The overall auto market is depressed, and auto companies are gradually becoming quiet

This picture is the highlight moment of new energy vehicles.

At that time, NIO, the representative of Internet new energy vehicles, was full of vigor and vitality. On September 12, 2018, NIO went public on the US stock market. Two days later, NIO’s official Weibo account announced: “Driving ES8 to Xinjiang, Day 10, from Hami to Urumqi, a total of 600km, refueling twice, once again feeling that we can go wherever gasoline cars can go.”

A cart tows a fuel truck to charge the electric car. Although it is a bit difficult to read and looks awkward, such a ridiculous thing actually happened, and the person involved was very arrogant.

Well-known car expert Wang Tonggen once drove a NIO ES8 to Northeast China. It was calculated that for every 100 kilometers traveled by NIO, the diesel vehicle pulling the generator would consume 35 to 40 liters of diesel, but the NIO ES8 did not consume a single liter of oil. At the end of the journey, NIO's big screen also displayed "You have contributed xxx grams of carbon emissions reduction to the blue sky."

NIO stock price

The hype about new energy vehicles gradually died down with NIO’s trip to Xinjiang, and words like “NIO has no future” became more and more widespread.

Weilai Automobile CEO Li Bin recently issued an internal letter, saying that according to the lean operation plan, the company will reduce 1,200 jobs worldwide by the end of September. After the adjustment, the company's staff size is about 7,500.

"This personnel adjustment will affect many colleagues, and I am very sorry for this. Everyone had a lot of expectations when they joined NIO, and this adjustment will make many colleagues sad and disappointed."

At the same time, the entire automotive industry is becoming increasingly depressed.

1. Skinny dipping

As can be seen from the figure below, in the net profit growth rate ranking in the first half of this year, the growth rate of automobiles and auto parts ranked last.

Similarly, we can also see some problems from the table below. In the first half of this year, the net profits of most car companies have almost declined year-on-year. Of course, there is also a company in the table with relatively good data. BYD's net profit grew by 203.61% against the trend.

But according to my good friend Yang Fu from the next village, ever since he bought a BYD F6 a few years ago, he has been going to the repair shop all the time, always to get the engine repaired. After six major overhauls, he sold the car to an honest man.

Yang Fu and I thought about it for a long time and both felt that the BYD E6 uses electricity and the F6 uses fuel, and the change from F to E may be the so-called dimensionality reduction attack. I asked Yang Fu a question, asking him if he would consider buying a BYD E6.

Yang Fu joked: "As long as my head is not caught in the door, why shouldn't I buy a Magotan or Accord Hybrid with that money?"

Jokes aside, according to the wholesale sales data of passenger car manufacturers, the sales of new energy passenger cars from January to June 2019 reached 570,000 units, a year-on-year increase of 65%. In June, the wholesale sales of new energy narrow passenger cars reached 134,000 units, a year-on-year increase of 90%. Compared with the wholesale growth rate of traditional passenger cars of -8%, new energy vehicles, riding on the policy, performed quite well.

But if we look at BAIC, another company whose net profit increased year-on-year, the sales volume of its EC series is also a mystery, and behind this mystery is fragility.

In December 2016, the monthly sales of new energy vehicles reached 104,000 units, which boosted the morale of relevant practitioners. So at the beginning of 2017, Xu Yanhua, deputy secretary-general of the China Automobile Association, said: Optimistically, the sales of new energy vehicles in my country are expected to reach about 800,000 units in 2017. As a result, in January 2017, the sales volume was only 7,000 units, but in the following months, the sales volume rose sharply, and finally sold 777,000 units in a year, which is about 800,000 units.

The monthly car sales of BAIC in 2018 were even more bizarre. In May 2018, BAIC EC series sold 12,624 units, and in June 2018, only 3 units were sold. The reason behind this is the tightening of subsidies. Car sellers are eyeing subsidies, and car buyers are eyeing green license plates.

Only when the tide goes out do you know who is swimming naked.

2. Automotive electronics

Looking at the past two or three decades of rapid development of automotive electronics, with the continuous changes in electronic information technology and the automobile manufacturing industry, the application and innovation of automotive electronic technology has played a very critical role in improving the power, economy, and safety of automobiles, improving automobile driving stability and comfort, and reducing automobile emission pollution and fuel consumption. At the same time, it also enables automobiles to have rich functions such as entertainment, office and communication. The electrification process of traditional automobiles is constantly accelerating.

                  Compiled from public data on the Internet

70% of automotive innovation comes from automotive electronics. The cost of electronic products as a percentage of the entire vehicle has grown from 4% in the 1970s to around 30% today.

If we look at it more specifically, the cost of automotive electronics in a pure electric sedan accounts for 65% of the entire vehicle.

Automotive electronics is a general term for vehicle body automotive electronic control devices and vehicle-mounted automotive electronic control devices. Vehicle body automotive electronic control devices include engine control systems, chassis control systems and body electronic control systems (body electronic ECU). The most important role of automotive electronics is to improve the safety, comfort, economy and entertainment of the car. The electronic control system is composed of sensors, microprocessors MPU, actuators, dozens or even hundreds of electronic components and their parts.

Automotive electronics products are classified as follows:   

Source: Internet

The automotive electronics industry chain consists of three parts: the upstream is the automotive electronic component factory, which is mainly responsible for providing related core chips and other discrete devices of automotive electronics; the midstream is the automotive electronics production and manufacturing, which is mainly engaged in the design, production and sales of automotive electronic modular functions; the downstream is the traditional vehicle manufacturer.

3. Depression

With the decline in global automobile sales, the financial reports of most automotive electronics-related IC manufacturers this year are not very good. According to the official data:

NXP Semiconductors announced its second quarter results for 2019. Total revenue for the quarter was $2.217 billion, compared to $2.290 billion in the same period last year. Operating profit for the quarter was $157 million, compared to $137 million in the same period last year. Net profit for the quarter was $41 million, compared to $54 million in the same period last year. 

Infineon Technologies announced its third quarter results (ending June 30). Revenue for the quarter was 2.015 billion euros (about 2.23 billion U.S. dollars), compared with 1.941 billion euros in the same period last year. Net profit for the quarter was 224 million euros, compared with 271 million euros in the same period last year.

Renesas Electronics announced its second quarter results for 2019. Revenue for the quarter was 192.6 billion yen (about 1.82 billion U.S. dollars), operating loss was 2.5 billion yen, and net loss was 1.2 billion yen.

STMicroelectronics announced its second quarter results for 2019. Net revenue in the second quarter was US$2.17 billion, down 4.2% year-on-year; operating profit was US$196 million, down 32.0% from US$289 million in the same period last year.

Texas Instruments announced its second quarter results. The financial report shows that Texas Instruments' second quarter revenue was $3.668 billion, down 9% from $4.017 billion in the same period last year; net profit was $1.305 billion, down 7% from $1.405 billion in the same period last year.

In 2018, Bosch Group achieved revenue of 77.9 billion euros, up 1.5% year-on-year, EBIT of 5.3 billion euros, and EBIT margin of 6.9%, both of which were the same as in fiscal 2017. Bosch Group's chief financial officer also announced that the company has revised its forecast for global automobile production in 2019, predicting a 5% decline this year, a larger drop than the previous estimate of 3%. As a result, it will not be able to achieve an EBIT margin of nearly 7% as last year.

ON Semiconductor's revenue in the second quarter of 2019 was US$1.34 billion, down about 7% year-on-year and about 3% quarter-on-quarter. Net profit for the quarter was US$102 million, down 34% from US$155 million in the same period last year.

Microchip Technology Inc. announced its first quarter results for fiscal year 2020 (ending June 30). Net sales for the quarter were $1.323 billion, down 0.5% from the previous quarter and up 9.1% from the previous year. Net profit was $50.7 million, up 42% year-on-year, calculated on a GAAP basis.

Toshiba announced its 2019Q2 results. Toshiba's revenue declined 10.6% from the previous quarter to US$1.948 billion.

The data for fiscal year 2019 released by ROHM showed that the net revenue for fiscal year 2019 (April 1, 2018 - March 31, 2019) was 24.147 billion yuan, a year-on-year increase of 0.47%, and the net profit was 2.75 billion yuan, a year-on-year increase of 21.99%.

Of course, although the reason for the decline in net profit is related to the overall environment of the semiconductor industry, the automotive electronics business of these companies has undoubtedly also held back the company.