Consumption is generally weak under the epidemic, but high-end consumption is hot against the market.It has become a unique economic phenomenon in the past two years.

The data also support the authenticity of this phenomenon. According to a report released by Bain earlier this year, China's high-end consumer goods market totaled nearly 471 billion yuan in 2021, more than double the 234 billion yuan spent in 2019 before the outbreak. Among them, total consumption increased by 48% in 2020 compared with the same period last year, and will continue to grow by 36% in 2021.

As the largest consumer goods in the optional consumption, the hot sales of luxury cars are quite representative.

According to the Federation of passengers, sales of luxury cars in the domestic market were 2.79 million in 2020, an increase of 19.9% over the same period last year, and will continue to grow by 4.9% in 2021.

And this is the rise of luxury cars against the market for many years in a row.Sales in China's auto market fell for three consecutive years in 2018, 2019 and 2020, with sales of new domestic narrow passenger cars down 3.9%, 9.2% and 6.3%, respectively. But over the same period, sales in the luxury car market have risen by double digits.

As a result, the performance of luxury car dealers has been quite eye-catching over the past few years. The largest luxury car dealer in China$ZHONGSHENG HLDG (00881.HK)$Has achieved double-digit income growth for several years in a row. Last July, Zhongsheng Group also received an investment of HK $2.995 billion from Hillhouse Capital.

But the good times didn't last long.After entering 2022, luxury car consumption also began to slow down.According to the federation of passengers, retail sales of 1.265 million luxury cars in the domestic market in the first half of the year fell 14 per cent from a year earlier, a drop larger than the industry average (down 7.2 per cent).

Naturally, Zhongsheng Group can not escape the influence of the environment. According to the semi-annual report, its operating income was 86.029 billion yuan, down 1.52% from the same period last year, and the net profit attributed to the parent company was 3.425 billion yuan, down 7.31% from the same period last year. This is the first half-yearly decline in revenue since it went public.

But the plight of luxury car brands is actually not as bad as it seems. Judging from the financial performance, the sales of the three BBA companies have fallen, but their profits are still growing. The reason behind this is that there has been a division in the field of high-end consumption.The deceleration of entry-level luxury car sales is the most prominent, while high-end luxury cars continue to grow against the trend.

At the same time, it also reveals more hidden changes in the distribution of social wealth to some extent.

Those who get the high end get the world.

Guanghui Automobile has been the largest car dealer in China for many years, topping the Top 100 dealer list for six consecutive years from 2016 to 2021.

But in July this year, on the "Top 2022 car Dealers list"Zhongsheng Group snatched the crown of Guanghui Automobile.With revenue of 175.1 billion yuan in 2021, Zhongsheng Group was successfully promoted to the top of the industry.

In fact, the change in the status of the two industries is not surprising-- in the past two years, Guanghui Motor's income growth was weak, profits showed an overall downward trend, and the decline was obvious; on the contrary, Zhongsheng Group's income and profit performance continued to rise, constantly creating the best performance in history, and the two performances were completely contrary to each other.

Behind this, apart from the differences in the level of operation and management,To a large extent, it is due to the huge difference in sales structure between the two enterprises.

More than 40% of Zhongsheng Group's income comes from Mercedes-Benz, including Lexus, BMW and Audi. By the end of 2021, its luxury brand outlets accounted for 61.7%. Guanghui Automobile covers more than 50 different grades of passenger car brands at home and abroad, and its luxury brand network accounts for 31.81%.

The difference in sales structure eventually led to a completely different operating performance of the two companies.

In 2021, Zhongsheng Group sold 899600 cars (including used cars) and 786 stores, while Guanghui not only sold less than Guanghui (667500), but also had only about half as many stores as its competitors. but the income has achieved to catch up with Guanghui cars.

Similarly, the top dealer groups in the top 100 dealers list in 2022, such as Lixing Hong and Yongda Group, are also dominated by luxury cars, so their sales are lower than their competitors, but their income can catch up with their competitors and rank in the forefront. They are all beneficiaries of hot sales of luxury cars.

And looking at the changes in the automobile industry in recent years,The hot sale of luxury cars has become a major trend that can not be ignored.As mentioned earlier, under the background of the overall malaise of the car market from 2018 to 2020, it still maintained a high growth against the market.

The Volkswagen (which refers to ordinary cars, not "Volkswagen" brands) market was basically stagnant from 2016 to 2021, while the luxury market segment is expected to increase its share at an annual rate of between 8% and 14% over the same period, market agency McKinsey said in its report "five important Trends in the Global luxury car sector" released in August.

In addition, profit margins in the luxury car market are in double digits, while those in the middle and low end of the car market are still pitiful single digits over the same period.

In other words, in today's market environment,It is difficult for the overall car market to grow in the next few years, but the structural growth of the luxury car market is still going on.This is a structural dividend for luxury cars.

This differentiation of the market and structural dividends are quite in line with a buzzword in the past two years, "K-shaped recovery". Since the outbreak, from UN reports to government officials, from research by think tanks and institutions to KOL speeches, there has been a frequent emergence of a word called "K-shaped recovery".

The so-called K-shaped recovery is a post-recession scenario.Its most obvious feature is differentiation.That is, there is a significant imbalance in different regions, different industries, different departments, different enterprises and different people from the crisis to the recovery.

Xiao Gang, former vice chairman of the CSRC, said at a meeting in 2021, "although the overall economy is recovering, the stock and housing markets are rising, and all kinds of asset prices are rising, but the situation of some people, even most people, is getting worse. "

A report by Ren Zeping's team last year summarized it as "consumption downgrading and upgrading, inflation for the rich and deflation for the poor".

Industry insiders also generally believe that the hot sales of luxury cars in recent years are closely related to the polarization under the influence of monetary policy during the epidemic. thereforeIt is difficult for automobile consumption to improve as a whole, but only a structural dividend.

Redifferentiation of luxury car market

Look at the whole consumer marketIn fact, the logic of "consumption degradation and consumption upgrading coexist" is universal.

For example, against the backdrop of sluggish overall consumption this year, luxury consumption has stepped out of the structural market. In the first half of this year, the French luxury goods giant$LVMH Moet Hennessy Louis Vuitton SE (LVMHF.US)$、$Hermes International SA (HESAY.US)$Revenue growth of Kaiyun Group (Kering) and Kering Group (Kaiyun) all exceeded 20%.

A report released in June by Bain, a consultancy, predicts that global luxury consumption will grow by 10% to 15% year-on-year in 2022.

In this contextBetting on high-end consumption has become one of the important main lines of institutional investment.Hillhouse Capital is still willing to bet after Zhongsheng Group's share price has risen dozens of times, and the probability is also based on this logic.

Strictly speaking, however, Zhongsheng Group is not fully classified as high-end consumption, and about 40 per cent of its income structure still comes from non-luxury brands.

And within the luxury brand, there is also an obvious differentiation in market performance.

以$DAIMLER AG ADR (DMLRY.US)$For example (currently more than 40% of Zhongsheng Group's income comes from Mercedes-Benz), Mercedes-Benz delivered more than 355800 new cars in China in the first half of the year, down 19% from the same period last year. While high-end luxury models are growing against the market--Sales of S-class cars rose 13% from a year earlier, while sales of ultra-high-end brand Maybach rose 62% from a year earlier.

Those who also belong to German three luxury cars$BAYER MOTOREN WERK (BMWYY.US)$Similar to Audi, sales of the two companies in the Chinese market fell 18.9% and 24.2% respectively in the first half of the year compared with the same period a year earlier. Among them, the sales of entry-level models all experienced a sharp decline in the first half of this year, while the decline of luxury high-end models was significantly smaller than that of entry-level models.

There are many reasons for BBA's collective stall in the first half of the year:The epidemic hit Shanghai, Beijing, Shenyang, Changchun and other places, causing car companies to stop production, poor logistics, sales were also affected; new energy vehicles gradually stronger wings, began to eat the BBA market, and so on.

But one of the reasons that can't be ignored isMiddle-class consumers, who rely on entry-level and medium-sized luxury cars, are less willing to spend in the changing new situation.For example, the Internet upstart, financiers and people within the system have suffered different impacts such as layoffs, wage cuts and benefits cuts since the beginning of this year, and are more inclined to reduce consumption.

Luxury car brands are not betting on the middle class. They are launching high-end, high-priced models in order to capture more rich people and make higher profits. This is also in line with the previous McKinsey's forecast for the car market.

Mercedes-Benz, for example, has launched a strategy to focus on high-priced luxury models in recent years, and plans to increase its sales share of its high-end models by about 60% by 2026 compared with 2019. To this endMercedes-Benz decided to spend more than 75 per cent of its investment on the most profitable ultra-luxury products and cut three entry-level models.

In terms of financial performance, the focus on the high end has brought higher profit margins.Sales of the three BBA companies have fallen, but profits are still growing.According to the data, BMW Group's first-half net profit was 13.232 billion euros, up 73.6 percent from the same period last year; Mercedes-Benz Group's first-half net profit was 6.79 billion euros, up 2.5 percent from the same period last year; Audi (including Bentley, Lamborghini and Ducati) made an operating profit of 4.9 billion euros in the first half, an increase of 58.5 percent over the same period last year.

But Zhongsheng Group is not so lucky. Strictly speaking, Zhongsheng Group does not belong to the target of high-end consumption, and his performance is affected by the overall consumption trend of the automobile market. Therefore, it can maintain a certain degree of growth resilience in the downward period of the market, but it is difficult to reverse the high growth and outshine others.

Hillhouse also suffered a failure in this investment. Last year, the subscription price for its investment in Zhongsheng Group was 63.3964 Hong Kong dollars, but by the close of trading on September 6, Zhongsheng Group's share price had reached 34.50 Hong Kong dollars per share.Hillhouse lost as much as 45% on the investment.

Write at the end

According to the data, the total sales of luxury cars in China was 2.5291 million in 2020, and the penetration of luxury cars in the overall passenger car market increased to 13.0%.Compared with the penetration level of 25% of developed countries, which is 30%, there is still a lot of room for growth.

"those who get the high end get the world" was once the success rule of the automobile and automobile distribution industry. Luxury brands represented by BBA and dealers represented by Zhongsheng Group are all beneficiaries of this trend.

但The process of any market penetration is often not continuous growth, but has ups and downs, twists and turns.In the face of the downward pressure on consumption brought about by the economic downturn, the track that can always maintain a high level of prosperity is getting narrower and narrower.

In the long run, the rise of new energy vehicles is the biggest trend in the industry.

当$Tesla (TSLA.US)$、$BYD COMPANY (01211.HK)$、$NIO Inc (NIO.US)$When gradually making efforts in the high-end market and striving for a larger market share, luxury car brands can only choose to develop in a "more luxurious" direction in order to ensure their brand value and status.