Great Wall Motor Company:Weakness continues in June

Event

Great Wall Motor reported June wholesale shipment data after the marketclose on 9July.

Impact

Weakness across the board: Sales of the Haval brand declined 20% YoY to42k units in June, with weak performance across the board. Sales of the H6dropped 25% YoY to 26k units (YTD: 219k, -3% YoY), the lowest since August2015. The H2(incl. H2s) only sold 5k units, down 58% YoY, partly reflectingthe cannibalisation from the newly launched H4(6k, N.A.). The WEY brandshipped 10k vehicles in June, 598units lower than May sales. Total sales in1H18were up 2% YoY at 472k units, representing 41% of the full year salestarget of 1.16m units.

Why we have a Neutral rating: As we have detailed (More effective productplanning needed, 14June), we are concerned about the cannibalisationamong the key models under the Haval and WEY brands and its weakness inmarketing. The focus on SUVs limits upside potential for sales expansion inthe long term until it moves overseas, which in itself bears margin risk. Wewould turn more positive if we see more effective product planning andmarketing strategies to improve product differentiation or major synergies fromthe co-operation with BMW.

Action and recommendation

We maintain our Neutral rating.