In the rapidly evolving automotive landscape, the traditional vehicles represented by the Haval H6 are witnessing a significant decline, largely attributed to the surge in demand for electric vehicles (EVs). This shift prompts a pressing question: What lies ahead for Great Wall Motor, the manufacturer behind the Haval brand, in terms of sustainable growth and product innovation?

April 11 marked a turning point for Great Wall Motor (601633.SH) as it published its production and sales data for March 2022. The company disclosed that it sold 100,900 vehicles in March, reflecting an 8.86% decrease year-on-yearThroughout the first quarter of 2022, total vehicle sales amounted to 283,500 units, a stark 16.32% decline compared to the previous yearThe consecutive sales drop at the start of 2022 underscored the increasing challenges facing Great Wall Motor.

Within the same period, the Haval brand, which remains the focal point of Great Wall Motor’s product lineup, sold 166,800 units, representing a significant decrease of 55,900 units year-on-year — a 25.13% drop

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Notably, the Haval H6, which was once the undisputed champion of SUV sales in China, has failed to clinch the top sales position for two consecutive months in February and March, signaling a shift in consumer preferences.

Since its inception as an independent brand in 2013, Haval has capitalized on the explosive growth of the SUV market, solidifying Great Wall Motor's position among the top Chinese automotive manufacturersHowever, the momentum that once propelled the H6 to prominence began to wane in 2018 as the SUV market approached saturationThis marked the onset of a challenging phase for Great Wall Motor, characterized by a stagnation in growth as the company relied heavily on the H6 as its flagship product.

By contrast, the electric vehicle sector has seen phenomenal growthIn 2021, China sold a staggering 3.52 million EVs, a surge of 160% compared to previous years

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The first quarter of 2022 alone saw sales reach 1.07 million vehicles, marking a new historical peak with a 146.6% increase year-on-yearThese numbers starkly illustrate the contrasting trajectories of traditional fuel vehicles and their electric counterparts.

In 2020, during Great Wall Motor's 30th anniversary, Chairman Wei Jianjun expressed profound concerns, admitting that the survival of the company hinged on its ability to adapt to rapidly changing market conditionsWith the recent decline in traditional vehicle sales, Great Wall Motor faces an urgent need to pivot and innovate to overcome the formidable challenges ahead.

Sales data highlighted the gravity of the situationIn March, Great Wall Motor's total vehicle sales fell to 100,900, highlighting an 8.86% year-on-year declineIn the initial quarter, the company sold a total of 283,500 vehicles, down 16.32% from the same time last year, indicating a pressing need for strategic repositioning.

Brand analysis revealed that the Haval brand still dominates Great Wall Motor's sales, accounting for approximately 54.03% of sales in March and 58.82% in the first quarter

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Despite this dominance, cumulative sales of Haval fell by 55,900 units year-on-year, with the H6 alone dropping 35.7% compared to the previous year.

The Haval H6’s journey began in 2011 at Great Wall's Tianjin plant, which soon became emblematic of its success and earning it the nickname of the "national car." The H6 enabled the company to significantly increase revenue and profits, establishing its place among China's automotive giantsHowever, the market dynamics shifted, and the H6's long-standing sales streak was interrupted in 2018 when it was dethroned by rival models.

The competition tightened further with significant launches from automakers such as Changan and Honda, which consistently challenged the H6's sales supremacyIn early 2022, Haval's struggles became more pronounced as it fell out of the top ranks, affected by the exponential rise of EVs like the Tesla Model Y and BYD's Song series, which claimed the top two spots in sales.

Amid these shifts, Great Wall Motor's foray into EVs has not yielded as robust results as the competition

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While the company recorded sales of 15,100 electric vehicles in March — a modest increase of 15.27% — this growth pales in comparison to the industry’s explosive growthConsequently, Great Wall Motor's ranking among EV manufacturers dropped from fourth to eighth within a year as newcomers overtook its market share.

Great Wall opted for a differentiated strategy upon its initial entry into the EV market, launching the Ora brand focused on appealing more to female customers with budget-friendly optionsThe introduction of models like Ora IQ and Ora R1 targeted a specific market segment, but faced challenges both from rising raw material costs and decreasing subsidies under new government policies aimed at regulating the EV market.

The impact of these new subsidy policies became evident throughout 2022. With many popular models falling under new restrictions, sales figures and profit margins for the Ora brand suffered dramatically

For instance, the sales of the Ora Black Cat plunged by 33.9% in the first quarter compared to the previous year, adding to the woes of Great Wall Motor’s overall performance.

Despite setbacks, Great Wall Motor is aiming high with its strategic plan for 2025, which includes ambitious goals such as achieving annual sales of 4 million vehicles, with EVs making up 80% of that figureThe company's approach emphasizes a shift towards premium offerings, which could involve modifying product lines and enhancing brand perception.

The evolution of Great Wall Motor is portending significant changesIn response to the growing competition and market trends, the firm has outlined a new product plan focusing on the development of several new models under the Ora brand, specifically targeting higher price points

In contrast, its experiences with the WEY brand have shown difficulties in consolidating the high-end market segment, with inconsistent sales results failing to meet expectations.

With the announcement of major investments in R&D totaling approximately 100 billion RMB in the next five years, Great Wall seeks to leverage innovation as a means of reclaiming its competitive edge in a saturated marketAlthough the company has consistently increased R&D spending, concerns remain about profitability margins as growth in R&D often outpaces revenue growth.

In conclusion, Great Wall Motor faces a multifaceted challenge as it navigates a transitional phase where traditional vehicle appeal dwindles against a backdrop of technologically advanced alternativesWith the Haval H6’s decline underlined by the ascendancy of EV sales, the company must pivot rapidly while embracing innovation and exploring new market segments to remain viable in the ever-competitive automotive sphere.