In a significant corporate maneuver, Beijing Automotive Group's subsidiary, BAIC Blue Valley, has announced a rebranding initiative, transitioning its name from "BAIC Blue Valley New Energy Technology Co., Ltd." to "BAIC Ji-Hu New Energy Automobile Co., Ltd." This move aims to bolster brand recognition and enhance market presence, particularly in the fiercely competitive electric vehicle (EV) landscape.

The reasons behind this name change stem from BAIC Blue Valley's current struggles within the rapidly evolving new energy vehicle sectorInitially revered as a pioneer, the company has witnessed a swift decline, leading many to question its strategies and brand identity.

Seven years ago, when the company went public, it had a promising outlook, boasting advantages in research and development that helped it secure the title of the first publicly traded new energy vehicle entity in China—akin to Tesla’s position in the USAHowever, in just a few years, the dynamics of the EV market shifted dramatically, resulting in a loss of market share and consumer trust.

Facing this daunting situation, the company is now looking to its home-grown brand, Ji-Hu, to revitalize its image and performanceThe weight of returning to past glories lies heavily on Ji-Hu’s shoulders, and only time will tell if this new direction will yield positive results.

Strategic Realignment

Before the name change was made public, BAIC Blue Valley had already started reallocating capital to focus more on the Ji-Hu brand and its corresponding projectsA key area of emphasis is the enrichment of their range of extended-range electric vehicles (EREVs), while Ji-Hu's counterpart brand, Xiangjie, will concentrate on product upgrades and development.

The reallocation of funds is sourced from a capital increase conducted earlier in 2023, wherein BAIC Blue Valley raised approximately 6.03 billion yuan

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Originally, these funds were intended to support six different initiatives, yet upon analyzing market demands and overall economic efficiency, the company decided it was prudent to adjust the financial directions for some of its projects.

In detail, certain segments of pre-planned projects such as the upgrade of the "ARCFOX Alpha T" vehicle and other automotive product developments were deemed ready to proceedConsequently, the company has decided to complete the fundraising projects associated with these initiatives.

However, several other smaller initiatives under these projects may be halted or slowed downFor instance, while the ARCFOX Alpha T upgrade project initially included three models, the company now plans to cease development on one of themSimilar decisions were made for other models, illustrating a decisive shift in product focus.

Moving forward, the funds that were intended for canceled or postponed projects will be redirected into enhancing existing initiatives and launching new onesThis includes additional funding for the "scene-based product skateboard platform development project" and the "ARCFOX Alpha T5 model upgrade project," as well as entirely new projects that incorporate EREV models and enhance the overall product line.

Among these new endeavors is the enhancement of the Alpha T5 EREV, slated for an investment of about 348 million yuan, with 200 million sourced from the raised fundsSimilarly, the Alpha S5 model upgrade also anticipates substantial investmentThis shift toward increased investment in EREV technology highlights a growing recognition of market trends favoring hybrid solutions.

BAIC Blue Valley has publicly reassured investors that the development of Xiangjie’s extended-range model is proceeding as planned, asserting that the company possesses the necessary research capabilities and technical reserves to competitively pivot towards this product category.

Regarding the evolving funding strategies, it's clear that the company has positioned itself to intensify its foray into the EREV segment, with both Ji-Hu and Xiangjie brands gearing up to tap into this new avenue.

Market Dynamics

Unlike traditional internal combustion engine vehicles that transition to electric by implementing EREV and plug-in hybrid systems, BAIC Blue Valley has always possessed electric vehicle DNA

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Their subsidiary, BAIC New Energy, founded in 2009, was among the first players in China’s burgeoning new energy vehicle market.

The company launched its first fully-electric vehicle, the E150EV, in 2011 and has since followed up with several models across various market segments under the EC, EX, and EU seriesThis early entry positioned them favorably in a nascent but rapidly growing sector.

BAIC's innovative spirit counted heavily on the advent of ride-hailing services, striking partnerships with platforms like Didi and leveraging the burgeoning demand for electric taxisData from Dongxing Securities indicated that from 2013 to 2017, BAIC New Energy sold over 180,000 vehicles, placing it at the helm of the pure electric vehicle market in terms of total salesBy November 2017, BAIC ranked second globally in EV sales, only behind Tesla.

The early successes fostered audacity within the BAIC Group, leading to a strategic pivot in 2018. Executives made bold declarations to phase out traditional gasoline vehicles entirelyCEO’s public statements voiced plans to halt sales of traditional gas passenger vehicles by 2020 and aiming for complete cessation by 2025.

Subsequently, BAIC Blue Valley focused unwaveringly on electric vehicle development, driving the Ji-Hu brand forward, collaborating with tech giants like Huawei to enhance smart mobility capabilities.

In 2020, the launch of Ji-Hu’s first mass-produced model, the Alpha T, was met with high hopesThis was followed by the release of the Alpha S the subsequent year and the Alpha S Huawei HI edition in 2022. However, despite the momentum, market reception was lukewarm, driven by mismatches in technology rollout and marketing efforts, with Ji-Hu only achieving sales of 6,000 vehicles in 2021 and 13,000 in 2022.

Simultaneously, the ride-hailing market began to saturate, exacerbating BAIC Blue Valley's challenges as competitors surged ahead

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From 2020 to 2023, BAIC New Energy’s annual sales figures indicated a stark decline from 150,600 vehicles in 2019 to just 25,900, 26,100, 50,200, and then 92,200 in subsequent years, highlighting a significant downward trajectory.

Challenges Facing BAIC

The sales slump has led to corresponding declines in financial performanceIn retrospect, 2018 and 2019 were peak years for BAIC Blue Valley's financial health, with revenues of 18.09 billion yuan and 23.59 billion yuan, correlating with minimal profits.

Following this advantageous phase, however, the tide shifted sharplyThe company's revenue plummeted to 5.27 billion yuan in 2020, accompanied by significant losses amounting to 6.48 billion yuan—a shocking turnaround.

This precarious situation has not shown signs of recoveryAccording to estimates, BAIC Blue Valley expects net losses between 6.5 billion and 6.95 billion yuan for 2024 alone—adding pressure as the cumulative losses from 2020 to 2024 are anticipated to surpass 29 billion yuan, averaging losses of over 5.8 billion yuan yearly.

The figures indicate that the sales model of BAIC took a turn towards unprofitabilityResearch by Cinda Securities indicated that in the first half of 2023, the company reported sales of 28,000 vehicles, with an average loss of approximately 86,900 yuan per vehicle sold—albeit a slight improvement compared to previous losses.

Adding to the complexity, BAIC Blue Valley's cash flow remains a pressing concernRecent years have shown that its liquid assets consistently fail to cover short-term liabilitiesAs of late September 2024, the company reported cash reserves of 3.716 billion yuan against short-term debts of around 7.743 billion yuan.

In response to these financial challenges, BAIC Blue Valley has resorted to multiple rounds of fund raising since going public, accumulating over 41 billion yuan since 2018, in addition to receiving approximately 10.49 billion yuan in government subsidies over the same period.

Such dependency on external funding raises concerns about the sustainability of the business model

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