Wall Street CN:“Material Changes”, Efforts of CIMC Vehicles to Find New “Orientations”
As the global leader in the semi-trailer industry, CIMC Vehicles maintains its advantages despite industry headwinds.
The annual report 2021 of CIMC Vehicles shows that its revenue hit a record high last year, with a year-on-year increase of 4.3% to RMB27.65 billion, and its net profit for the year was RMB0.99 billion.
It is known that there was a lot of pressure in the industry in 2021, due to the increase in the prices of raw materials and sea freight, and the transition from China V to China VI. Industry players also need to adopt a more flexible business model to meet the challenges in cost, supply and demand, etc.
In response to the industry changes, CIMC Vehicles further split its original three core business segments into six major businesses or groups last year.The management said that through the establishment of six major businesses or groups, including Champion Ta n k e r B u s i n e s s G r o u p, t h e i n t e r n a l coordination and integration of the Company will be further strengthened to reshape a light tower manufacturing network, instead of previous single plants, which will help further strengthen the businesses.
In response to the short-term industry dilemma, CIMC Vehicles adopted long-term development strategies and showed their resilience. In the “Material Changes”, CIMC Vehicles, which have always maintained a flexible response, will also take proactive actions. This will be the upper hand for CIMC Vehicles to deal with the material changes in the industry, and will also help further expand its leading position in the industry.
REVENUE HIT A RECORD HIGH DESPITE THE HEADWIND
On the whole , CIMC Vehicles kept endogenous growth last year, while
expanding the growth boundary of external
demand.
For a long time in the past, the business of CIMC Vehicles focused on three major areas: global semi-trailers, China’s truck bodies for specialty vehicles, and lightweight van truck bodies. These three markets are closely related to its annual report. The four major markets of the global semi-trailer business achieved steady growth, with the revenue increasing by 12.49% year on year, reflecting the unabated trend of global semi-trailer market centralization. This also benefits CIMC Vehicles, as the industry leader. The data of Global Trailer for 2021 show that CIMC Vehicles has ranked first in the world for nine consecutive years in terms of production volume.
However, while maintaining the growth in the three traditional core areas, CIMC Vehicles also began to take proactive actions. “Identifying demand and making quick response” is the key of CIMC Vehicles to rapid development into the global semi-trailer industry leader in more than ten years. CIMC Vehicles also wants to apply this method to other business modules.
In 2021, CIMC Vehicles further split its original three core business segments into six major businesses or groups, namely “Champion Tanker Business Group”, “Light Tower Pioneer Business”, “TB Business Group”, “Urban Dump Truck Business”, “North American Business” and “European Business.”
Specifically, Champion Tanker Business Group mainly manufactures and sells two core products, namely tank trailers, and concrete mixer trucks, and recorded a revenue of RMB10.89 billion during the reporting period. The Company ranked first for the fifth year running in terms of sales volume of concrete mixer trucks in China, with a market share increasing to 29.3% n China.
Light Tower Pioneer Business is deeply engaged in the business of semi-trailer products in the market of China. For the previous year, the revenue of Light Tower Pioneer Business was RMB6.4 billion, and the sales volume of container chassis trailers of Light Tower Pioneer Business increased significantly by 48.5% year on year.
TB Business Group is mainly composed of refrigerated van body and dry truck body businesses and recorded a revenue of RMB0.47 billion in the previous year.
Urban Dump Truck Business also achieved an increase in the number of orders for new energy products by developing new energy pure electric dump truck business and other measures. Last year, the revenue of Urban Dump Truck Business of CIMC Vehicles was RMB1.89 billion.
While stabilizing the revenue from the market of China, CIMC Vehicles recorded double-digit growth of 14.91% and 27.63% in revenue year on year in the North American market and the European market respectively.
Its shares of many markets also gradually increased. For example, it ranked third in terms of North American refrigerated trailers in the North American market; with the market share increasing by 4.8 percentage points year-on-year to approximately 27.5%, SDC, a European subsidiary of CIMC Vehicles ranked first in the UK market.
The management of CIMC Vehicles said that the growth of the European market was mainly due to the continuous and moderate recovery of major markets in Europe, while the reshaping of e-commerce spending habits by the pandemic further unleashed the demand for semi-trailers in Europe.
The same is true of the North American market. The management pointed out that the approval for the large-scale infrastructure plan of the United States stimulated the economic growth of the United States, and consequently the semi-trailer and logistics transportation equipment market of the United States recovered rapidly.
CIMC Vehicles hoped to further seize the opportunities in these two markets and strengthen its advantages. The management said that the six new major businesses or groups changed the previous pattern of business segments, and CIMC Vehicles also hoped to remove barriers in operation and realize the linkage between production and marketing and maximize benefits.
EARLY IMPLEMENTATION FOR FUTURE DEVELOPMENT
Through there - arrangemen to fits organizational structure, CIMC Vehicles is more flexible to cope with changes in the industry. In the next step, the development focus of CIMC Vehicles will be to strengthen their advantages while achieving quality growth. According to the management, CIMC Vehicles Group has been committed to the construction of the sophisticated manufacturing system, upgrading and building of new plants and production lines that conform to the sophisticated manufacturing system, so as to capture growth opportunities.
The goal of CIMC Vehicles is to complete the construction of the sophisticated manufacturing system covering eight major production lines of six major businesses or groups from 2021 to 2022. Cer tain production lines with the investment performed well in 2021. For example, with regard to the investment in and construction of the production line of the Yangzhou light tower project, the building of the plant and the upgrading of the production line were completed, and the market opportunities from e-commerce logistics vehicles were seized in 2021; in terms of the overseas market, North American Polar Bear automatic production plant for refrigerated trailers and Canadian Glacier refrigerated truck assembly plant were put into operation.
As the global economic growth gradually picks up, the global automobile manufacturing, logistics and transportation demand will gradually revive. The management pointed out that North American Business will seize the opportunity from the recovery of overseas market demand, improve the order delivery capacity and continuously enhance the profitability in the North American market; European Business will further optimize its corporate governance structure to support the transformation and upgrading of the SDC company, and further enhance the profitability through the core workflow of the intercontinental operation.
This will be the source of profit growth of CIMC Vehicles in the future. CIMC Vehicles prefers to respond to the material changes of the industry in the next 3-5 years with a flexible attitude and explore China’s “intellectual manufacturing.” The management pointed out that in the past six years, CIMC Vehicles invested in the construction and upgrading of more than 20 light tower production lines. However, the production lines have not been fully utilized or able to support intercontinental operation and trans-regional operations very flexibly and quickly.
As a result, CIMC Vehicles will actively make a plan for the upgraded version of the light tower manufacturing network. By maintaining the investment in the construction and upgrading of “Light Tower” Plants, CIMC Vehicles can promote the full automation, intelligentization and digitalization of production.
According to the management, by building the trans-regional operation network of 1#- 5# semi-trailers in China, CIMC Vehicles can accelerate the launch of products, improve the utilization rate of LTP core production equipment, and effectively link its global semi-trailer businesses in the long run.
In addition, CIMC Vehicles will also promote the construction of the sophisticated manufacturing system of its headquarters and core subsidiaries, build new management infrastructure, and actively promote the expansion of the “Product + Ser vice + Finance” business model. CIMC Vehicles will make efforts in terms of system construction, b u s i n e s s m o d e l a n d o r g a n i z a t i o n a l development.
The management pointed out that the impact of the transition from China V to China VI on the market in the second half of last year will be short-term and generally last for 6-9 months. After the short-term industry pressure is released, the situation will remain favorable for the industry in the long run.
CIMC Vehicles will give play to greater advantages and release the long pentup potential with breakthrough points. Meanwhile, with the establishment of “Champion Tanker Business Group” and “Light Tower Pioneer Business”, CIMC Vehicles is once again in a state of strategic integration in semi-trailers and tank trailers.
Subsequently, CIMC Vehicles will also actively pay attention to the opportunities of low-cost integration among peers, and to upstream parts and components enterprises, especially travelling mechanism and circuit parts manufacturing enterprises, downstream semi-trailer rental enterprises and after-sales service enterprises.
After the listing of A shares last year, CIMC Vehicles has A shares and H shares, which also provides a capital advantage for CIMC Vehicles to further strengthen its global strategic arrangement and market penetration
T h e m a n a g e m e n t b e l i e v e s t h a t t h e unreleased high-end production capacity of the Company, the strong market demand and shortage of supply, will contribute to a further increase in the revenue of CIMC Vehicles
CIMC Vehicles turns passivity into initiative, through acceptance and rejection. CIMC Vehicles created room for its strategic adjustment in 2021. At present, CIMC Vehicles, which has prepared for a long time, is about to launch an initiative.