By ZHAO Boyuan, ZHOU Shuqi
In GAC's H1 2023 report, its electric vehicle (EV) subsidiary, Aion, celebrated two consecutive months of profitability. It has achieved this turnaround in just six years, outpacing Li Auto (eight years) and Tesla (17 years). Aion sold over 40,000 units monthly for five consecutive months, ranking only behind BYD and Tesla in China's EV market.
However, when you visit Aion's showrooms, the situation appears different. Compared to bustling crowds at nearby BYD and Neta showrooms, Aion's outlets often seem less busy.
Established in 2017 under the state-owned automaker GAC, Aion is one of China's early companies to develop its independent fully electric vehicle platform. This allowed Aion to launch EV models ahead of the competition, gaining a crucial first-mover advantage.
However, slim profit margins initially hindered growth. To expand and reduce costs, Aion primarily focused on the business channel. The plan was to introduce premium models in the future to enhance the brand's image and increase profits. Aion's models catered to both households and ride-hailing services, rapidly gaining popularity.
Despite six years in the market, many still associate Aion primarily with the ride-hailing business. This strategic focus on supplying vehicles to ride-hailing platforms boosted sales and valuation for Aion. However, sustainable growth hinges on the consumer channel. From 2021 to H1 2023, consumer channel sales declined despite overall sales growth, creating a contrast between impressive revenue figures and vacant stores.
XIAO Yong, deputy director-general of Aion, said Toyota and Volkswagen are the two biggest sellers in the business market. Aion gains popularity in the ride-hailing market due to its "exceptional durability and high quality."
However, it's important to note that Toyota and Volkswagen's significant sales base contributes to their prominence in the business market, which differs from Aion's situation. Overreliance on the business market can hinder sustainable growth and brand expansion, especially if consumer perceptions remain fixed. This is why Aion is striving for transformation, introducing mid-to-high-end models like Aion V and Aion LX, and creating a new premium brand called Hyper to reshape consumer perceptions.
Aion also aims to reform its corporate structure, introducing external strategic investors and share incentive plans to boost the initiative and competitiveness of its core R&D team. However, internal sources suggest that the company's efficiency remains relatively low, reflecting in its slower pace of model updates.
In H1 2023, cumulative retail sales of new energy vehicles reached 3.09 million units, a YoY increase of 37.3 percent. However, pure electric vehicle sales increased only slightly (20 percent), while hybrid vehicle sales saw substantial growth (97.9 percent). Aion's upcoming focus should be on addressing these gaps, building skills, and improving brand recognition as quickly as possible.
