Summary of Key Points
The production and sales data for GAC Group in July reveal the following: The sales of its joint-venture brands (especially GAC Honda) have continued to decline, while there is a clear divergence among its domestic brands (with Aion experiencing strong growth and Trumpchi showing a slight decrease). The new brand “Qijing,” developed in collaboration with Huawei, made its debut in the financial reports for the first time, and its sales for the initial month need to be verified. Although GAC Honda’s sales have been halved, the company has renewed its contract with Honda; however, its transformation plans have raised doubts within the industry. Aion, despite rapid growth, faces potential issues with battery reliability. Overall, the proportion of sales from GAC’s joint-venture and domestic brands is now nearly equal, indicating a significant rise in the strength of the domestic brands.
Detailed Analysis
1. Joint-Venture Brands: GAC Honda Suffers Heavy Losses, and GAC Fengdong Also Faces Challenges
Both of GAC’s major Japanese joint-venture brands, GAC Honda and GAC Fengdong, saw declines in sales in July: GAC Honda sold 11,700 units, a year-on-year decrease of 27%, while GAC Fengdong sold 46,500 units, a decline of 19.8%. The situation over the first seven months is even more dramatic—GAC Honda’s sales were cut in half (a year-on-year drop of 53%), with only 80,000 units sold; GAC Fengdong managed to maintain roughly the same level (a decrease of 0.05%).
The main reason for these poor results is that Japanese cars do not meet the new needs of Chinese consumers. Nowadays, buyers place more emphasis on advanced features such as large screens and assisted driving systems, as well as electric or hybrid vehicles. GAC Honda’s product lineup has traditionally focused on fuel-powered vehicles, and its hybrid models do not align well with domestic market preferences. GAC Honda itself has acknowledged that it has fallen behind in meeting these demands. Although the company has adjusted production capacity at its factory in Guangzhou (essentially reducing output or reorganizing production lines), it has renewed its contract with Honda until 2038. However, there are concerns that Honda’s transformation pace may not keep up with the competitive landscape in the Chinese market, where Chinese automakers can release several new models each year, whereas Honda plans to launch only five new models over two years.
2. Domestic Brands: Aion Shows Strong Growth but with Concerns, and Trumpchi Faces a Decline
Among GAC’s domestic brands, Aion performed exceptionally well, selling 28,800 units in July, a year-on-year increase of 36%, with cumulative growth of over 9% for the first seven months. This success is due to its focus on electric vehicles, which aligns with market demand. However, recent issues have arisen with the AION S series, which uses batteries from Zhongxin Innovation Aviation. There have been reports of charging abnormalities and significant reductions in range, although no recall has been issued yet, which could impact Aion’s reputation.
Trumpchi, on the other hand, has seen a decline in sales, with 22,700 units sold in July, a year-on-year decrease of 5.5%. This is largely because Trumpchi still relies heavily on fuel-powered vehicles, and its transition to electric and hybrid models is not as rapid as Aion’s.
3. Debut of Qijing: The New Brand Collaborated with Huawei
The biggest highlight of this report is the introduction of Qijing, a new brand developed in partnership with Huawei. Its first model, the GT7, was launched in June, and production began in July, resulting in 4,147 units manufactured and 2,658 units sold. These figures are not particularly impressive compared to other brands like the Xiaomi SU7 or Shangjie Z7. The industry is watching Qijing’s performance closely, as it plans to launch a large five-seater SUV, the GX7, this year, and aims to expand into mainstream markets such as sedans and SUVs by 2028, showing considerable ambition.
4. Overall Market Trend: A Balance Between Joint-Venture and Domestic Brands
Previously, GAC’s sales were primarily driven by its joint-venture brands. However, the current ratio of sales between joint-venture (GAC Honda + GAC Fengdong) and domestic brands (Aion + Trumpchi + Qijing) is approaching 1:1, indicating a shift in momentum towards domestic brands. This suggests that Chinese consumers are increasingly favoring domestic brands that offer better value and advanced features.
5. GAC’s Challenges and Opportunities
GAC faces two main challenges: first, the slow transformation of its joint-venture brands, with uncertainty around the effectiveness of Honda’s new product plans; second, although its domestic brands are growing, Aion has battery-related issues, and Qijing is still in the early stages of development. On the positive side, Aion has a solid foundation in electric vehicles, and Qijing benefits from Huawei’s advanced technology. If these challenges can be overcome, GAC’s domestic brands could become even stronger.
In summary, GAC is at a transitional phase, with joint-venture brands struggling to adapt to market changes while its domestic brands are growing rapidly. The future of the company depends on whether its domestic brands can continue to thrive and whether its joint-venture partnerships can keep up with the pace of the Chinese automotive market.