GAC Group, a notable player in the automotive industry, has recently faced a daunting start to the yearThe company's data reveals that in January this year, GAC Group's overall sales plummeted by a staggering 25.41% compared to the same period last yearNotably, GAC Honda, GAC Trumpchi, and GAC Aion, three pivotal brands under the GAC umbrella, saw their sales figures fall sharplyIn the realm of electric vehicles, GAC's sales nosedived by 47.22%, capturing merely 8.5% of the market shareThis situation has placed GAC behind many traditional automobile manufacturers, highlighting the company's growing struggle in a sector that is rapidly evolving.

In light of this alarming scenario, GAC Group has opted to reinforce its partnership with Huawei, a strategic move aimed at developing a new automotive brandThe first model from this collaboration is slated to be a luxury smart electric vehicle priced at around 300,000 yuanHowever, the landscape is increasingly competitive; Huawei has already collaborated with several other automotive companies, with reports surfacing about SAIC's partnership to launch the "Shangjie" brand, leaving GAC with limited resources and time to act.

Compounding the challenges for GAC Group, there has been a recent shift in leadershipFormer chairman Zeng Qinghong has retired, with Feng Xingya taking overThe pressing question now is whether Feng can navigate the company through this turbulent phase, reviving both its joint ventures and its own brands that are currently underperforming.

Looking into the sales specifics, GAC Group has reported concerning figures for January 2024, showing that the production of its vehicles reached 116,345 units, down by 26.13% year-on-yearSales figures followed suit, tallying at 98,437 units—a stark 25.41% decrease compared to January 2023. Delving deeper, the numbers reveal that GAC Honda sold 15,123 vehicles this January, a dizzying drop of 57.14% from 35,282 units last yearGAC Trumpchi and GAC Aion fared marginally better with reductions of 45.78% and 27.62% respectively, while only GAC Toyota managed a slight uptick with sales increasing by 11.7% to 57,000 units.

The decline isn’t confined to traditional models; GAC's foray into the electric vehicle market is equally worrying

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The company reported selling only 9,905 electric vehicles this January, an alarming decrease of 47.22% from 18,766 units the previous yearAs it stands, GAC Group’s penetration rate in the electric vehicle segment is about 8.5%, positioning it at a disadvantage among its peers.

Currently, GAC Aion is bearing the brunt of the electric vehicle offerings from GAC Group, yet it too is experiencing a significant setbackIn 2023, GAC Aion achieved remarkable growth, with sales hitting 480,000 units, reflecting a 77% year-on-year increaseThe ambition was set high for 2024, targeting at least 700,000 unitsHowever, as the new year has progressed, the projections have dimmed drastically due to a variety of factors, causing sales to decline steadily from February through October, with its cumulative sales standing at only 374,884 units—a 21.9% drop from the previous year.

The underperformance extends to GAC Group's joint ventures, with partners struggling to pivot towards new energy developmentsTake GAC Honda as a case in point; in 2024, they introduced the "Ye P" brand, intended as a new electric vehicle lineDespite attempts to draw consumers in with a name that symbolizes brilliance and uniqueness, public reception has been lukewarmThe name, seen as clunky and difficult to remember, has drawn criticism akin to sounding foreboding, leading the company to rethink its branding strategy.

Financially, GAC Group is also facing tough realitiesHistorically, during the combustion engine era, GAC flourished thanks to its partnerships with Toyota and HondaHowever, with the shift towards electric, the company is now grappling with dwindling sales and deteriorating financial healthAs reported in January, the projected net profit for 2024 is expected to be between 800 million to 1.2 billion yuan—an alarming drop of 72.91% to 81.94% year-on-yearAmid efforts to boost sales, the company has invested roughly 18 billion yuan into subsidies and incentives, further exacerbating financial strains.

The first three quarters of 2024 bore out this troubling trend, where total revenue slipped 24% to 74 billion yuan, net profit tanked to just 120 million yuan, showcasing a staggering 97.34% decline compared to previous figures

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With revenues and profits nosediving, GAC Group announced in February changes in leadership, with Zeng Qinghong stepping down after nearly three decades with the company.

After Zeng's departure, his successor Feng Xingya inherits a company at a crossroadsHaving worked at GAC since 2004, Feng is expected to rally the company but will have to contend with formidable challengesUnder Zeng’s governance, GAC reached impressive heights; whether Feng can replicate that success in today's rapidly changing landscape is yet to be seen.

As GAC seeks salvation, it turns its attention to Huawei, a partnership that has the potential to redefine its strategic directionBefore Zeng’s exit, GAC had already recognized the looming crisis and initiated the "Panyu Action" reform plan, which aims to stabilize joint ventures while pushing for the development of independent brandsThis plan aims for 60% of GAC's total sales to come from autonomous brands by 2027, indicating ambitious growth of at least 2 million units in independent brand sales.

However, given the current trajectory, this ambition appears overwhelmingBy 2024, cumulative sales for GAC Trumpchi and GAC Aion are reported at only 414,600 units; a marginal increase of just 1.99% and a worrying decline of 21.9% respectivelyThus, their sales contribution is far from the targeted 60%, signaling the need for radical shifts in strategy.

In light of these pressing circumstances, GAC’s partnership with Huawei emerges as criticalIn January, Feng Xingya took to social media, unveiling news about their collaboration, which includes a significant investment of 1.5 billion yuan to establish a new project company, GHThis initiative promises a synergistic integration of both companies, aligning technological advantages and innovation to craft a uniquely positioned automobile brand within the competitive landscape.

The collaborative efforts are already beginning to yield results, with plans for a range of smart new models, the first of which aims to merge luxury and technology in the smart electric vehicle niche

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