sales, but the quality of profits is in doubt. The cost-cutting expectations of the Guiyuan platform have been eroded by the expenses associated with direct-operated expansion, and there is severe internal competition among the brands (same-model vehicles competing for customers). The valuation logic for Great Wall is being reset from that of a "traditional automaker" to that of a "global platform company," and the second half of the year will be a critical period for verification.
Detailed Analysis
Profit Loss: An Accident on the Surface, but Actually Caused by Expenses and Internal Competition
The so-called "black swan events" (postponed subsidies + exchange rate losses) did affect profits by RMB 4 billion. However, excluding these unexpected factors, operating profits only decreased by 4%-9%. The real pressures come from soaring sales expenses and internal brand competition:
- Direct-operated expansion is costly: Sales expenses in 2025 were RMB 11.27 billion (up 43.9%), and the expense ratio rose to 5.8% in Q1 of 2026, meaning that for every 100 vehicles sold, RMB 5.8 are spent on channels, which is higher than the industry average.
- Internal competition reduces profits: The same-model vehicles compete with each other for customers (for example, the Haval Menglong PLUS competing with the Tank 300), leading to a loss of the premium image of the high-end brands and dilution of profits from volume-selling models.
Investors' attitudes are straightforward: they have downgraded their ratings to "sell" Great Wall Motor. Institutions such as Jefferies and Société Generale have cut their profit forecasts, mainly due to uncertainties around subsidy receipts and rising raw material prices squeezing gross margins.
Internal Brand Competition: Self-impeding Growth and Strategic Uncertainty
Great Wall's "five brands (Haval, Tank, WEY, Ola, Great Wall Cannon)" seem to cover all market segments, but in reality, they are hindering each other:
- The Tank brand's decline is most evident: Sales in June dropped by 27%, with the Tank 300 falling from a peak of 10,000 units to 3,000 units. This is because the Haval Menglong PLUS is cheaper (by tens of thousands of yuan) and also uses the same "Tank turning" technology, leading consumers to choose the cheaper option.
- Unbalanced brand development: Haval's sales volume in June decreased by 3.38%, Tank's sales decreased by 10.6% year-on-year, with only WEY (up 29%) and Ola (up 89%) showing growth, although their bases are small. The penetration of new energy vehicles is only 29.4%, far below the industry average.
- Root causes of strategic contradictions:
- Diverse technologies: While BYD focuses on DM-i and all-electric vehicles, Great Wall pursues a mix of hybrid, electric, and hydrogen energy approaches, spreading resources thinly. The Hi4 hybrid model has not been successful due to high costs, and the all-electric models rely on the niche Ola brand.
- Prioritizing profits over market share: The Ola Black Cat/White Cat models were discontinued due to losses, missing out on the boom in microelectric vehicles, making it difficult to catch up now.
- Brand overlap: Haval and Tank compete for rugged off-road customers, while WEY's high-end models conflict with Tank's high-end offerings. Ola's shift to more mainstream models also competes with Haval in the passenger car market.
Overseas Sales Surpass Domestic Sales: Bright Figures, but Profit Quality Uncertain
Overseas sales in the first half of the year were 291,400 units (up 50%), accounting for nearly 50% of total sales. For the first time, overseas sales exceeded domestic sales. This is Great Wall's most impressive growth factor, but the key question is whether profits can keep up:
- Capacity bottlenecks: The factory in Brazil has an annual capacity of only 50,000 units and is still ramping up production. Despite high sales, costs cannot be reduced.
- Model risks: The European market has shifted from self-built channels to agency models, which are less capital-intensive, but whether this approach can control costs and ensure profits remains uncertain.
- Exchange rate risks: Exchange rate losses in the first half of the year resulted in a loss of RMB 1.759 billion, indicating that global operations have not yet mastered exchange rate hedging. Future exchange rate fluctuations could further affect profits.
Guojin Securities predicts continued growth in overseas sales, but investors are more concerned with how much profit can be made from each overseas sale rather than the total number of units sold.
The Guiyuan Platform: A Hope for Cost Reduction?
Great Wall launched the Guiyuan platform at the beginning of the year as a potential solution. It is compatible with five types of powertrains (hybrid, electric, etc.) and has an 80% part interchangeability rate, theoretically reducing new vehicle costs by 50% and saving 70% in research and development expenses. However, the actual effectiveness will depend on the success of new models:
- Next half of the year: Models like the WEY V9X and Tank 700 are planned for release. If these vehicles sell well, it will prove that the platform can indeed reduce costs and increase efficiency. Otherwise, cost reduction will remain unattainable.
- Continuing expenses: The savings from the Guiyuan platform may be offset by the expenses associated with direct-operated expansion, making it unclear when a profit turnaround will occur.
Valuation Dilemma: Discount for a Traditional Automaker or Premium for a Global Platform?
Great Wall's current PE ratio ranges from 9 to 12 times, much lower than BYD's (over 30 times). The question for investors is whether Great Wall is still a "traditional automaker" or a "global platform company":
- Positive signs: The ONE GWM strategy is integrating Haval, Ola, and Great Wall Cannon under one brand, reducing internal competition. Overseas growth is stable, and the Guiyuan platform has potential for cost reduction.
- Uncertainties: Can internal brand competition be resolved? Can the new energy penetration catch up with the industry average? Will new models based on the Guiyuan platform sell well?
The second half of the year will be crucial: if new vehicles perform well and overseas profits improve, the valuation may move closer to that of a global platform company. If old issues persist, Great Wall will likely continue to be valued as a traditional automaker.
Conclusion
Great Wall Motor is a paradoxical company with rapid overseas growth but unstable profits. The Guiyuan platform holds promise, but direct-operated expansion is costly, and there is severe internal competition among brands. The performance of new vehicle sales, overseas profits, and brand integration in the second half of the year will determine whether it can "break through and revive" or continue to struggle. For consumers, Great Wall vehicles may become more affordable (due to cost reductions from the Guiyuan platform), but for investors, they need to wait until these uncertainties are resolved before making a move.