On April 4, China Meidong Automobile Holding Co., Ltd. (1268.hk, hereinafter referred to as Meidong automobile) announced that the group completed the acquisition of Zhuxing Automobile Sales Group Co., Ltd. (hereinafter referred to as Zhuxing automobile) at the cost of 3.7 billion yuan.
According to the data, star chasing automobile was registered and established in Hong Kong, China in 2009 and operates the automobile brand Porsche. It has 7 4S car dealerships, 4 exhibition centers and 3 service centers in Nanjing, Qingdao, Tianjin, Chongqing, Weifang, Jinan and Zhengzhou, with a total of 14 business sites.
As of December 31, 2019, 2020 and 2021, the sales of Star chaser’s passenger vehicles were about RMB 4.633 billion, RMB 5.182 billion and RMB 5.91 billion respectively, accounting for 91.80%, 92.15% and 92.21% of its revenue from continuing operations, and the total sales of new vehicles were 6609, 7121 and 7534 respectively; The after-sales service revenue was 414 million, 441 million and 499 million respectively.
The gross profit is about 459 million yuan, 528 million yuan and 684 million yuan respectively, and the overall gross profit margin is about 9.10%, 9.40% and 10.66% respectively. Among them, the gross profit margin of passenger car sales is about 5.93%, 6.28% and 7.65% respectively, and the gross profit margin of after-sales service is about 44.62%, 46.02% and 46.34% respectively.
On December 13, 2021, Meidong automobile signed a sale and purchase agreement (acquisition agreement) with the parent company of Zhuxing automobile, Wearnes starchase limited, to acquire all the issued shares of Zhuxing automobile at a total price of RMB 3.7 billion. This acquisition is limited to seven Porsche 4S stores under Zhuxing automobile, and other distribution brands are not included in the scope of acquisition.
“As Star chaser and Meidong automobile are basically engaged in the same industry in China, their business models are similar, and they have rich experience in the distribution of Porsche brand cars, the acquisition is a timely opportunity for the group to expand to the luxury car distribution market with high profitability through acquisition.” Meidong automobile said in the announcement that due to the scarcity of distribution licenses, internal growth is difficult or takes time and cost to expand this business. The acquisition will further consolidate Meidong automobile’s position in the luxury car distribution business (especially Porsche brand cars), expand the network of Porsche brand car stores from 9 stores (as of December 31, 2021) to 16 stores, and add 7 stores in Meidong automobile’s expanded area and other areas, which will effectively supplement the existing distribution and service outlets.
It is worth noting that the regional coverage of star chasing automobile business is in line with the expansion strategy of Meidong automobile to cope with the shift from low-level cities to luxury car consumption, which has become an effective way for Meidong automobile to rapidly expand the scale of Porsche distribution business and focus on the overall luxury car distribution business.
accelerated expansion
Statistics show that Meidong automobile was established in 2004. Its business core is the joint venture brands of Toyota and Hyundai, focusing on the layout of second, third and fourth tier cities. When it was listed on the main board of Hong Kong in 2013, there were only 15 4S stores.
After eight years of development, Meidong automobile has focused on high growth luxury brands such as Porsche, Lexus and BMW. Its sales network has expanded to 700 (as of December 31, 2021), and the total scale of 4S stores has increased by nearly five times.
After the acquisition of Star chaser, the number of Porsche 4S stores of Meidong automobile will increase to 16, becoming one of the three major Porsche dealers in China, ranking second only to Porsche wholly-owned / holding company and Yongda Automobile.
It is understood that since 2012, Meidong automobile has obtained the distribution right of Porsche brand cars. By monitoring, evaluating and analyzing the current market and business conditions of the automobile distribution industry and other major market participants (including but not limited to the distribution network and dealers of Chinese Porsche brand cars), Meidong automobile believes that the market conditions of star chasing automobile and the group will maintain stability and growth, and it is expected that there will be no significant adverse changes in the short term.
“After the acquisition, the company has begun to adjust and improve the existing business structure and medium and long-term business capacity of the target group. The cooperation and integration between the company’s business team and the existing team of the target group are progressing steadily.” Meidong automobile said.
It is worth noting that thanks to the rapid growth of China’s luxury car market, the total revenue of Meidong automobile reached RMB 23.577 billion in 2021, a year-on-year increase of about 16.7%. The sales revenue of new passenger vehicles increased by about 2.98 billion yuan, accounting for about 2.68% of the total year-on-year revenue; The after-sales service revenue was 2.747 billion yuan, a year-on-year increase of 22.0%, accounting for 11.7% of the total revenue.
However, with the increase of new car sales, the sales cost also increased by 14.5% from RMB 18.172 billion in 2020 to RMB 20.806 billion. Meidong automobile said that the increase in sales costs was mainly due to the growth of new passenger car sales and after-sales service. The sales cost of new passenger cars and after-sales service increased by about 14.4% and 15.5% respectively.
In terms of profit, the gross profit of Meidong automobile in 2021 was 2.771 billion yuan, a year-on-year increase of 36.1%; The gross profit margin was 11.8%, with a year-on-year increase of 1.7 percentage points. Among them, the gross profit margin of passenger car sales business increased by 1.3 percentage points to 6.8%; The gross profit margin of after-sales service increased by 28 percentage points to 49.1%. The net profit was 1.213 billion yuan, a year-on-year increase of 57.4%, and the net profit margin was 5.1%, an increase of 1.3 percentage points over the same period in 2021.
Meidong automobile said that high-end brand cars have become the core sales revenue source of Meidong automobile. The sales of new passenger cars of BMW, Porsche and Lexus were 8.792 billion yuan, 4.853 billion yuan and 4.270 billion yuan respectively, accounting for 42.2%, 23.3% and 20.5% of the total sales revenue of new passenger cars respectively.
In terms of sales volume, subject to the shortage of supply, Meidong automobile sold 61595 new cars in 2021, a year-on-year increase of 7.7%. BMW, Porsche and Lexus sold 24964, 5708 and 11699 vehicles respectively.
At present, the Chinese market has become the largest single market of Porsche. According to the data, Porsche delivered nearly 96000 units in China in 2021.
“The Group continues to implement its effective high-end brand focus and cooperate with the ‘single city, single store’ strategy to expand its distribution network. In 2021, Meidong automobile added four new stores and acquired three new stores. As of December 31, 2021, it had 70 self operated stores in Beijing, Hebei, Hubei, Hunan, Jiangxi, Fujian, Guangdong, Gansu and Anhui.” On the evening of March 30, Meidong Motor said in its 2021 financial report.
In the ranking of the top 100 dealer groups of China Automobile Circulation Association over the years, Meidong automobile has shown an upward trend for many consecutive years, and has risen to the 23rd place in 2020.
Meidong automobile said that the chip shortage and Geopolitics in 2022 have increased the uncertainty of the supply chain, and it will continue to prudently implement the M & a strategy, further expand its business scope and maintain sustainable growth.
advance and retreat confrontation
Behind the acquisition of star chasing cars by Meidong automobile, the merger and reorganization of dealer group is also being staged in the field of automobile circulation.
On the one hand, although the shortage of chip supply leads to the shortage of new car inventory and the gross profit margin of new cars of dealer groups has increased significantly, many small and medium-sized car dealer groups are also difficult to be optimistic; On the other hand, new car manufacturing enterprises represented by Tesla, Weilai, ideal and Xiaopeng are accelerating their sinking, and a new situation of multi-channel integration and coexistence is taking shape.
Behind this, the head dealer Group continues to layout luxury car tracks, and “compete” for 4S stores by means of self construction, merger and acquisition. The competition is becoming more and more intense, and high-quality resources are gradually concentrated to the head dealers.
In October 2021, Zhongsheng group completed the acquisition of Renfu (China) Co., Ltd., and the final transaction consideration was about US $1.314 billion. Statistics show that before the merger, Zhongsheng group had 75 Mercedes Benz brand stores, and with the merger of 25 Mercedes Benz brand stores, Mercedes Benz authorized stores reached 100. After the acquisition, the group’s market share in the Mercedes Benz brand increased significantly to about 18%, which strengthened the market position of the Mercedes Benz brand as the second largest dealer in China, and further consolidated the group’s regional leading position in the market segments of South China and West China.
Due to the transformation and upgrading of China’s automobile market, luxury brand 4S stores have made good profits in recent years. Zhongsheng group has purchased Mercedes Benz brand 4S stores on a large scale more than once. In July 2020, Zhongsheng Group acquired 8 4S stores of Baolide with 720 million yuan, including 6 Mercedes Benz 4S stores in Hubei, Fujian, Yunnan, Jiangxi and other places; In January 2019, Zhongsheng Group acquired seven Mercedes Benz business 4S stores such as Zhejiang Jiuhua for 202 million yuan; In July 2017, Zhongsheng Group acquired four Mercedes Benz business 4S stores in Shandong for 262 million yuan; In January 2017, Zhongsheng Group acquired five 4S stores in Jiangsu with 675 million yuan, including three Mercedes Benz brand 4S stores.
Also in October 2021, Yongda Automobile announced that it would purchase two BMW 4S stores and two Lexus 4S stores in Jiangsu Province for 833 million yuan. Previously, as a well-known BMW dealer group in China, Yongda has acquired BMW 4S stores for many times.
In August 2021, Meidong automobile acquired Nanjing Xiezhong for 420 million, further consolidating its position as the second largest dealer group in the Lexus system.
It is worth mentioning that thanks to the growth of China’s luxury car market, dealer groups such as Zhongsheng, Yongda, Meidong and harmonious automobile, which mainly focus on luxury brand business, achieved significant growth in 2021.
“The potential growth space of this track is very large. In recent years, China’s automobile consumption has obviously shifted to second and third tier cities. Luxury brands will be sought after due to strong economic growth and higher disposable income of residents.” Harmony automobile pointed out in the financial report that with the launch of multiple new cars by BMW in 2022, the sales volume of the company will reach 46000 in 2022, with a year-on-year increase of 11.8%. Harmony automobile will also continue to tap the potential of its main business – luxury and ultra luxury brand dealers.
To this end, harmonious automobile plans to expand its network layout through acquisition. In 2022, harmony Auto plans to increase the number of stores by 15%. At present, it has obtained four new authorized stores of ultra luxury brands, including two Ferrari, one Bentley and one Lamborghini.
However, while expanding the luxury brand business, the head dealer group is also facing the challenge of the direct sales model advocated by Tesla, velai and other new car manufacturers. Under the new business model, consumers can complete car ordering and other services online, and complete delivery and after-sales services in directly operated offline stores. Compared with the traditional 4S licensing model, the role of dealers is weakened and their interests are affected.
In addition, influenced by the new forces of car making, traditional vehicle enterprises are also testing a new sales model. At present, Volvo, SAIC Volkswagen ID. series, SAIC Audi and other brands have tried the agency model.
In the face of the fierce changes in new energy vehicles and marketing mode, major dealer groups have established new energy vehicle departments. While strengthening cooperation with traditional OEMs, major dealer groups, including Zhongsheng and Yongda, have embraced new forces in vehicle manufacturing.
In the first half of 2021, Zhongsheng Group signed a strategic cooperation agreement with Xiaopeng and established different models, including 4S dealerships, new car sales centers and delivery centers in high-speed cities, after-sales service centers in second tier cities and after-sales service stations in third and fourth tier cities.
Facing the future competition, Zhongsheng group said that the group’s national service network, especially in high-speed cities and economically developed regions, its existing customer base of more than 6.5 million people and its core automobile consumption service capabilities such as leading service and operation capabilities in the industry will provide a solid foundation for the future development of electric vehicle business.
Similarly, in 2021, Yongda Automobile established the new energy vehicle service industry development committee and working group, established an independent new energy vehicle service group, independently carried out the new energy vehicle service industry business, and will focus on promoting the rapid development of authorized brand agency, comprehensive after-sales service and other business sectors. In 2021, the sales volume of new energy vehicles of Yongda Automobile reached 15920 units, with a year-on-year increase of 55.0%, accounting for 7.4% of the overall sales volume and a year-on-year increase of 2.3%. Among them, the sales volume of independent new energy brands reached 2986 units, with a year-on-year increase of 135.5%, including 1863 units of direct sales vehicles of new energy manufacturers.
In terms of new authorization, Yongda Automobile has 13 newly opened outlets of independent new energy brands and 15 newly authorized independent new energy brands, respectively authorized by AITO, Xiaopeng, Byd Company Limited(002594) , Great Wall Euler, Zero run and other head new energy brands.
At the same time, with the transformation and exploration of traditional luxury brands in the new retail mode of new energy vehicles, Yongda Automobile has successively completed BMW I-space and I exhibition hall; Volvo new energy city center store; Volkswagen ID store; Cadillac new energy city exhibition hall, and further carry out the sales and service business of new energy models of traditional automobile brands such as BMW, Porsche, Audi, Mercedes Benz, Volvo and general motors.
China Grand Automotive Services Group Co.Ltd(600297) has also reached strategic cooperation with Jihu. The two sides will actively build a new energy vehicle sales and service network with market competitiveness. Moreover, China Grand Automotive Services Group Co.Ltd(600297) said that cooperation with other new energy brands would not be ruled out in the future.
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