SAIC's car sales accounts have been repaired first.

SAIC's core car sales business improved further in the first half of the year.

The financial report released on August 28 showed that SAIC Motor's operating revenue in the first half of the year was 294.987 billion yuan, basically the same as last year; operating costs were 260.413 billion yuan, a decrease of 9.45 billion yuan. The highlight was that SAIC's gross profit increased by approximately 10.1 billion yuan compared to the same period last year, and the company's disclosed gross profit margin also increased by 3 percentage points to 12.6%.

During the same period, the operating costs of automobile manufacturers above a certain size increased by 2.8%, while profits decreased by 19.5%, and the sales profit margin was only 3.8%, which has fallen to a new low in nearly ten years. In the past, the most familiar practice for large groups was to spread the cost of factories and R&D through scale; now, with raw material and logistics costs still rising, sales volume and profits are beginning to diverge.

While SAIC's revenue remained flat, its operating costs actually decreased by 3.5%, and its R&D expenses remained essentially unchanged at 8.111 billion yuan.

Of the ten vehicles sold by SAIC, seven are now from its own brands. In the first half of the year, sales of its own brands reached 1.469 million units, a year-on-year increase of 12.6%, accounting for 71.8% of the group's total sales, an increase of 8.3 percentage points compared to last year; sales of new energy vehicles reached 796,000 units, an increase of 23.1%, and overseas sales reached 735,000 units, an increase of 48.7%.

During the same period, domestic automobile sales declined by 4.1%. SAIC wholesaled 2.045 million vehicles and retailed 2.075 million vehicles, making it the only Chinese automobile company with sales exceeding 2 million vehicles in the first half of the year. The MG4 family achieved monthly sales of over 10,000 vehicles for several consecutive months, and the sales of Zhiji also doubled.

This sales structure is different from the joint venture model that SAIC was familiar with in the past. The money earned by the joint venture was mainly included in the group's financial statements as investment income; the independent business, from R&D and vehicle manufacturing to channels and marketing, all had to be funded by the company itself.

With its own brands accounting for 70% of sales, the group is primarily focused on boosting sales volume; the profits remaining after the reduction in subsidies for joint ventures will need to be supplemented by its own brands. Furthermore, the proportion of its own brands increased by 8.3 percentage points in the first half of the year, while the group's operating costs decreased by 3.5%.

For traditional automotive groups, changing profit sources is slower than changing sales structure. New models can change the proportion of self-owned brands within one or two cycles, but the initial R&D and channel investments must be gradually amortized through subsequent sales.

For SAIC, once its own-brand sales reach 70%, the money spent on R&D, manufacturing, and sales will be reflected in its own financial statements, and gross profit and cash will have to be earned back by its own-brand business.

More cash has also returned. The Group's net cash flow from operating activities was RMB 54.303 billion, a year-on-year increase of 158.13%. SAIC stated that the net cash flow from manufacturing operations increased year-on-year, and SAIC Finance also adjusted its financial asset allocation; the parent company's operating cash flow turned from a net outflow of RMB 3.283 billion in the same period last year to a net inflow of RMB 5.327 billion.

Net profit attributable to shareholders was still 865 million yuan less. SAIC's net profit attributable to shareholders in the first half of the year was 5.152 billion yuan, a year-on-year decrease of 14.38%; net profit excluding non-recurring items was 4.569 billion yuan, a decrease of 15.86%. Below gross profit, financial expenses increased from -1.783 billion yuan in the same period last year to 2.746 billion yuan, and fair value changes changed from a gain of 3.617 billion yuan to a loss of 266 million yuan, with the two items combined being approximately 8.4 billion yuan less than last year.

SAIC stated that the increase in financial expenses was mainly due to exchange losses caused by exchange rate fluctuations. SAIC's total profit only decreased by 3.08% to RMB 10.185 billion, while consolidated net profit decreased by approximately 4.1% to RMB 7.974 billion; minority shareholders' profit increased from RMB 2.301 billion to RMB 2.822 billion, and the profit attributable to the parent company decreased even faster.

The joint venture's outstanding debts have not yet been settled. SAIC-GM's share of SAIC's net profit this period is approximately RMB 579 million, but this amount was first used to offset previously accumulated unrecognized losses and was not included in the group's investment income. After the offset, there are still RMB 8.401 billion in unrecognized losses.

SAIC-GM has begun to offset past losses but has not yet contributed investment income to SAIC again. Its own-brand business is also incurring expenses: sales expenses reached 9.845 billion yuan, a year-on-year increase of 14.27%; administrative expenses reached 9.944 billion yuan, an increase of 4.91%; and inventory increased by 11.53% compared to the beginning of the year. Meanwhile, its own-brand revenue for the first half of the year was 8.357 billion yuan, with a net loss attributable to the parent company of 1.324 billion yuan.

With the decline in joint venture profits, traditional automotive groups need to address not just sales figures, but their profit sources. Their own brands have already accounted for 70% of SAIC's sales, and the group's gross profit and operating cash flow are improving. While net profit attributable to shareholders is still recovering, the debt from car sales has already been addressed.

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