GAC GROUP has issued a stark profit warning for 2025, forecasting a net loss attributable to shareholders of up to 9 billion yuan. The company also failed to achieve its annual sales target of 2.3 million vehicles. GAC Honda has emerged as the most significant contributor to the parent company's disappointing performance. By the end of last year, cumulative sales for GAC Honda reached 351,900 units, a sharp decline of 25.22% year-on-year, making it the brand with the largest sales drop within the group.

The worrying sales trend has continued into the current year. According to the January production and sales report, GAC Honda sold only 4,558 vehicles, representing a dramatic year-on-year plunge of 69.86%.

In an effort to win back customers, GAC Honda has been implementing significant price cuts. For instance, the "P7" model, with a guide price of 199,900 yuan, is now being sold for 149,900 yuan, a 25% reduction compared to the previous year. Staff at a 4S store indicated that the initial high launch price led to poor sales. The original six color options have reportedly been reduced to just one, and there are considerations to reduce the specifications for subsequent P7 models.

Six months ago, GAC Group Chairman Feng Xingya announced that the company was entering a "wartime state," pledging to win "three major battles" crucial for its future and to rebuild a new GAC. However, based on the latest performance figures, achieving this "new GAC" remains a formidable challenge for Feng Xingya.

The projected loss of up to 9 billion yuan marks the company's largest decline in a decade. GAC Group's recent performance forecast estimates a net profit attributable to shareholders in the range of -8 billion to -9 billion yuan. This contrasts sharply with the profit of 824 million yuan recorded in the same period of 2024, representing the most significant drop for the group in nearly ten years.

In its performance预告, GAC Group explained that during the reporting period, fierce competition in the automotive industry and rapid restructuring of the industrial ecosystem were key factors. Although vehicle sales showed sequential improvement from the second quarter, the full-year sales volume fell short of expectations. In response to the sharp market changes, the company quickly adjusted its strategy and increased sales investments.

Simultaneously, GAC Group emphasized that due to sales performance and adjustments in the product structure of its self-owned new energy brands, it expects increased impairment provisions for intangible assets and inventory compared to the previous year. Furthermore, some joint ventures are accelerating their transition to new energy, involving production line adjustments and optimizations, which has led to a further reduction in the company's investment income due to asset impairments at these joint ventures.

Signs of GAC Group's slowdown were evident earlier. As far back as 2023, the company's revenue growth rate began to decelerate, dropping from 45.72% to 17.62% year-on-year. By 2024, revenue growth turned negative. The decline in profits was even more pronounced, plummeting from a net profit of 8.064 billion yuan in 2022 to just 824 million yuan in 2024—a nearly tenfold decrease.

Possibly in response to the "continuous decline" in performance, GAC Group previously initiated the "Panyu Action" reform. This included measures aimed at creating a more operational headquarters, implementing integrated operations for self-owned brands, and introducing an IPD system to overhaul the product development process.

Additionally, GAC Group strengthened operational control over its self-owned brands. A newly established department is now responsible for major client business for the Trumpchi, Aion, and Hyper brands, and will oversee marketing, vehicle sales, and channel development for these marques.

Regarding sales, GAC Group's target for 2025 was to grow sales by approximately 15% from the 2024 base of 2.0031 million vehicles, aiming for around 2.3 million units. However, the actual full-year vehicle sales were approximately 1.7215 million, a year-on-year decrease of 14.06%.

Among its subsidiaries, GAC Honda was a primary factor in this sharp decline. By the end of last year, its cumulative sales of 351,900 units represented a 25.22% drop, the largest within the group.

The situation for GAC Honda has not improved in 2026. The January production and sales report showed sales of only 4,558 units, a drastic 69.86% year-on-year collapse. Production performance was even weaker, with only 9,331 units manufactured in January, down 65.05% year-on-year. This dual decline in production and sales further indicates the brand is in a period of deep adjustment.

Compared to other brands under the GAC Group umbrella, GAC Honda's shortcomings are more apparent. In January, GAC Aion sold 21,600 vehicles, a surge of 171.63% year-on-year. GAC Linc commercial new energy vehicle sales reached 145 units, up 559.09%. GAC Toyota sold 62,600 vehicles, an increase of 9.82%.

Industry observers suggest that GAC Honda's lag is due to its failure to keep pace with the new energy transition. In 2024, Honda China launched a new electric vehicle brand, "Ye," tailored for the Chinese market. Officially, the character "烨" signifies brilliance and radiance.

However, shortly after its launch, the "Ye" brand faced a setback due to homophone-related controversy. Many netizens pointed out that the character can be split into "火" (fire) and "华" (splendor), which together sound similar to "火化" (cremation). In the Changsha dialect, "Ye P" sounds like a local phrase meaning "finished" or "no good," considered an inauspicious connotation.

In response to the public sentiment, GAC Honda quietly removed the "Ye" character from its promotional materials last year, with the "Ye P7" becoming simply the "P7," which remains its flagship model. In October, GAC Honda introduced a promotion offering a direct price cut of 50,000 yuan to boost sales. Contrary to expectations, while the P7 experienced a brief sales recovery following the new policy, volumes only hovered between 1,000 and 1,200 units per month, failing to achieve sustained growth.

This situation has been corroborated by several sales personnel. A staff member at a 4S store in Haidian District, Beijing, confirmed that the 50,000 yuan promotion is still active. The base model with a guide price of 199,900 yuan now starts at 149,900 yuan, while the top-tier model has been reduced from 249,900 yuan to 199,900 yuan, a 25% year-on-year decrease.

An employee at a store in Tongzhou District explained that the high initial pricing led to disappointing sales, and even the standard version continues to sell modestly. The original six color choices have been cut back to only white.

Inventory movement for the P7 also appears sluggish. The staff member noted that most new cars in stock were produced around July or August. Even if a customer orders a new car, it is likely to be delivered from existing factory inventory, suggesting it might be difficult for buyers insisting on a very recent production date.

The employee also revealed that due to the large gap between the guide price and the actual selling price, cost recovery is challenging. Consequently, subsequent versions of the GAC Honda P7 are considering specification reductions.

Zhang Xiang, a guest professor at Huanghe Science and Technology College and Secretary-General of the International Association of Intelligent Transport Technology, commented on the challenges. He noted that on one hand, the traditional fuel vehicle market is being squeezed in a difficult macro environment. On the other hand, GAC Honda has few new energy models, and those it has are selling poorly, failing to capitalize on the era's new energy boom. Additionally, GAC Honda's marketing approaches are considered outdated and struggle to adapt to current market dynamics.

Zhang Xiang pointed out that both new automakers and traditional car companies are embracing new retail models, including selling cars in shopping malls. GAC Honda, however, has largely maintained its traditional offline dealership model, resulting in low customer traffic and a gradually weakening brand profile.