The automotive industry is always running on the edge of financial unpredictability; Jianghuai Automobile (JAC) exemplifies this fine line between struggle and successRecently, JAC's financial report has shown signs of distress—revenue is down, and the adjusted net profit is dipping into the redYet, against this backdrop, the company's stock has reached record highs, stirring curiosity about the juxtaposition of performance indicators and market sentiment.

In the latest third-quarter report for 2024, JAC revealed a revenue of 32.27 billion yuan, marking a decrease of 5.02% year-on-yearInterestingly, the net profit attributable to shareholders jumped to 625 million yuan, representing an impressive rise of 239.86%. However, if we look closely at the underlying dynamics, the adjusted net profit paints a different picture, revealing a loss of 231 million yuan compared to a loss of 529 million yuan in the previous yearThe significant increase in net profit can primarily be attributed to non-recurring gains; the company recorded an asset disposal profit of 580 million yuan.

Historically, JAC has demonstrated a pattern of achieving net profit increases through one-off advantagesBetween 2017 and 2023, JAC suffered continuous losses in their adjusted net profit, totaling over 11 billion yuan, with net profit losses recorded only in 2018 and 2022. Such a financial trajectory raises questions about the company's sustainability in the fiercely competitive auto market as it continues to rely on non-operational income to mask operational deficiencies.

Jianghuai Automobile operates as a comprehensive automotive group, producing a full range of commercial and passenger vehicles as well as powertrainsTheir production encompasses categories like SUVs, MPVs, sedans, trucks, pickups, and busesThis diverse portfolio offers JAC a framework to capture varying segments of the market, yet struggles with market share have hindered their progress.

In terms of volume, the first nine months of 2024 saw JAC's total sales dip by 4.72%. Breaking it down, the passenger vehicle segments—SUVs, MPVs, and sedans—experienced declines of 22.41%, 18.07%, and 9.05%. Although the sales of JAC’s new energy passenger vehicles crept up by 1.48% to reach a total of 21,576 units, the overall narrative remains concerning, particularly with a notable 15.93% decline in September.

The stock market, however, is painting a different picture, with JAC's shares surging recently, hitting a record high of 42.22 yuan on November 5. This paradox begs the question: what is driving such optimism in light of the company's financial challenges?

Market watchers have increasingly placed their bets on JAC becoming the “next Seres,” driven largely by the anticipation of a significant new model.

The standout news from JAC in recent months has been the collaborative development of a luxury electric vehicle model named "ZunJie," in partnership with tech behemoth Huawei

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According to broker reports, ZunJie is positioned as a premium electric sedan expected to debut at the Guangzhou Auto Show on November 15, with a planned market launch in the first quarter of 2025.

Market statistics for the luxury EV segment highlight that the top three bestsellers during the first nine months of 2024 were vehicles like the Mercedes S-Class, Porsche Panamera, and Maybach S, each achieving monthly sales exceeding 1,000 unitsZunJie's core advantages, experts believe, lie in its technological prowess and the high-end branding that Huawei has successfully cultivated through its marketing strategies.

Huawei's Executive Director Yu Chengdong has boldly stated that ZunJie exceeds the likes of Maybach and Rolls-Royce Phantom in luxury and high-end positioningThe aspiration behind the brand suggests a focus not just on vehicles, but on a lifestyle marked by prestige and advanced technology.

In media circles, ZunJie has been dubbed the "domestic Maybach," indicating the high expectations surrounding its launch.

Huawei’s investment in the automotive sphere extends beyond JAC; they are working collaboratively with several other manufacturersThis “Four Realms” strategy includes the AITO M5 with Seres, the LUXEED models via Chery, and the STELATO with BAIC New Energy, positioning JAC’s ZunJie as the flagship model of the group.

Each model in this quartet has its distinct positioning, with ZunJie being labeled as ultra-premium in scopeYu Chengdong described the lineup's segments, indicating that Jianghuai's ZunJie is tailored for the ultra-high-end market, contrasting with the more accessible offerings from their other collaborations.

The AITO brand, in particular, has been hailed as a rising star in the new energy vehicle sector, often reigning as the sales leader with models like the M9 consistently exceeding sales of 500,000 units each month.

The success of AITO raises hopes that ZunJie can replicate this trajectory, potentially helping JAC emerge from its recent profitability pitfalls

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Analysts speculate that if ZunJie matches the sales performance of AITO, it could shift JAC's overall market performance significantly.

Research analysts have suggested that ZunJie is not just a model launch but rather a strategic maneuver that could redefine JAC’s trajectory in the passenger vehicle market.

A research report from Everbright Securities highlighted the potential for ZunJie to break the dominance of foreign brands within the luxury market segment, with deliveries that may push JAC’s sales to unprecedented levels.

The stakes are high; should ZunJie perform well in the ultra-luxury segment similar to AITO's exemplary performance, JAC may very well reverse the downward trend in revenue and halt the slide into negative profits.

On November 5, JAC's stock closed at 42.02 yuan with a market capitalization of approximately 91.77 billion yuan, placing it firmly in historic high territorySince the beginning of 2024, share prices have surged by 160%. The enthusiasm in the market reflects hopeful speculation about JAC becoming the “next Seres.”

However, questions loom large over whether JAC can truly transform into the next SeresWill ZunJie be the salvation for JAC, reversing its declining revenue and negative adjusted net profits? Several factors remain in play, including the sales performance of ZunJie, the timeline of its release, and the pace of technological advancements embedded in the new vehicles.

Beyond mere speculation, JAC's substantial investments into ZunJie indicate their serious commitment to making this model a commercial success.

New Energy Vehicles as a Key Move

The collaboration with Huawei on ZunJie represents a critical pivot for JAC into the N.E.V. landscape, positioning it amid rapid growth trends in the sector.

Back in March,Anhui province ecological environment department publicized documents showing that JAC has laid out plans for two electric vehicle platforms: DE and X6. The DE platform is designed to meet the needs of the budget-conscious segment, while covering sedans, SUVs, and MPVs.

On the other hand, the X6 platform represents a new luxury electric framework that capitalizes on Huawei's technological innovations to seize a share of the high-end market, covering vehicle classifications from B to D-grade

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ZunJie is a product emerging from the X6 platform and is anticipated to set new standards in the industry.

On September 30, JAC announced a fundraising plan aimed at generating 4.9 billion yuan to support the development of high-end smart electric platforms—specifically the ZunJie project, with a total investment earmarked at 5.87 billion yuan.

Moving forward, JAC has declared it will focus on advancing electric propulsion systems, smart driving, and vehicle connectivity collaborations, actively pursuing innovation and upgrades alongside Huawei.

Through this series of strategic maneuvers, JAC aims to establish a strong foothold in the new energy vehicle market, leveraging Huawei’s technological strength.

According to financial records, JAC is recognized as a pioneer in China's new energy vehicle industry, having consistently invested in research and development since 2007. However, despite its technological advancements, the company has yet to capture significant market share.

In the first nine months of 2024, JAC's cumulative sales amounted to 315,335 units, which includes 131,382 passenger vehicles, while new energy passenger sales reached 21,576 unitsThese figures accounted for 16.42% and 6.84% of the total sales, respectivelyTo put things in perspective, Seres managed to sell 316,713 units of new energy vehicles during the same period, surpassing JAC's total vehicle sales.

Compared to competitors such as BYD, Geely, Great Wall, and Changan, JAC's new energy passenger vehicle sales remain significantly lower.

Beyond Huawei, JAC has forged other alliances with industry giants, including a partnership with Volkswagen.

Earlier this year in March, JAC announced plans to inject 6.5 billion yuan into Volkswagen Anhui, maintaining a 25% equity share in the venture, while Volkswagen retains 75% ownership.

Volkswagen Anhui, formerly Jianghuai Volkswagen, was established as Volkswagen's first joint venture focusing on the N.E.V. segment in China.

Currently, Volkswagen Anhui boasts a state-of-the-art manufacturing facility, completed just 18 months after breaking ground in July 2021. This plant specializes in producing electric vehicles using Volkswagen’s MEB modular electric drive platform, with their first model expected by the end of 2023.

Recently on July 17, Volkswagen Anhui launched the ID.Yuzhong, their first luxury SUV branded for the Chinese market, starting at a price of 209,900 yuan

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