Great Wall Earnings: Net Loss on Recurring Basis, Rising Expenses To Linger

No-moat Great Wall Motor's first-quarter 2023 recurring bottom line plunged 89% year over year to a net loss. Excluding the first quarter of 2020 when the pandemic broke out, this would be the first recurring net loss the company recorded in the past decade. We attribute the earnings decline to sluggish vehicle sales and mounting expenses in the quarter. The heightened operating expenses, due to price promotions, dealer rebates, and the company’s step-up in efforts toward vehicle electrification, offset the gains in average selling price on sales mix improvement (Tank brand) for the period. Our cautious view on the company’s profitability trend and new energy vehicle, or NEV, strategy is unchanged. We expect the elevated level of expenses are here to stay given the company’s step-up in research and development efforts toward vehicle electrification.