Saic Motor Corporation Limited, once the long-reigning profit champion in China's automotive industry, relied on its two major joint ventures—SAIC Volkswagen and SAIC General Motors—as cash cows for comfortable earnings. However, after a severe profit contraction in 2024 with a net profit of only 1.666 billion yuan, the company reported seemingly impressive results for 2025. On April 2, Saic Motor released its annual report for 2025, revealing an operating revenue of 656.244 billion yuan, a year-on-year increase of 4.57%, while net profit attributable to shareholders surged 506.45% to 10.106 billion yuan. On the surface, this represents a remarkable V-shaped recovery.
A closer examination of the numbers, however, reveals an unconventional profit strategy. Of the 10.106 billion yuan profit, a significant portion came from non-recurring gains—non-current asset disposal gains alone amounted to 4.04 billion yuan, combined with fair value changes in financial assets and the low base effect from 2024, indicating substantial profit manipulation.
Non-current asset disposal gains refer to income from selling long-held assets such as plants, land, equipment, equity in subsidiaries, and long-term investments. Fair value changes in financial assets, such as stocks, funds, and bonds, represent paper gains or losses without actual transactions. These non-recurring items are often used by automakers to embellish earnings when core operations underperform.
In 2024, Saic Motor recorded 5.189 billion yuan in non-current asset disposal gains, while net profit attributable to shareholders was only 1.666 billion yuan, indicating a substantial loss from its main business.
Despite efforts by self-owned brands like IM and MG to fill the gap, the sales structures of SAIC Volkswagen and SAIC General Motors have irreversibly deteriorated. Meanwhile, as a leader in China's automotive exports, Saic's overseas sales growth plummeted to 3.1% in 2025, starkly contrasting with rival BYD's doubling of sales.
In 2025, Saic pursued partnerships with Huawei for the "Shangjie" brand, promoted younger management, and shut down loss-making assets in a bid to revitalize its operations amid a market downturn.
The profit recovery in 2025 was not driven by a rebound in core operations but rather by asset sales and financial engineering. The financial report shows Saic divested equity in subsidiaries, including 100% of SAIC Volkswagen United Automotive Modification Co., Ltd. and 51% of Shanghai Motor Vehicle Recycling Service Center Co., Ltd., while SAIC Hongyan underwent judicial reorganization.
Additionally, the company disposed of long-term equity investments, with investment income surging 87.15% to 13.433 billion yuan, attributed mainly to increased returns from associates and joint ventures, suggesting partial divestment of equity in these entities.
Fixed asset disposals included the closure of older plants by SAIC Volkswagen and SAIC General Motors. For instance, the shutdown of SAIC Volkswagen's Anting Plant No. 1 likely generated disposal gains from land and building sales or leasebacks.
These one-time asset reductions do not reflect earnings from vehicle sales. Behind the 506% growth figure lies a traditional giant struggling between depreciating fuel vehicle assets and costly electrification investments.
The dramatic profit surge is largely due to the exceptionally low base in 2024. That year, SAIC General Motors and its subsidiaries recognized substantial asset impairment losses, causing net profit attributable to shareholders to plunge to 1.666 billion yuan, making the 2025 profit appear exaggerated in comparison.
In reality, the 10.106 billion yuan profit remains far below the 14.1 billion yuan level in 2023 and peaks from earlier years. Excluding non-recurring items, net profit was 7.423 billion yuan in 2025, a significant improvement from 2024's loss but only a modest recovery.
SAIC Volkswagen and SAIC General Motors are undergoing painful restructuring. Sales figures reflect this starkly: SAIC Volkswagen sold 1.024 million vehicles in 2025, down 10.81% year-on-year, while SAIC General Motors saw a 22.99% increase to 535,000 units, though this followed a trough in 2024 and remains far below peak levels.
More concerning is capacity utilization. SAIC Volkswagen's design capacity is 1.92 million vehicles, but utilization fell to 55% with only 1.058 million units produced. SAIC General Motors' utilization was even lower at 37%, indicating nearly half of their production lines sit idle.
For example, SAIC Volkswagen's Anting Plant No. 1 was closed, with equipment relocated to Changsha and Ningbo, while SAIC General Motors' Shenyang Beisheng plant was revitalized by Geely.
Low capacity utilization brings depreciation pressures, a significant challenge for traditional joint ventures. Saic's solution involves reallocating idle capacity from Volkswagen and General Motors to the self-owned "Shangjie" brand. While this reduces costs, it signals the end of the golden era for joint ventures in China.
According to the China Association of Automobile Manufacturers, average capacity utilization in the passenger vehicle industry was about 55% in 2025, with even lower rates for fuel vehicles. SAIC Volkswagen's utilization aligns with the industry average, while Changan Ford and Beijing Hyundai operate at 25%-30%. To transition effectively, Saic has shut down or repurposed inefficient fuel vehicle plants for self-owned brands and new energy vehicles.
Meanwhile, Saic's self-owned brands are striving to compensate but face a significant profitability gap. In 2025, self-owned brand sales (including passenger vehicles, Maxus, IM, and Wuling) reached 2.928 million units, up 21.6%, accounting for 65% of total group sales, marking a structural shift from joint venture-driven to self-owned brand-driven growth.
However, this transition is challenging. SAIC-GM-Wuling contributed 1.615 million sales but with low product prices, primarily serving as a volume driver. IM Motors saw a 23.68% sales increase to 81,000 units but remains small compared to leading EV startups, achieving monthly profitability only in December 2025, with sustained profits still distant.
The true profit contributor is components giant Huayu Automotive, with a net profit of 7.2 billion yuan. This highlights an awkward reality: brand premiums in vehicle manufacturing are eroding due to price wars, forcing Saic to rely more on internal supply chain cycles for stability.
The "Shangjie" brand, developed with Huawei, launched its H5 model in September last year, quickly entering the 150,000-200,000 yuan market segment. While benefiting from Huawei's brand appeal, this partnership also means profit sharing. For Saic, it is a shortcut to smart technology but also a compromise under sales pressure. Self-owned brands have taken the sales baton but not yet the profit baton.
While challenges in the domestic joint venture segment are long-standing, slowing overseas growth emerged as a new concern in 2025. As a pioneer in China's auto exports, Saic long held the top spot, but 2025 data signals risks.
Export growth slowed sharply, with overseas sales reaching 1.071 million units, up only 3.09% year-on-year. Although still substantial, this near-stagnation contrasts sharply with previous rapid growth. By comparison, BYD's overseas sales surpassed 1 million units for the first time, surging 145%.
MG brand sales exceeded 300,000 units in Europe, maintaining its position as the best-selling Chinese brand there, but growth was constrained by anti-subsidy investigations and tariff barriers. Saic responded with hybrid models like the MG3 HEV to bypass restrictions and promoted local production in Indonesia and India, yet geopolitical friction raises barriers to expansion.
Revenue from "other regions" grew 15.6%, higher than domestic growth but slower than previous doubling trends, indicating Saic's export engine needs new momentum.
Significant cash flow volatility also hints at financial risks and operational strain. Net cash flow from operating activities fell 50.47% to 34.3 billion yuan in 2025 from 69.27 billion yuan in 2024, which Saic attributed to changes in auto loan business scale at subsidiary SAIC Finance.
Amid intense price wars in 2025, automakers increased financial penetration to boost sales. The fluctuation in SAIC Finance's loan scale suggests Saic may be bearing higher financial risks or advancing more funds to clear inventory or stimulate demand.
When vehicle sales profits cannot cover the cost of financial services, cash flow suffers. Although the 34.3 billion yuan inflow remains solid, the halving indicates tighter finances.
Confronting these challenges, Saic is betting on "technology foundations" and cost reduction. R&D spending totaled 21.7 billion yuan in 2025, but the ratio to revenue was only 3.36%, far below BYD's 7.8% and even lower than some EV startups.
Saic emphasized "seven technology foundations," including solid-state batteries and the Galaxy full-stack solution. Semi-solid-state batteries have been mass-produced in the MG4, and a pilot line for all-solid-state batteries is operational, representing key barriers in the EV race. However, it remains uncertain whether these technologies can grant market pricing power like BYD's Blade Battery and DM-i system. Currently, Saic's tech appears defensive, aimed at catching up rather than leading.
Additionally, Saic is pursuing extreme cost-cutting to squeeze out profits. Measures include dissolving the commercial vehicle division, judicial reorganization of SAIC Hongyan, and closing loss-making direct stores. These painful steps led to significant asset impairment losses but shed historical burdens. This "big bath" accounting provided a short-term earnings boost in 2025 while clearing obstacles for future health.
Saic in 5 resembles a critical patient undergoing major surgery. The profit surge stems from a low base and asset disposals rather than genuine operational recovery.
The real test lies in 2026 and beyond. Self-owned brands must evolve from volume drivers to profit drivers; overseas markets must find gaps in trade barriers to reaccelerate; and investments in solid-state batteries and smart tech must generate brand premiums akin to the joint venture era. Chairman Wang Xiaoqiu's targets of 5 million vehicle sales and 700 billion yuan revenue mean Saic must advance further from current levels.
Excluding 4 billion yuan in non-current asset disposal gains and financial asset fluctuations, has Saic's core business truly bottomed out? Amid competition from BYD, Geely, and Huawei-affiliated brands, the era of easy profits from Volkswagen and General Motors is over. Saic now fights a tough battle for a ticket to the next phase of the new energy vehicle race.
Comments