Core Insights - Zhengtong Automobile reported a total revenue of 20.747 billion RMB for the year 2024, with a significant increase in ordinary shareholders' loss to 1.709 billion RMB [1] - The company sold a total of 55,054 new vehicles, with mid-to-high-end brand sales accounting for 46,756 units, and new energy vehicle sales reaching approximately 5,759 units, representing 10.5% of total sales, both showing year-on-year growth [1] - The logistics business generated revenue of 350 million RMB, with vehicle logistics dispatch volume reaching 254,000 units, and the used car business saw total sales of 14,000 units, a year-on-year increase of 27% [1] Financial Performance - The company achieved after-sales service for 1.1021 million vehicles, generating after-sales service revenue of approximately 3.195 billion RMB [1] - In Q4 2024, the retail volume experienced a remarkable growth of over 120% year-on-year [1] Strategic Developments - Zhengtong Automobile is part of Xiamen Guomao Holdings Group and operates a network of 4S dealerships for various mid-to-high-end brands [2] - The company ranked 18th in the "2024 China Automobile Dealer Group Top 100" and was included in the "2024 China Automobile Top 100 Dealer Group - New Energy Sub-list" [2] - To support sustainable development, the controlling shareholder plans to inject approximately 1 billion RMB into the company to optimize its financial structure and enhance risk resilience [2] Business Operations - The company is focusing on maintaining its core business in mid-to-high-end brand dealerships while enhancing after-sales and financial derivative services [3] - Zhengtong Automobile has established connections with multiple new energy manufacturers and opened two new energy after-sales outlets during the reporting period [3] - The company is actively optimizing its used car management model and enhancing online promotion to improve used car turnover efficiency [3] Future Outlook - The company aims to improve operational quality in its 4S dealership business and enhance communication with manufacturers to increase the profitability of models sold [4] - Zhengtong Automobile plans to strengthen after-sales services and explore new profit growth points through used cars and other derivative businesses [4] - The company is committed to accelerating its transition to new energy and expanding its international market presence through export trade and establishing a dealership and service network abroad [4]

Group 1 - The company reported a revenue of 20.747 billion RMB for the year ending December 31, 2024, representing a year-on-year decrease of 14.03% [1] - The net loss attributable to ordinary shareholders was 1.709 billion RMB, an increase of 91.75% compared to the previous year, with a basic loss per share of 0.56 RMB [1] - The total new car sales for the year reached 55,054 units, with mid-to-high-end brand sales accounting for 46,756 units [1] - Sales of new energy vehicles amounted to approximately 5,759 units, making up 10.5% of total sales, showing an increase in both volume and percentage compared to the previous year [1] - The company achieved 1.1021 million after-sales service instances, generating approximately 3.195 billion RMB in after-sales service revenue [1] - The total sales of used cars reached 14,000 units, reflecting a year-on-year growth of about 24%, with retail sales of 1,817 units, up approximately 36% [1] - The fourth quarter of 2024 saw particularly strong performance, with retail volume increasing by over 120% year-on-year [1] - The company has strategically phased out weaker brands in response to industry transformation trends [1] - As of December 31, 2024, the company operated 93 outlets across 36 cities in 15 provinces and municipalities, with additional authorized and planned dealerships [1] Group 2 - The company ranked 18th in the "2024 China Automotive Dealer Group Top 100" list, improving by 4 positions from 2023 [2] - The company was included in the "2024 China Automotive Top 100 Dealer Group - New Energy Sub-list" and ranked 12th in the "2024 China Automotive Circulation Industry Social Responsibility Top 100" [2] - The company's stores have collectively received 319 awards from manufacturers, local governments, industry media, and associations, including 293 manufacturer awards and 26 from government, media, and industry associations [2]

Financial Performance - The group's revenue for the year ended December 31, 2024, was approximately RMB 20,746.8 million, a decrease of 14.0% compared to RMB 24,132.0 million in 2023[3]. - The overall gross profit was approximately RMB 779.1 million, down 22.8% from RMB 1,008.6 million in 2023, with a gross profit margin of 3.8%, a decline of 0.4 percentage points year-on-year[3]. - The operating loss for the year was approximately RMB 549.0 million, compared to an operating profit of approximately RMB 168.2 million in 2023[3]. - The net loss for the year was approximately RMB 1,529.1 million, an increase of about 86.4% from RMB 820.5 million in 2023[3]. - The company reported a basic and diluted loss per share of RMB 56.0, compared to RMB 31.9 in 2023[4]. - Revenue from the sale of passenger vehicles decreased to RMB 15,978,627,000 in 2024 from RMB 20,224,295,000 in 2023, representing a decline of approximately 21.1%[18]. - Total revenue for the year was RMB 20,746,774,000, down from RMB 24,131,975,000 in the previous year, indicating a decrease of about 13.5%[18]. - The group reported a net loss of RMB 1,529 million for the year ending December 31, 2024, compared to a net loss attributable to equity shareholders of RMB 357 million as of December 31, 2023[13]. Assets and Liabilities - Total assets less current liabilities amounted to RMB 5,564.0 million, down from RMB 6,870.4 million in 2023[8]. - Non-current liabilities decreased to RMB 4,494.3 million from RMB 5,583.3 million in 2023[8]. - The company's cash and cash equivalents were RMB 573.1 million, down from RMB 744.9 million in 2023[7]. - The group's current liabilities net amount was RMB 8,333 million as of December 31, 2024, compared to RMB 8,218 million as of December 31, 2023[13]. - The group’s total non-current assets added in 2024 amount to RMB 710,535, down from RMB 1,787,140 in 2023[34]. - The total reportable segment assets for 2024 are RMB 17,922,425, a decrease from RMB 18,262,176 in 2023[36]. - The total amount of notes payable was RMB 3,409,756,000 as of December 31, 2024, compared to RMB 3,609,422,000 in 2023, reflecting a decrease of about 5.5%[64]. Operational Efficiency and Strategy - The company is actively responding to market changes by enhancing operational efficiency and accelerating the transformation towards new energy brands[2]. - The company aims to improve its used car business model and promote international business development[2]. - The company has optimized its procurement management model, resulting in a 20% reduction in the comprehensive cost of collective procurement products[94]. - The company is actively adjusting its store layout and inventory structure to respond to market challenges and price wars[95]. - The company has established a cross-regional resource coordination management mechanism to accelerate turnover and reduce inventory depth[95]. - The group plans to continue strengthening its strategic partnerships with major manufacturers, particularly in the new energy sector, to enhance brand structure and profitability[104]. Employee and Cost Management - Employee costs decreased from RMB 955,750,000 in 2023 to RMB 802,334,000 in 2024, representing a reduction of approximately 16.0%[23]. - The group employed 5,672 employees as of December 31, 2024, down from 6,669 employees on December 31, 2023[127]. - The group’s current liabilities as of December 31, 2024, were approximately RMB 23,654.2 million, an increase of about RMB 1,009.8 million from RMB 22,644.4 million on December 31, 2023, primarily due to an increase in short-term loans and borrowings[118]. Financial Instruments and Investments - The group recognized an impairment loss of RMB 32,095,000 for goodwill and RMB 76,161,000 for intangible assets in 2024, with no impairment recognized in 2023[41]. - The company’s borrowing costs were capitalized at an annual rate of 5.2%–5.8% for 2023, compared to 3.7%–5.0% previously[22]. - The group received dividend income of RMB 20,280,000 from Dongfeng Logistics in 2024, down from RMB 39,538,000 in 2023, a decrease of approximately 48.9%[61]. - The group redeemed part of its financial products, recovering RMB 2,976,000 in 2024, an increase from RMB 850,000 in 2023[59]. Market Performance and Sales - The group achieved total new car sales of 55,054 units for the year ending December 31, 2024, with mid-to-high-end brand sales accounting for 46,756 units[97]. - New energy vehicle sales reached approximately 5,759 units, representing 10.5% of total sales, showing an increase in both volume and percentage compared to the previous year[97]. - The group sold 14,000 used cars in 2024, marking a year-on-year increase of approximately 24%, with retail sales up 36%[100]. - The group organized multiple marketing activities throughout the year, resulting in a 60% increase in sales leads and a 63% increase in new media-driven transactions[96]. Corporate Governance and Compliance - The audit committee, consisting of three independent non-executive directors, has reviewed the group's annual performance for the year ending December 31, 2024[140]. - The financial statements for the year ending December 31, 2024, have been matched with the amounts in the audited consolidated financial statements by the auditors, KPMG[141]. - The company has complied with the corporate governance code as stipulated in the listing rules for the year ending December 31, 2024[139]. - The company has taken necessary measures to comply with listing rules regarding the composition of the board and committees within three months[139].

CHINA ZHENGTONG AUTO SERVICES HOLDINGS LIMITED 中國正通汽車服務控股有限公司 (Incorporated under the laws of the Cayman Islands with limited liability) INTERIM REPORT 中期報告 (根據開曼群島法律註冊成立的有限公司) Stock Code 股份代號 : 1728 鳥 類先的 綜合 股榜 陪 目錄 2 管理層討論及分析 12 其他資料 18 獨立審閱報告 19 綜合損益表 20 綜合損益及其他全面收入表 21 綜合財務狀況表 22 綜合權益變動表 24 簡明綜合現金流量表 25 未經審計中期財務報告附註 54 公司資料 管理層討論及分析 業務回顧 2024年中報 2 2024年上半年，國內汽車市場競爭進一步加劇，新能源新模式帶來的價格衝擊和市場情緒波動等因素，對傳統燃油汽車 經銷商帶來了巨大挑戰。雖然受益於國家及各級地方政府以舊換新等鼓勵政策的陸續落地，銷量有所穩定，但新車銷售 利潤率仍處於歷史低位。面臨行業轉型期的震盪與困境，在國資大股東的堅定支持和全力保障下，本集團專注於發 ...

Financial Performance - Revenue decreased by approximately 19.8% to about RMB 9,876 million, primarily due to declines in new car sales volume and selling prices [3]. - Overall gross profit decreased by approximately 71.9% to about RMB 177 million, with a gross profit margin decline of 3.3 percentage points to 1.8% [3]. - The net loss for the period was approximately RMB 635 million, compared to a net loss of approximately RMB 386 million in the same period of 2023 [3]. - Basic loss per share was approximately RMB 25, compared to RMB 14 in the same period of 2023 [3]. - Total comprehensive loss for the period was RMB 641.85 million, compared to RMB 393.89 million in the same period of 2023 [5]. - Total revenue for the six months ended June 30, 2024, was RMB 9,875,622,000, a decrease of 19.7% compared to RMB 12,309,565,000 in the same period of 2023 [12]. - Revenue from passenger vehicle sales decreased to RMB 7,657,625,000, down 27.3% from RMB 10,580,807,000 in the same period of 2023 [12]. - The group reported a net loss of approximately RMB 635 million for the six months ended June 30, 2024, compared to a loss of RMB 386 million in the same period of 2023 [75]. Cash Flow and Liquidity - Net cash inflow from operating activities was approximately RMB 147 million, compared to a net outflow of approximately RMB 446 million in the same period last year [3]. - Cash and cash equivalents as of June 30, 2024, were approximately RMB 470 million, a decrease of about RMB 275 million from RMB 745 million as of December 31, 2023 [77]. - As of June 30, 2024, the company's cash and cash equivalents amounted to approximately RMB 5,451 million, a decrease of about RMB 169 million from RMB 5,620 million as of December 31, 2023 [81]. Operational Adjustments - The company plans to maintain its focus on luxury and ultra-luxury brand car sales while implementing operational adjustments and cost reduction measures [2]. - The company plans to enhance operational efficiency and reduce leverage through various methods [82]. - The company is focusing on the development of luxury and ultra-luxury brand automotive sales while optimizing operational quality and innovating marketing strategies [51]. Employee and Costs - Employee costs totaled RMB 367,388 thousand for the six months ended June 30, 2024, compared to RMB 414,472 thousand in the same period of 2023, reflecting a decrease of about 11.4% [15]. - Employee costs for the first half of 2024 were approximately RMB 396 million, compared to RMB 441 million for the same period in 2023 [85]. - The company employed 6,555 employees in China as of June 30, 2024, a decrease from 6,669 employees as of December 31, 2023 [85]. Inventory and Sales - Inventory costs were RMB 9,472,953 thousand for the six months ended June 30, 2024, down from RMB 11,419,654 thousand in the same period of 2023, indicating a decline of approximately 17.0% [17]. - The total inventory as of June 30, 2024, was RMB 3,833,371,000, compared to RMB 3,771,902,000 as of December 31, 2023 [32]. - The average inventory turnover days for the first half of 2024 was 50.4 days, an increase of 1.0 day compared to 49.4 days in the first half of 2023 [79]. - The company's new car sales totaled 26,615 units, representing a year-on-year decline of 12.9%, including 22,679 units of luxury and ultra-luxury brands, which decreased by 13.4% [54]. - The used car market in China saw a total transaction of 9.383 million vehicles in the first half of 2024, an increase of 610,000 vehicles year-on-year, representing a growth of 7% with a total transaction value of RMB 625.212 billion [56]. - The company’s used car sales volume increased by approximately 11% year-on-year as of June 30, 2024 [57]. Revenue Streams - Revenue from after-sales services increased to RMB 1,698,980,000, up 19.1% from RMB 1,425,687,000 in the same period of 2023 [12]. - The group recognized RMB 325,635,000 in revenue from providing mortgage loan services, which was previously not included in revenue reporting [12]. - The automotive finance revenue of the company grew by 108.4% year-on-year as of June 30, 2024 [58]. Financial Instruments and Investments - The company issued perpetual bonds totaling RMB 200 million with an initial annual interest rate of 8.5% on February 28, 2023 [41]. - The company issued two additional perpetual bonds of RMB 100 million each on April 14 and June 12, 2023, with initial interest rates of 8.5% and 8.0% respectively, totaling RMB 200 million [42]. - The company issued perpetual bonds of RMB 350 million and RMB 150 million on November 11 and December 26, 2023, with initial interest rates of 7.2% and 7.0% respectively, totaling RMB 500 million [44]. Legal and Compliance - The company has initiated appeals regarding the first-instance judgment related to equity investment obligations, with ongoing legal proceedings [38]. - The company has not made any provisions for potential liabilities as of June 30, 2024, based on legal opinions and assessments of the situation [48]. Future Outlook - The group expects to continue its operations for at least the next 12 months based on cash flow forecasts and financial support from Xiamen International Trade Holdings Group [10]. - The company is actively exploring opportunities in emerging businesses such as new energy vehicle distribution and after-sales services [87].

Financial Performance - The total comprehensive income for the year ended December 31, 2023, was RMB (824,118) thousand, compared to RMB (318,044) thousand for the year ended December 31, 2022, indicating a significant increase in losses[33]. - The net loss attributable to ordinary shareholders for the year was RMB (894,628) thousand, compared to RMB (316,908) thousand in the previous year, highlighting the challenges faced[33]. - The company reported a significant increase in reserves, moving from RMB (41,814) thousand in 2022 to RMB (895,485) thousand in 2023, indicating a turnaround in reserve management[66]. - The company reported a loss of RMB 1,883 million for the year ending December 31, 2023, compared to a loss of RMB 1,421 million for the previous year[144]. - The company does not recommend a final dividend for the year 2023, consistent with the previous year[144]. - The company will not declare an interim dividend for the six months ending June 30, 2023, similar to the previous year[145]. Revenue and Growth - The company reported a total revenue growth rate of X% for the fiscal year, with specific segments contributing to this growth[16]. - For the fiscal year ending December 31, 2023, total revenue reached RMB 246,394 thousand, an increase from RMB 235,203 thousand in the previous year[37]. - Future guidance indicates a projected revenue growth of approximately 10% for the upcoming fiscal year[37]. - The company plans to expand its market presence through new product development and strategic acquisitions in the automotive service sector[16]. - The company plans to expand its market presence and invest in new product development to drive future growth[37]. Assets and Liabilities - The total assets as of December 31, 2023, were RMB 8,392,179 thousand, reflecting an increase from RMB 8,250,000 thousand in the previous year[37]. - The company’s equity attributable to shareholders was RMB 1,287,060 thousand, up from RMB 1,224,444 thousand in the previous year[37]. - Non-current liabilities decreased from RMB 8,596,839 thousand in 2022 to RMB 5,583,349 thousand in 2023, a reduction of approximately 35.5%[66]. - The company’s borrowings decreased from RMB 6,439,857 thousand in 2022 to RMB 3,488,141 thousand in 2023, a decline of approximately 45.8%[66]. - The company’s total liabilities have shown a consistent downward trend, reflecting improved financial health and management efficiency[66]. Audit and Compliance - The financial statements were prepared in accordance with the Hong Kong Financial Reporting Standards, ensuring compliance with local regulations[13]. - The independent auditor's report confirmed that the financial statements present a true and fair view of the company's financial position as of December 31, 2023[24]. - The independent non-executive directors reviewed the related party transactions and confirmed they are part of the group's ordinary business and conducted on normal commercial terms[100]. - The company has appointed KPMG as an independent auditor to report on the related party transactions for the year ending December 31, 2023[99]. - All independent non-executive directors have confirmed their independence according to the listing rules[126]. Sustainability and Efficiency - The company aims to continue its sustainability development strategy, promoting environmental protection and resource recycling in its operations[8]. - The company is committed to enhancing its operational efficiency and reducing energy consumption through green office initiatives[8]. - The company is focusing on enhancing its technology capabilities to improve operational efficiency and customer experience[37]. Related Party Transactions - The group has ongoing related party transactions that require compliance with the listing rules, specifically under Chapter 14A[127]. - Wuhan Zhengtong signed a service subcontracting agreement with Xiamen Gaoxin Yundao Technology, with a total annual cap of RMB 55 million for the years ending December 31, 2023, 2024, and 2025, and an actual amount incurred of RMB 35.7 million for the year ending December 31, 2023[128]. Governance and Management - The board of directors has undergone changes, with Mr. Wang Mingcheng resigning as chairman on April 10, 2024, and Mr. Huang Junfeng appointed as the new chairman[118]. - The company has no significant contracts or agreements with current directors that could be terminated without compensation within one year[120]. - The company’s board of directors underwent changes, with new independent non-executive directors appointed effective February 7, 2024[149]. Financial Policies and Provisions - The company measures expected credit losses based on the entire expected life of financial instruments, with specific assessments for significant increases in credit risk since initial recognition[177]. - The company has established provisions for expected credit losses that are higher than the carrying value of guarantees in specific debtor default scenarios[166]. - The company will write off financial assets or receivables when it determines that the debtor has no assets or sufficient cash flow to repay the amount to be written off[163]. - The company has a policy to recognize any changes in expected credit loss amounts in profit or loss, reflecting changes in credit risk since initial recognition[180].

Financial Performance - The group's revenue for the year ended December 31, 2023, was approximately RMB 24,132 million, an increase of 7% compared to RMB 22,607 million in 2022[9]. - The overall gross profit was approximately RMB 1,009 million, a decrease of about 36% from RMB 1,587 million in 2022, resulting in a gross profit margin of approximately 4%, down 3 percentage points from 7% in 2022[9]. - Operating profit for the year was approximately RMB 168 million, a decline of about RMB 666 million compared to RMB 834 million in 2022[10]. - The net loss for the year was approximately RMB 820 million, an increase of about 176% from RMB 297 million in 2022[10]. - Revenue from passenger car sales increased to RMB 20,224,295 thousand in 2023, up from RMB 18,844,892 thousand in 2022, representing a growth of approximately 7.3%[24]. - The group reported a net loss of RMB 820 million for the year ended December 31, 2023, with current liabilities totaling RMB 8,218 million[21]. - The group recorded a basic loss per share of RMB (31.9) cents for the year ended December 31, 2023, compared to RMB (10.9) cents in 2022, indicating a worsening in performance[50]. - The company reported a pre-tax loss of RMB 886,600,000 for the year ended December 31, 2023, compared to a loss of RMB 130,342,000 in 2022, indicating a significant increase in losses[68]. - The basic loss per share for the year ended December 31, 2023, was RMB 890,990,000, compared to RMB 296,285,000 for the year ended December 31, 2022, reflecting a worsening financial performance[71]. Assets and Liabilities - Total assets as of December 31, 2023, were RMB 15,088 million, compared to RMB 13,902 million as of December 31, 2022[5]. - Current liabilities increased to RMB 22,644 million from RMB 18,911 million in the previous year[6]. - The company's equity attributable to shareholders increased to RMB 361 million from RMB 193 million in 2022[6]. - The group's current liabilities as of December 31, 2023, were approximately RMB 22,644 million, an increase of about RMB 3,733 million from RMB 18,911 million as of December 31, 2022, primarily due to an increase in short-term borrowings[136]. - The total liabilities as of December 31, 2023, were RMB 91,209,000, reflecting the financial position prior to losing control of Shanghai Yige[84]. - The carrying amount of inventory pledged as collateral for loans was RMB 1,212,183,000 as of December 31, 2023, up from RMB 1,121,577,000 in 2022[89]. - As of December 31, 2023, pledged assets amounted to approximately RMB 9,468 million, an increase from RMB 8,003 million in 2022, primarily due to increased pledged bank deposits[144]. Cash Flow and Financing - The group expects to receive financial support from Xiamen International Trade Group for at least the next 12 months, ensuring sufficient funds for ongoing operations[21]. - The total financing costs for loans and borrowings amounted to RMB 1,031,600 thousand, compared to RMB 957,414 thousand in the previous year, indicating an increase of approximately 7.7%[26]. - The net cash inflow from operating activities for the year ended December 31, 2023, was approximately RMB 37 million, compared to RMB 159 million in 2022[137]. - Cash and cash equivalents, along with bank deposits, were approximately RMB 5,620 million as of December 31, 2023, an increase of about RMB 929 million from RMB 4,691 million in 2022, primarily due to increased financing[142]. - The net debt ratio as of December 31, 2023, was approximately 1,198.1%, a significant decrease from 6,828.9% in 2022, indicating improved financial health[142]. Operational Highlights - The company continues to focus on mid-to-high-end brand sales and is actively seeking growth opportunities in the used car and automotive export sectors[9]. - The luxury car brand market share has steadily increased, with sales volume rising during the reporting period[9]. - The group plans to focus on mainstream luxury brands and optimize brand structure, aiming to improve operational quality and control vehicle sales prices[149]. - The group aims to expand into emerging businesses, including new energy brands and after-sales services, through acquisitions and partnerships[151]. - The group will accelerate its layout in the used car export business, leveraging national policies to promote overseas sales and cross-border e-commerce platforms[151]. Tax and Regulatory Compliance - The group’s income tax expense for the year was RMB 37,303 thousand, down from RMB 73,849 thousand in the previous year, representing a decrease of approximately 49.5%[45]. - The company has adopted the corporate governance code as per the listing rules and has complied with its provisions during the year[160]. - The company did not purchase, sell, or redeem any of its listed securities during the year ended December 31, 2023[159]. Employee and Cost Management - Employee costs for continuing operations decreased to RMB 955,750 thousand in 2023 from RMB 985,319 thousand in 2022, a reduction of about 3.0%[26]. - The group employed 6,669 employees as of December 31, 2023, down from 7,181 employees in 2022, with employee costs for the year amounting to approximately RMB 956 million[146]. - Administrative expenses decreased by approximately 15.3% to RMB 1,085 million from RMB 1,281 million in 2022, attributed to cost control measures[172]. Inventory and Cost of Sales - The group reported a cost of inventory amounting to RMB 22,558,926 thousand for the year ended December 31, 2023, compared to RMB 20,454,963 thousand in 2022, reflecting an increase of approximately 10.2%[45]. - The group's cost of sales for the year ended December 31, 2023, was approximately RMB 23,123 million, an increase of about 10.0% compared to RMB 21,020 million in 2022[169]. - The group's inventory write-down for the year ended December 31, 2023, was RMB 48,764,000, compared to RMB 54,386,000 in 2022[120]. - As of December 31, 2023, total inventory was RMB 3,092,763,000, a decrease from RMB 3,403,685,000 in 2022, representing a decline of approximately 9.1%[89]. Future Projections - The group’s revenue growth rate projections for 2024 are estimated between 1.5% and 24.3%, indicating potential for significant revenue increase[55]. - The company’s revenue growth rate for the forecast period from 2024 to 2028 is based on historical performance and reflects the latest developments in customer demand in the automotive industry[76]. - The estimated growth rate for cash flows beyond the five-year forecast period is set at 3%, consistent with industry reports[74].

Financial Performance - For the six months ended June 30, 2023, the company recorded revenue of approximately RMB 12,310 million, representing a year-on-year increase of about 11.2%[5] - The company's gross profit for the same period was approximately RMB 630 million, reflecting a year-on-year decrease of about 33.6%[5] - The group recorded a net loss of approximately RMB 386 million for the first half of 2023, compared to a profit of RMB 6 million in the same period of 2022[43] - Operating profit for the first half of 2023 was approximately RMB 153 million, down from RMB 533 million in the same period of 2022, primarily due to a decline in new car sales gross margin[41] - The group's selling and distribution expenses for the first half of 2023 were approximately RMB 566 million, an increase of about 4.4% from RMB 542 million in the first half of 2022[45] - The company's net loss for the period was RMB 386,064 thousand, compared to a profit of RMB 5,675 thousand in the previous year[158] - Basic and diluted loss per share was RMB (14.4), compared to earnings of RMB 0.3 per share in 2022[164] Sales and Market Activity - New car sales totaled 30,560 units, a year-on-year increase of approximately 17.1%, including 26,187 units of luxury and ultra-luxury brands, which grew by about 22.1%[8] - New car sales revenue for the first half of 2023 was approximately RMB 10,581 million, up about 14.0% from RMB 9,281 million in the first half of 2022, accounting for 86.0% of total revenue[37] - The used car market in China saw a cumulative transaction volume of 8.7686 million units in the first half of 2023, a year-on-year increase of 15.6%[19] - The company plans to leverage existing store resources and favorable conditions to expand its used car export business significantly[78] Service and After-Sales - The company achieved 574,600 after-sales service transactions, generating after-sales service revenue of approximately RMB 1,426 million[17] - Service revenue for the first half of 2023 reached RMB 437.841 million, a significant increase of 97.5% compared to RMB 221.635 million in the same period of 2022[127] Operational Developments - The company completed upgrades for 9 core brand stores and showrooms to enhance customer purchasing experience[6] - The company continues to optimize its online platform, enhancing customer interaction and satisfaction through various digital initiatives[10] - The company has opened two new NIO maintenance centers in the first half of 2023, furthering its presence in the new energy sector[24] - The company has established a comprehensive logistics base that integrates parts logistics, vehicle logistics, and vehicle storage, expected to be operational soon[30] Corporate Governance and Risk Management - The company has optimized its governance structure by revising 31 internal regulations and abolishing 5, enhancing decision-making and supervision processes[32] - The company has focused on risk management by establishing a risk management system and emergency response mechanisms to address operational risks[34] - The company remains committed to high standards of corporate governance, ensuring compliance with the corporate governance code[97] Financial Position and Assets - As of June 30, 2023, the group's current assets were approximately RMB 14,610 million, an increase of about RMB 780 million from RMB 13,830 million as of December 31, 2022[49] - The group's cash and cash equivalents were approximately RMB 705 million as of June 30, 2023, a decrease of about RMB 29 million from RMB 734 million as of December 31, 2022[54] - The company's inventory was approximately RMB 3,581 million, a decrease of about RMB 483 million from RMB 4,064 million on December 31, 2022, primarily due to reduced new car inventory[58] - The total assets of the group as of June 30, 2023, amounted to RMB 3,580,553 thousand, down from RMB 4,064,270 thousand as of December 31, 2022, indicating a reduction of 11.9%[108] Shareholder and Equity Information - As of June 30, 2023, the total number of issued shares is 2,867,102,420, with major shareholders holding significant stakes: Xiamen Guomao Holding Group at 28.62% and Zhang Mei at 10.01%[83] - The company has granted a total of 47,100,000 shares under the share incentive plan, representing approximately 1.92% of the issued shares as of the adoption date[89] - The company did not declare any interim dividends for the six months ended June 30, 2023[151] Future Outlook and Strategy - The company plans to focus on market expansion and new product development to improve future performance[168] - The company is actively exploring investment and collaboration opportunities in the new energy market, particularly in the stable revenue-generating maintenance sector[24] - The company will continue to focus on luxury and ultra-luxury car brands, enhancing strategic partnerships with major manufacturers, including those in the new energy sector[78]

[Interim Results Announcement for the Six Months Ended June 30, 2023](index=1&type=section&id=Interim%20Results%20Announcement) [Summary](index=1&type=section&id=%E6%91%98%E8%A6%81) The Group's revenue increased by 11.2% year-on-year to RMB 12,310 million in H1 2023, driven by higher new car sales, but overall gross profit decreased by 33.6% due to lower average selling prices, resulting in a loss attributable to equity holders of approximately RMB 394 million and basic loss per share of RMB 14.4 cents Key Financial and Operating Highlights for H1 2023 | Indicator | H1 2023 (RMB Million) | H1 2022 (RMB Million) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 12,310 | 11,068 | +11.2% | | Overall Gross Profit | 630 | 949 | -33.6% | | Gross Profit Margin | 5.1% | 8.6% | -3.5 percentage points | | Loss/Profit Attributable to Equity Holders of the Company | (394) | 8 | N/A | | Basic Loss/Earnings Per Share (RMB Cents) | (14.4) | 0.3 | N/A | | New Car Sales Units | 30,560 | N/A | +17.1% | | Luxury and Ultra-Luxury Car Sales Units | 26,187 | N/A | +22.1% | [Consolidated Financial Statements](index=2&type=section&id=%E7%B6%9C%E5%90%88%E8%B2%A1%E5%8B%99%E5%A0%B1%E8%A1%A8) This section presents the unaudited consolidated statement of profit or loss, statement of profit or loss and other comprehensive income, and statement of financial position for the six months ended June 30, 2023, reflecting the Group's financial performance and position [Consolidated Statement of Profit or Loss](index=2&type=section&id=%E7%B6%9C%E5%90%88%E6%90%8D%E7%9B%8A%E8%A1%A8) For the six months ended June 30, 2023, Group revenue increased to RMB 12,309,565 thousand, but gross profit significantly decreased due to higher cost of sales and lower average selling prices for new cars, resulting in a loss of RMB 386,064 thousand Key Data from Consolidated Statement of Profit or Loss (RMB Thousand) | Indicator | For the Six Months Ended June 30, 2023 | For the Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Revenue | 12,309,565 | 11,068,764 | | Cost of Sales | (11,679,149) | (10,119,500) | | Gross Profit | 630,416 | 949,264 | | Other Income | 623,786 | 393,264 | | Selling and Distribution Expenses | (565,904) | (542,098) | | Administrative Expenses | (535,363) | (500,141) | | Operating Profit | 152,935 | 532,715 | | Finance Costs | (536,380) | (482,527) | | (Loss)/Profit Before Tax | (383,569) | 70,407 | | (Loss)/Profit for the Period | (386,064) | 5,675 | | (Loss)/Profit Attributable to Equity Holders of the Company | (393,537) | 8,150 | | (Loss)/Profit Attributable to Non-controlling Interests | 7,473 | (2,475) | | Basic and Diluted (Loss)/Earnings Per Share (RMB Cents) | (14.4) | 0.3 | [Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=3&type=section&id=%E7%B6%9C%E5%90%88%E6%90%8D%E7%9B%8A%E5%8F%8A%E5%85%B6%E4%BB%96%E5%85%A8%E9%9D%A2%E6%94%B6%E5%85%A5%E8%A1%A8) For the six months ended June 30, 2023, the Group reported a loss for the period of RMB 386,064 thousand, which, combined with exchange differences in other comprehensive income (net of tax), resulted in a total comprehensive loss of RMB 393,889 thousand Key Data from Consolidated Statement of Profit or Loss and Other Comprehensive Income (RMB Thousand) | Indicator | For the Six Months Ended June 30, 2023 | For the Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | (Loss)/Profit for the Period | (386,064) | 5,675 | | Other Comprehensive Income for the Period (Net of Tax) | (7,825) | (10,245) | | Total Comprehensive Income for the Period | (393,889) | (4,570) | | Total Comprehensive Income Attributable to Equity Holders of the Company | (401,362) | (2,095) | | Total Comprehensive Income Attributable to Non-controlling Interests | 7,473 | (2,475) | [Consolidated Statement of Financial Position](index=4&type=section&id=%E7%B6%9C%E5%90%88%E8%B2%A1%E5%8B%99%E7%8B%80%E6%B3%81%E8%A1%A8) As of June 30, 2023, the Group's non-current assets slightly decreased while current assets increased, with a significant rise in current liabilities leading to an expanded net current liabilities position, though net assets and total equity grew substantially due to the issuance of perpetual bonds Key Data from Consolidated Statement of Financial Position (RMB Thousand) | Indicator | As of June 30, 2023 | As of December 31, 2022 | | :--- | :--- | :--- | | Non-current Assets | 13,860,314 | 13,902,668 | | Current Assets | 14,609,696 | 13,830,091 | | Current Liabilities | 20,339,004 | 18,911,476 | | Net Current Liabilities | (5,729,308) | (5,081,385) | | Net Assets | 1,176,274 | 224,444 | | Total Equity | 1,176,274 | 224,444 | | Perpetual Bonds | 899,951 | — | [Notes to the Unaudited Interim Financial Statements](index=6&type=section&id=%E6%9C%AA%E7%B6%93%E5%AF%A9%E6%A0%B8%E4%B8%AD%E6%9C%9F%E8%B2%A1%E5%8B%99%E5%A0%B1%E8%A1%A8%E9%99%84%E8%A8%BB) This section details the basis of preparation, new accounting policies, composition of income and expenses, balance sheet items, and significant financial guarantees, perpetual bonds, and contingent liabilities, providing essential supplementary information for understanding the financial statements [1 General Information](index=6&type=section&id=1%20%E4%B8%80%E8%88%AC%E8%B3%87%E6%96%99) The Group primarily engages in 4S dealership, automotive supply chain, and integrated property businesses in China - The Group's principal businesses include 4S dealership, automotive supply chain, and integrated property businesses[36](index=36&type=chunk) [2 Basis of Preparation](index=6&type=section&id=2%20%E7%B7%A8%E8%A3%BD%E5%9F%BA%E6%BA%96) This interim financial report is prepared in accordance with the HKEX Listing Rules and HKAS 34, reviewed by KPMG, includes 2022 annual financial data for comparison, and the directors confirm the Group's ability to continue as a going concern - This interim financial report is prepared in accordance with the HKEX Listing Rules and HKAS 34, and has been reviewed by KPMG[25](index=25&type=chunk)[38](index=38&type=chunk) - Despite a net loss of **RMB 386 million** and net current liabilities of **RMB 5,729 million** for the period, the Board believes the Group can continue as a going concern for at least the next 12 months, based on cash flow forecasts and financial support from controlling shareholder Guomao Holdings[29](index=29&type=chunk) [3 New Accounting Policies Applied and Changes in Accounting Policies](index=7&type=section&id=3%20%E6%96%B0%E6%87%89%E7%94%A8%E7%9A%84%E6%9C%83%E8%A8%88%E6%94%BF%E7%AD%96%E5%8F%8A%E6%9C%83%E8%A8%88%E6%94%BF%E7%AD%96%E7%9A%84%E8%AE%8A%E5%8B%95) The Group applied HKFRS 17 and amendments to HKAS 8 and 12 this period, classifying perpetual bonds as equity, with HKFRS 17 having no material impact, HKAS 8 amendments aligning with existing methods, and HKAS 12 amendments primarily affecting deferred tax asset and liability disclosures without altering overall balances - Perpetual bonds are classified as equity due to no fixed maturity date and discretionary coupon payments by the Group[30](index=30&type=chunk) - The Group has applied HKFRS 17 (Insurance Contracts) and amendments to HKAS 8 (Definition of Accounting Estimates) and HKAS 12 (Income Taxes: Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction)[31](index=31&type=chunk) - Following HKAS 12 amendments, the Group will separately determine temporary differences related to right-of-use assets and lease liabilities, primarily impacting the disclosure of deferred tax asset and liability components in annual financial statements, but not the overall deferred tax balance[58](index=58&type=chunk)[68](index=68&type=chunk) [4 Revenue](index=9&type=section&id=4%20%E6%94%B6%E7%9B%8A) The Group's revenue primarily derives from passenger vehicle sales, after-sales services, logistics services, and lubricant sales, with passenger vehicle sales, after-sales services, and lubricant sales recognized at a point in time, and logistics services recognized over time Revenue Composition (RMB Thousand) | Revenue Category | For the Six Months Ended June 30, 2023 | For the Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Sales of Passenger Vehicles | 10,580,807 | 9,281,151 | | Provision of After-sales Services | 1,425,687 | 1,467,521 | | Provision of Logistics Services | 189,234 | 220,270 | | Sales of Lubricants | 113,812 | 99,156 | | Others | 25 | 666 | | **Total Revenue** | **12,309,565** | **11,068,764** | - Revenue from logistics services is recognized over time, while revenue from passenger vehicle sales, after-sales services, and lubricant sales is recognized at a point in time[79](index=79&type=chunk) [5 Other Income](index=9&type=section&id=5%20%E5%85%B6%E4%BB%96%E6%94%B6%E5%85%A5) The Group's other income primarily includes service income, bank interest, net gain on disposal of property, and net gain on financial instruments, with a significant increase to RMB 623,786 thousand for the six months ended June 30, 2023, mainly due to higher service income and net realized and unrealized gains on financial instruments Other Income Composition (RMB Thousand) | Income Category | For the Six Months Ended June 30, 2023 | For the Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Service Income | 437,841 | 221,635 | | Bank Deposit Interest Income | 33,338 | 15,516 | | Net Gain on Disposal of Property, Plant and Equipment | 21,792 | 93,161 | | Net Realized and Unrealized Gains on Financial Instruments | 76,753 | 8,491 | | Government Grants | 5,446 | 8,431 | | Others | 48,616 | 46,030 | | **Total Other Income** | **623,786** | **393,264** | [6 (Loss)/Profit Before Tax](index=10&type=section&id=6%20%E9%99%A4%E7%A8%85%EF%BC%88%E虧%E6%90%8D%EF%BC%89%E2%88%95%E6%BA%A2%E5%88%A9) The Group's loss before tax was primarily impacted by increased finance costs and a reduced reversal of impairment losses on intangible assets, while staff costs slightly decreased and depreciation and amortization expenses increased (Loss)/Profit Before Tax Components (RMB Thousand) | Item | For the Six Months Ended June 30, 2023 | For the Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Finance Costs | 536,380 | 482,527 | | Staff Costs | 441,045 | 459,121 | | Cost of Inventories | 11,419,654 | 9,824,236 | | Depreciation (Owned Property, Right-of-Use Assets, Investment Property) | 334,261 | 354,887 | | Amortization of Intangible Assets | 81,489 | 78,730 | | Reversal of Impairment Loss (Intangible Assets, Property) | — | (253,665) | | Net Exchange Loss | 119,158 | 160,847 | - The increase in finance costs was primarily due to higher interest on loans and borrowings, partially offset by capitalized interest[82](index=82&type=chunk) - Staff costs slightly decreased, primarily comprising salaries, wages and other benefits, contributions to defined contribution retirement plans, and equity-settled share-based payment expenses[72](index=72&type=chunk)[81](index=81&type=chunk) [7 Income Tax](index=11&type=section&id=7%20%E6%89%80%E5%BE%97%E7%A8%85) The Group's income tax expense significantly decreased, mainly due to reduced provision for China income tax and the generation of temporary differences for deferred tax, with Chinese subsidiaries taxed at 25% and Cayman Islands, BVI, and Hong Kong subsidiaries exempt Income Tax Expense (RMB Thousand) | Item | For the Six Months Ended June 30, 2023 | For the Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Provision for China Income Tax for the Period | 10,718 | 47,964 | | Deferred Tax: (Generation)/Reversal of Temporary Differences | (8,223) | 16,768 | | **Total Income Tax Expense** | **2,495** | **64,732** | - The Group's PRC subsidiaries are subject to a corporate income tax rate of **25%**[91](index=91&type=chunk) - Subsidiaries in the Cayman Islands, British Virgin Islands, and Hong Kong were not subject to income tax during the period[88](index=88&type=chunk)[90](index=90&type=chunk) [8 (Loss)/Earnings Per Share](index=12&type=section&id=8%20%E6%AF%8F%E8%82%A1%EF%BC%88%E虧%E6%90%8D%EF%BC%89%E2%88%95%E6%94%B6%E7%9B%8A) For the six months ended June 30, 2023, the loss attributable to equity holders of the Company resulted in both basic and diluted loss per share of RMB 14.4 cents, compared to earnings per share of RMB 0.3 cents in the prior period, with potential ordinary shares from the share award scheme having an anti-dilutive effect this period (Loss)/Earnings Per Share (RMB Cents) | Indicator | For the Six Months Ended June 30, 2023 | For the Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Basic (Loss)/Earnings Per Share | (14.4) | 0.3 | | Diluted (Loss)/Earnings Per Share | (14.4) | 0.3 | | Weighted Average Number of Ordinary Shares in Issue | 2,733,099,326 | 2,716,922,420 (Basic) / 2,724,245,883 (Diluted) | - For the six months ended June 30, 2023, potential ordinary shares from the share award scheme had an anti-dilutive effect as they would decrease the loss per share[94](index=94&type=chunk) [9 Intangible Assets](index=13&type=section&id=9%20%E7%84%A1%E5%BD%A2%E8%B3%87%E7%94%A2) The Group's intangible assets primarily comprise automotive dealership and operating rights, favorable lease contracts, trademarks, and software, with a slight decrease in net book value as of June 30, 2023, and management's impairment assessment confirmed no impairment losses Net Book Value of Intangible Assets (RMB Thousand) | Intangible Asset Category | As of June 30, 2023 | As of December 31, 2022 | | :--- | :--- | :--- | | Automotive Dealership and Operating Rights | 2,398,216 | 2,477,338 | | Favorable Lease Contracts | — | 6 | | Trademarks | 217,105 | 217,105 | | Software and Others | 8,756 | 10,623 | | **Total Net Book Value** | **2,624,077** | **2,705,072** | - Automotive dealership rights have an estimated useful life of **40 years**, and dealership operating rights **10 years**, both fair values determined using the multi-period excess earnings method[76](index=76&type=chunk)[104](index=104&type=chunk) - Management, with the assistance of external valuers, performed an impairment assessment and did not recognize any impairment losses for intangible assets (automotive dealership rights and/or goodwill)[105](index=105&type=chunk) [10 Other Financial Assets/(Liabilities)](index=15&type=section&id=10%20%E5%85%B6%E4%BB%96%E9%87%91%E8%9E%8D%E8%B3%87%E7%94%A2%E2%88%95%EF%BC%88%E8%B2%A0%E5%82%B5%EF%BC%89) The Group's other financial assets primarily include wealth management products, forward contracts, option contracts, and equity investment in Dongfeng Logistics, with a significant increase in financial assets at fair value through profit or loss, mainly driven by realized/unrealized gains on option contracts, and the Group has reclassified its equity investment in Dongfeng Logistics as a financial asset at fair value through profit or loss after losing significant influence Other Financial Assets/(Liabilities) (RMB Thousand) | Item | As of June 30, 2023 | As of December 31, 2022 | | :--- | :--- | :--- | | **Other Financial Assets at Fair Value Through Profit or Loss** | | | | Wealth Management Products (Current) | 133,105 | 89,969 | | Forward Contracts (Current) | 32,375 | 13,592 | | Option Contracts (Current) | 97,568 | — | | Equity Investment in Dongfeng Logistics (Non-current) | 944,947 | 944,947 | | **Other Financial Liabilities at Fair Value Through Profit or Loss** | | | | Forward Contracts | — | (91,516) | | Option Contracts | (5,977) | — | - For the six months ended June 30, 2023, net realized/unrealized gains on option contracts amounted to **RMB 149,764 thousand**, recognized under 'Other income' in the consolidated statement of profit or loss[109](index=109&type=chunk) - The Group has lost significant influence over Dongfeng Logistics and reclassified its equity investment as a financial asset at fair value through profit or loss, with a fair value of **RMB 944,947 thousand**[113](index=113&type=chunk)[114](index=114&type=chunk) - The Group plans to dispose of its entire equity interest in Dongfeng Logistics, but completion within one year is unlikely due to regulatory and shareholder approvals being outside the Group's control[111](index=111&type=chunk) [11 Inventories](index=17&type=section&id=11%20%E5%AD%98%E8%B2%A8) The Group's inventories primarily consist of vehicles, spare parts, and properties under development for sale, totaling RMB 3,580,553 thousand as of June 30, 2023, a decrease from year-end 2022 mainly due to reduced vehicle inventories Inventories Composition (RMB Thousand) | Inventory Category | As of June 30, 2023 | As of December 31, 2022 | | :--- | :--- | :--- | | 4S Dealership Business - Vehicles | 2,558,130 | 3,044,340 | | 4S Dealership Business - Vehicle Spare Parts | 295,850 | 313,179 | | 4S Dealership Business - Others | 47,434 | 46,166 | | Integrated Property Business - Properties Under Development for Sale | 679,139 | 660,585 | | **Total Inventories** | **3,580,553** | **4,064,270** | Amount of Inventories Recognized as Expense and Included in Profit or Loss (RMB Thousand) | Item | For the Six Months Ended June 30, 2023 | For the Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Carrying Amount of Inventories Sold | 11,372,991 | 9,790,629 | | Write-down of Inventories | 46,663 | 33,607 | | **Total** | **11,419,654** | **9,824,236** | [12 Trade and Bills Receivables](index=18&type=section&id=12%20%E8%B2%BF%E6%98%93%E6%87%89%E6%94%B6%E6%AC%BE%E9%A0%85%E5%8F%8A%E6%87%89%E6%94%B6%E7%A5%A8%E6%93%9A) As of June 30, 2023, the Group's total trade and bills receivables amounted to RMB 900,989 thousand, primarily comprising amounts due within three months, and the Group's strict credit risk management indicates a low default risk Aging Analysis of Trade and Bills Receivables (RMB Thousand) | Aging | As of June 30, 2023 | As of December 31, 2022 | | :--- | :--- | :--- | | Within 3 Months | 893,601 | 900,002 | | Over 3 Months but Within 1 Year | 2,163 | 2,178 | | Over 1 Year | 5,225 | 5,262 | | **Total** | **900,989** | **907,442** | - Trade receivables primarily consist of amounts due from individual customers and warranty deposits from automobile manufacturers, with default risk considered low[127](index=127&type=chunk) [13 Prepayments, Deposits and Other Receivables](index=19&type=section&id=13%20%E9%A0%90%E4%BB%98%E6%AC%BE%E9%A0%85%E3%80%81%E4%BF%9D%E8%AD%89%E9%87%91%E5%8F%8A%E5%85%B6%E4%BB%96%E6%87%89%E6%94%B6%E6%AC%BE%E9%A0%85) As of June 30, 2023, the Group's total prepayments, deposits, and other receivables amounted to RMB 4,265,095 thousand, an increase from year-end 2022 driven by higher other receivables, with all amounts expected to be recovered within one year Prepayments, Deposits and Other Receivables (RMB Thousand) | Item | As of June 30, 2023 | As of December 31, 2022 | | :--- | :--- | :--- | | Prepayments | 278,441 | 402,403 | | Deposits | 359,496 | 399,940 | | Other Receivables | 3,627,158 | 3,261,174 | | **Total** | **4,265,095** | **4,063,517** | - Other receivables primarily include supplier rebates earned through various arrangements with automobile manufacturers, assessed based on purchase or sales volume and performance[128](index=128&type=chunk) [14 Trade and Other Payables](index=19&type=section&id=14%20%E8%B2%BF%E6%98%93%E5%8F%8A%E5%85%B6%E4%BB%96%E6%87%89%E4%BB%98%E6%AC%BE%E9%A0%85) As of June 30, 2023, the Group's total trade and other payables amounted to RMB 4,300,082 thousand, a decrease from year-end 2022 primarily due to reductions in trade and bills payables and contract liabilities Aging Analysis of Trade and Other Payables (RMB Thousand) | Aging/Category | As of June 30, 2023 | As of December 31, 2022 | | :--- | :--- | :--- | | Trade and Bills Payables (Within 3 Months) | 2,798,811 | 3,379,485 | | Trade and Bills Payables (Over 3 Months but Within 1 Year) | 381,530 | 460,686 | | Contract Liabilities | 479,602 | 1,215,170 | | Other Payables and Accruals | 637,766 | 771,927 | | Amounts Due to Related Parties | 2,373 | 507 | | **Total Current** | **4,300,082** | **5,827,775** | | Long-term Payables (Non-current) | 168,364 | 186,648 | | **Total** | **4,468,446** | **6,014,423** | [15 Financial Guarantees Issued](index=20&type=section&id=15%20%E5%B7%B2%E6%8E%88%E5%87%BA%E8%B2%A1%E5%8B%99%E6%93%94%E4%BF%9D) Wuhan Zhengtong, a Group subsidiary, provided financial guarantees for Beijing Guangze's equity investment repurchase obligations and outstanding loan balances; despite an initial court ruling for joint liability, a second-instance judgment clarified its role as a deficiency guarantor, and a settlement agreement with the creditor, combined with collateral valuation, indicates an immaterial expected credit loss provision for the financial guarantee - Wuhan Zhengtong provided financial guarantees for Beijing Guangze, covering equity investment repurchase obligations and outstanding loan balances, with a maximum guarantee amount of **RMB 1.93 billion**[121](index=121&type=chunk)[130](index=130&type=chunk) - The first-instance judgment held Wuhan Zhengtong jointly liable for Beijing Guangze's debts, but the second-instance judgment overturned this, clarifying Wuhan Zhengtong as a deficiency guarantor[132](index=132&type=chunk)[135](index=135&type=chunk) - Wuhan Zhengtong reached a settlement agreement with Yuchen Fengze, where Yuchen Fengze agreed to assist in disposing of collateral to recover the debt, limiting the Group's cash exposure to the difference between collateral disposal proceeds and the debt[135](index=135&type=chunk)[146](index=146&type=chunk) - As of June 30, 2023, the fair value and estimated net realizable value of the pledged assets were **RMB 2.79 billion** and **RMB 1.97 billion**, respectively, and the expected credit loss provision for the financial guarantee was assessed as immaterial[136](index=136&type=chunk)[147](index=147&type=chunk) [16 Dividends](index=22&type=section&id=16%20%E8%82%A1%E6%81%AF) The Board does not recommend an interim dividend for the six months ended June 30, 2023, and no proposed final dividend for the previous financial year was approved or paid during the reporting period - The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2023[123](index=123&type=chunk)[215](index=215&type=chunk) - No proposed final dividend for the previous financial year was approved or paid during the reporting period[137](index=137&type=chunk) [17 Perpetual Bonds](index=22&type=section&id=17%20%E6%B0%B8%E4%B9%85%E5%82%B5%E5%88%B8) The Group issued three perpetual bonds totaling RMB 1.299951 billion, which are classified as equity due to their indefinite term and discretionary redemption or interest payment, with Perpetual Bonds 1 and 2 recognized in non-controlling interests and Perpetual Bond 3 in equity attributable to equity holders of the Company - Wuhan Zhengtong issued Perpetual Bond 1 (**RMB 200 million**, initial annual interest rate **8.5%**) and Perpetual Bond 2 (**RMB 200 million**, initial annual interest rates **8.5%** and **8.0%**), both with no fixed maturity and discretionary redemption or interest payment[124](index=124&type=chunk)[138](index=138&type=chunk)[149](index=149&type=chunk) - A short-term loan of **US$124.547 million** (approximately **RMB 899.951 million**) from Guomao Hong Kong to the Company was converted into Perpetual Bond 3, with an annual interest rate of **5.0%**, no fixed maturity, and discretionary redemption or interest payment[151](index=151&type=chunk) - Perpetual Bonds 1 to 3 are all classified as equity, with Perpetual Bonds 1 and 2 recognized in non-controlling interests and Perpetual Bond 3 directly in total equity attributable to equity holders of the Company in the consolidated statement of financial position[152](index=152&type=chunk) [18 Contingent Liabilities](index=23&type=section&id=18%20%E6%88%96%E7%84%B6%E8%B2%A0%E5%82%B5) Wuhan Zhengtong, a Group subsidiary, entered into a general contracting agreement with Beijing Guangze, and subsequently received payment notices from subcontractors due to Beijing Guangze's non-performance; based on external legal advice, Beijing Guangze is the primary debtor, and the Group's likelihood of making payments is low, thus no provision has been made - Wuhan Zhengtong entered into a general contracting agreement with Beijing Guangze for 4S dealership and related commercial projects; due to Beijing Guangze's non-performance, the Group received payment notices totaling **RMB 6 million** from subcontractors[153](index=153&type=chunk) - External legal counsel opined that Beijing Guangze is the primary debtor, and the likelihood of the Group being sued by subcontractors and making payments is low, thus no provision has been made[139](index=139&type=chunk)[155](index=155&type=chunk) [19 Comparative Figures](index=24&type=section&id=19%20%E6%AF%94%E8%BC%83%E6%95%B8%E5%AD%97) Certain comparative figures have been adjusted to conform to the current period's presentation - Certain comparative figures have been adjusted to conform to the current period's presentation[141](index=141&type=chunk) [Management Discussion and Analysis](index=25&type=section&id=%E7%AE%A1%E7%90%86%E5%B1%A4%E8%A8%8E%E8%AB%96%E5%8F%8A%E5%88%86%E6%9E%90) This section reviews the Group's operating results and management initiatives for H1 2023, highlighting revenue growth despite market challenges through focus on luxury brands, optimized after-sales services, expanded used car exports, and strengthened financial services, alongside significant progress in governance, risk prevention, human resources, and digitalization - For H1 2023, Group revenue was approximately **RMB 12,310 million**, a **11.2%** year-on-year increase, while gross profit was approximately **RMB 630 million**, a **33.6%** year-on-year decrease[169](index=169&type=chunk) - Amidst a volatile market, the Group continued to focus on luxury and ultra-luxury vehicle sales and after-sales services, while also monitoring the rise of domestic brands and exploring new growth opportunities[157](index=157&type=chunk)[1](index=1&type=chunk) [Business Review](index=25&type=section&id=%E6%A5%AD%E5%8B%99%E5%9B%9E%E9%A1%A7) In H1 2023, the Chinese automotive industry faced challenges including the transition to National VI A standards, NEV price adjustments, and price wars, yet the Group maintained stable operations by focusing on luxury and ultra-luxury brand sales and after-sales services, earning 193 awards - In H1 2023, the Group's stores received **193 awards**, including **165 manufacturer awards** and **28 government, media, and industry association awards**[143](index=143&type=chunk) - The market faced challenges such as promotional waves, intense industry competition, and inventory clearance pressure from the National VI B emission standard transition; domestic passenger vehicle retail sales grew by **2.7%** year-on-year, but consumer sentiment and price recovery still require time[158](index=158&type=chunk) [(I) Automobile Dealership Segment](index=25&type=section&id=(%E4%B8%80)%20%E6%B1%BD%E8%BB%8A%E7%B6%93%E9%8A%B7%E6%9D%BF%E5%A1%8A) The automobile dealership segment actively responded to market changes in H1 2023, achieving a 17.1% year-on-year increase in new car sales units, with luxury brands growing by 22.1%, after-sales service revenue reaching RMB 1,426 million, and used car business gaining export qualifications and strengthening retail, while automotive finance performed well with new insurance policies up 7% and renewals up 13%, and the Group continued to optimize its network, expand new brands, and strengthen cooperation with OEMs - The Group represents luxury and ultra-luxury brands such as Porsche, Mercedes-Benz, BMW, Audi, Jaguar Land Rover, Volvo, and Hongqi, as well as mid-to-high-end brands like FAW-Volkswagen and Buick[183](index=183&type=chunk) - The Group actively responded to market changes, completing upgrades and renovations for **9 core brand stores and showrooms**, and expanding key account supply chain business and new media marketing channels[171](index=171&type=chunk) [1. New Car Sales Business](index=25&type=section&id=1.%20%E6%96%B0%E8%BB%8A%E9%8A%B7%E5%94%AE%E6%A5%AD%E5%8B%99) In H1 2023, the Group sold 30,560 new cars, a 17.1% year-on-year increase, with luxury and ultra-luxury brands accounting for 26,187 units, up 22.1%, achieved through enhanced communication with manufacturers, store upgrades, key account expansion, and new media marketing New Car Sales Data | Indicator | For the Six Months Ended June 30, 2023 | Year-on-Year Growth | | :--- | :--- | :--- | | New Car Sales Units | 30,560 | 17.1% | | Luxury and Ultra-Luxury Car Sales Units | 26,187 | 22.1% | [2. After-sales Service Business](index=27&type=section&id=2.%20%E5%94%AE%E5%BE%8C%E6%9C%8D%E5%8B%99%E6%A5%AD%E5%8B%99) The Group maintained a customer-centric approach, enhancing digital customer operations and online mall optimization to provide convenient after-sales services, accumulating 574,600 after-sales service units and generating approximately RMB 1,426 million in revenue for the six months ended June 30, 2023 - The Group enhanced digital customer operations through self-developed information systems, WeChat mini-programs, and enterprise WeChat, offering services like maintenance reminders and online consultations[159](index=159&type=chunk) After-sales Service Data | Indicator | For the Six Months Ended June 30, 2023 | | :--- | :--- | | Automotive After-sales Service Units | 574,600 | | After-sales Service Revenue | Approximately RMB 1,426 Million | [3. Used Car Business](index=27&type=section&id=3.%20%E4%BA%8C%E6%89%8B%E8%BB%8A%E6%A5%AD%E5%8B%99) In H1 2023, China's used car transaction volume increased by 15.6% year-on-year, and the Group updated its standardized used car management system, focused on strengthening retail business, and obtained used car export qualifications in July 2023 to accelerate business expansion - From January to June 2023, China's cumulative used car transaction volume reached **8.7686 million units**, a **15.6%** year-on-year increase, with a transaction value of **RMB 551.726 billion**[160](index=160&type=chunk) - The Group updated its standardized used car management system, enhancing retail business quality through increased external procurement support, establishing benchmark retail outlets, and sharing vehicle sources[162](index=162&type=chunk) - The Group obtained used car export qualifications in July 2023 and has commenced export operations, accelerating expansion and building a full-link supply chain system[162](index=162&type=chunk) [4. Automotive Finance Business](index=28&type=section&id=4.%20%E6%B1%BD%E8%BB%8A%E9%87%91%E8%9E%8D%E6%A5%AD%E5%8B%99) The Group's automotive finance business performed well in H1 2023, with new insurance policies up 7% year-on-year, renewals up 13%, and dual-insurance product sales reaching RMB 76 million, as the Group focused on customer needs and innovative insurance services to enhance customer retention and store comprehensive profit Automotive Finance Business Data | Indicator | For the Six Months Ended June 30, 2023 | Year-on-Year Increase | | :--- | :--- | :--- | | New Insurance Policies Units | 26,000 | 7% | | New Car Insurance Penetration Rate | 94% | N/A | | Renewal Insurance Policies Units | 93,000 | 13% | | Dual-Insurance Product Sales | RMB 76 Million | N/A | [Company Network Development and Layout](index=29&type=section&id=%E5%85%AC%E5%8F%B8%E7%B6%B2%E7%B5%A1%E7%99%BC%E5%B1%95%E8%88%87%E4%BD%88%E5%B1%80) As of June 30, 2023, the Group operated 109 outlets and had 3 under construction across 16 provinces and 37 cities in China, opening 2 new 4S stores and 2 NIO service centers in H1, expanding its luxury brand advantage and entering the new energy sector, while actively advancing core brand projects, strengthening OEM cooperation, and streamlining underperforming brands and outlets Outlet Details (As of June 30, 2023) | Outlet Type | Operating Outlets | Outlets Under Construction | Total | | :--- | :--- | :--- | :--- | | Luxury and Ultra-Luxury Brand 5S/4S Stores | 58 | 1 | 59 | | Mid-to-High-End and New Energy Brand 4S Stores | 17 | 1 | 18 | | Luxury Brand City Showrooms | 5 | 0 | 5 | | Luxury Brand Authorized Service Centers | 4 | 1 | 5 | | Mid-to-High-End and New Energy Brand Showrooms | 1 | 0 | 1 | | Mid-to-High-End and New Energy Brand Service Centers | 5 | 0 | 5 | | Self-operated Outlets | 19 | 0 | 19 | | **Total** | **109** | **3** | **112** | - In H1 2023, the Group opened **one Mercedes-Benz 4S store**, **one Great Wall Haval 4S store**, and **two NIO service centers**, continuously expanding its traditional luxury brand advantage and venturing into new energy vehicle maintenance[1](index=1&type=chunk) - The Group actively advanced core and highly profitable brand projects, aligning with brand image upgrades and new energy transformation, while streamlining underperforming brands and outlets to enhance overall profitability[166](index=166&type=chunk) [(II) Supply Chain Business Segment](index=30&type=section&id=(%E4%BA%8C)%20%E4%BE%9B%E6%87%89%E9%8F%88%E6%A5%AD%E5%8B%99%E6%9D%BF%E5%A1%8A) In H1 2023, the Group's supply chain business segment achieved total revenue of RMB 303 million, with Shengze Jietong making new progress in vehicle logistics, warehousing, and spare parts, and being recognized among the "2023 Top 50 Car Carrier Self-Owned Capacity" - For H1 2023, the Group's supply chain business segment achieved total revenue of **RMB 303 million**[186](index=186&type=chunk) - Shengze Jietong added Dongfeng Honda Chongqing Port last-mile distribution business, successfully introduced XPeng Motors vehicle warehousing business, and won the bid for the nationwide transportation and distribution project of BWI Group auto parts[166](index=166&type=chunk) - The construction of Hannan Logistics Base is largely complete, poised to become a comprehensive logistics hub integrating spare parts logistics, vehicle logistics, and vehicle warehousing businesses[166](index=166&type=chunk) - Shengze Jietong was recognized by the China Federation of Logistics & Purchasing Automotive Logistics Branch as one of the '2023 Top 50 Car Carrier Self-Owned Capacity' for its business development and cost management achievements[176](index=176&type=chunk) [(III) Management Enhancement](index=31&type=section&id=(%E4%B8%89)%20%E7%AE%A1%E7%90%86%E6%8F%90%E5%8D%87) In H1 2023, the Group optimized and enhanced its governance, organizational structure, internal oversight, risk prevention, human resources, and digitalization, including revising policies, establishing an ESG committee, optimizing executive responsibilities, strengthening internal audits, formulating operational risk management policies, refining compensation systems, and accelerating digital operation project development - In terms of standardized governance, **31 new/revised policies** were introduced, **5 abolished**, clarifying decision-making, execution, and oversight responsibilities, and optimizing approval authorities[187](index=187&type=chunk) - Regarding organizational structure, an Environmental, Social, and Governance (ESG) Committee was established under the Board, and executive division of labor and headquarters department responsibilities were adjusted and optimized[187](index=187&type=chunk) - In internal audit and supervision, audit priorities were emphasized, issue rectification promoted, and internal control research, diagnosis, and system optimization projects initiated[188](index=188&type=chunk) - For risk prevention, dynamic risk analysis and assessment were conducted, operational risk management policies formulated, and management of financing, guarantees, and foreign exchange transactions strengthened[177](index=177&type=chunk) - In human resources, the compensation system was optimized, an employee career management system established, and internal competitive recruitment and market-based selection for mid-to-high-level positions promoted[177](index=177&type=chunk) - For digitalization, a series of automotive information projects were independently designed and developed, including client-side enterprise WeChat mini-programs, electronic vehicle tag inventory management systems, and test drive and courtesy car management systems[178](index=178&type=chunk) [Financial Review](index=33&type=section&id=%E8%B2%A1%E5%8B%99%E5%9B%9E%E9%A1%A7) This section provides a detailed review of the Group's H1 2023 financial performance, covering revenue growth, gross profit decline, expense variations, period loss, liquidity, capital expenditure, inventory management, pledged assets, and foreign currency risk hedging, highlighting the impact of reduced new car sales gross profit margin on overall profitability [Operating Revenue](index=33&type=section&id=%E7%87%9F%E6%A5%AD%E6%94%B6%E5%85%A5) For the six months ended June 30, 2023, the Group's operating revenue was approximately RMB 12,310 million, an 11.2% year-on-year increase, primarily driven by higher new car sales volume, with new car sales revenue accounting for 86.0% and after-sales service revenue for 11.6% of total revenue Operating Revenue Composition and Growth | Item | H1 2023 (RMB Million) | H1 2022 (RMB Million) | Year-on-Year Growth/Decrease | | :--- | :--- | :--- | :--- | | Total Revenue | 12,310 | 11,069 | +11.2% | | New Car Sales Revenue | 10,581 | 9,281 | +14.0% | | After-sales Service Revenue | 1,426 | 1,468 | -2.9% | | New Car Sales Revenue as % of Total Revenue | 86.0% | 83.8% | +2.2 percentage points | | Luxury and Ultra-Luxury Car Sales Revenue as % of New Car Sales Revenue | 95.0% | 93.5% | +1.5 percentage points | [Cost of Sales](index=33&type=section&id=%E9%8A%B7%E5%94%AE%E6%88%90%E6%9C%AC) For the six months ended June 30, 2023, the Group's cost of sales was approximately RMB 11,679 million, a 15.4% year-on-year increase, mainly due to higher new car sales volume and promotional activities for some inventory vehicles, with new car sales cost rising by 20.6% while after-sales service cost decreased by 21.0% due to operational cost control Cost of Sales Composition and Growth | Item | H1 2023 (RMB Million) | H1 2022 (RMB Million) | Year-on-Year Growth/Decrease | | :--- | :--- | :--- | :--- | | Total Cost of Sales | 11,679 | 10,120 | +15.4% | | New Car Sales Cost | 10,558 | 8,755 | +20.6% | | After-sales Service Cost | 851 | 1,077 | -21.0% | - The decrease in after-sales service cost of sales was primarily due to operational cost control at integrated and mid-to-high-end brand stores[181](index=181&type=chunk) [Gross Profit and Gross Profit Margin](index=33&type=section&id=%E6%AF%9B%E5%88%A9%E5%8F%8A%E6%AF%9B%E5%88%A9%E7%8E%87) For the six months ended June 30, 2023, the Group's gross profit was approximately RMB 630 million, a 33.6% year-on-year decrease, with a gross profit margin of 5.1%, down 3.5 percentage points from the prior period, primarily due to lower average selling prices for new cars Gross Profit and Gross Profit Margin | Indicator | H1 2023 (RMB Million) | H1 2022 (RMB Million) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Gross Profit | 630 | 949 | -33.6% | | Gross Profit Margin | 5.1% | 8.6% | -3.5 percentage points | - The decline in gross profit and gross profit margin was primarily due to lower average selling prices for new cars[205](index=205&type=chunk) [Selling and Distribution Expenses](index=34&type=section&id=%E9%8A%B7%E5%94%AE%E5%8F%8A%E5%88%86%E9%8A%B7%E9%96%8B%E6%94%AF) For the six months ended June 30, 2023, the Group's selling and distribution expenses were approximately RMB 566 million, a 4.4% year-on-year increase, mainly due to higher marketing expenses and staff costs Selling and Distribution Expenses (RMB Million) | Indicator | H1 2023 | H1 2022 | Year-on-Year Growth | | :--- | :--- | :--- | :--- | | Selling and Distribution Expenses | 566 | 542 | +4.4% | - The increase in selling and distribution expenses was primarily due to higher marketing expenses and staff costs[5](index=5&type=chunk) [Administrative Expenses](index=34&type=section&id=%E8%A1%8C%E6%94%BF%E9%96%8B%E6%94%AF) For the six months ended June 30, 2023, the Group's administrative expenses were approximately RMB 535 million, a 7.0% year-on-year increase, primarily due to higher depreciation and amortization from new store openings Administrative Expenses (RMB Million) | Indicator | H1 2023 | H1 2022 | Year-on-Year Growth | | :--- | :--- | :--- | :--- | | Administrative Expenses | 535 | 500 | +7.0% | - The increase in administrative expenses was primarily due to higher depreciation and amortization resulting from new store openings[6](index=6&type=chunk) [Operating Profit](index=34&type=section&id=%E7%B6%93%E7%87%9F%E6%BA%A2%E5%88%A9) For the six months ended June 30, 2023, the Group's operating profit was approximately RMB 153 million, a significant decrease from RMB 533 million in the prior period, primarily due to lower new car sales gross profit margin Operating Profit (RMB Million) | Indicator | H1 2023 | H1 2022 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Operating Profit | 153 | 533 | Significant Decrease | - The primary reason for the decline in operating profit was the decrease in new car sales gross profit margin during the period[189](index=189&type=chunk) [Income Tax](index=34&type=section&id=%E6%89%80%E5%BE%97%E7%A8%85) For the six months ended June 30, 2023, the Group's income tax expense was approximately RMB 2 million, a significant reduction from RMB 65 million in the prior period Income Tax Expense (RMB Million) | Indicator | H1 2023 | H1 2022 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Income Tax Expense | 2 | 65 | Significant Decrease | [Contingent Liabilities](index=34&type=section&id=%E6%88%96%E7%84%B6%E8%B2%A0%E5%82%B5) As of June 30, 2023, the Group had no other significant contingent liabilities apart from those related to certain construction projects disclosed in Note 18 to the interim financial information - As of June 30, 2023, the Group had no other significant contingent liabilities, except for contingent matters related to certain construction projects disclosed in Note 18[191](index=191&type=chunk) [(Loss)/Profit for the Period](index=34&type=section&id=%E6%9C%9F%E5%85%A7%EF%BC%88%E虧%E6%90%8D%EF%BC%89%E2%88%95%E6%BA%A2%E5%88%A9) For the six months ended June 30, 2023, the Group recorded a loss for the period of approximately RMB 386 million, compared to a profit of approximately RMB 6 million in the prior period, primarily due to lower new car sales gross profit margin (Loss)/Profit for the Period (RMB Million) | Indicator | H1 2023 | H1 2022 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | (Loss)/Profit for the Period | (386) | 6 | Turned to Loss | - The primary reason for the period turning to loss was the decrease in new car sales gross profit margin[192](index=192&type=chunk) [Current Assets and Current Liabilities](index=34&type=section&id=%E6%B5%81%E5%8B%95%E8%B3%87%E7%94%A2%E5%8F%8A%E6%B5%81%E5%8B%95%E8%B2%A0%E5%82%B5) As of June 30, 2023, the Group's current assets were approximately RMB 14,610 million, an increase of approximately RMB 780 million from year-end 2022, while current liabilities were approximately RMB 20,339 million, an increase of approximately RMB 1,428 million, mainly due to higher business-related short-term bank borrowings Current Assets and Current Liabilities (RMB Million) | Indicator | As of June 30, 2023 | As of December 31, 2022 | Change | | :--- | :--- | :--- | :--- | | Current Assets | 14,610 | 13,830 | +780 | | Current Liabilities | 20,339 | 18,911 | +1,428 | | Primary Reason for Increase in Current Liabilities | Increase in business-related short-term bank borrowings | N/A | N/A | [Cash Flow](index=35&type=section&id=%E7%8F%BE%E9%87%91%E6%B5%81%E9%87%8F) For the six months ended June 30, 2023, the Group's net cash from operating activities was a net outflow of approximately RMB 446 million, compared to a net inflow of approximately RMB 171 million in the prior period, primarily due to lower new car sales gross profit, with cash and cash equivalents slightly decreasing Cash Flow (RMB Million) | Indicator | H1 2023 | H1 2022 | Change | | :--- | :--- | :--- | :--- | | Net Cash from Operating Activities | (446) (Net Outflow) | 171 (Net Inflow) | Turned to Net Outflow | | Cash and Cash Equivalents | 705 | 734 (As of Dec 31, 2022) | -29 | - The net cash outflow from operating activities was primarily due to the decrease in new car sales gross profit[208](index=208&type=chunk) [Capital Expenditure and Investments](index=35&type=section&id=%E8%B3%87%E6%9C%AC%E9%96%8B%E6%94%AF%E5%8F%8A%E6%8A%95%E8%B3%87) For the six months ended June 30, 2023, the Group's capital expenditure and investments were approximately RMB 401 million, an increase from RMB 371 million in the prior period, primarily due to upgrades and renovations of some stores Capital Expenditure and Investments (RMB Million) | Indicator | H1 2023 | H1 2022 | Year-on-Year Growth | | :--- | :--- | :--- | :--- | | Capital Expenditure and Investments | 401 | 371 | +30 | - The increase in capital expenditure and investments was primarily due to upgrades and renovations of some stores[195](index=195&type=chunk) [Inventories](index=36&type=section&id=%E5%AD%98%E8%B2%A8) As of June 30, 2023, the Group's inventories were approximately RMB 3,581 million, a decrease of approximately RMB 483 million from year-end 2022, primarily due to reduced new car ending inventory, with average inventory turnover days increasing to 49.4 days Inventories and Turnover Days (RMB Million) | Indicator | As of June 30, 2023 | As of December 31, 2022 | Change | | :--- | :--- | :--- | :--- | | Inventories | 3,581 | 4,064 | -483 | | Average Inventory Turnover Days (Days) | 49.4 | 40.8 (H1 2022) | +8.6 | - The decrease in inventories was primarily due to the Group reducing its new car ending inventory[210](index=210&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=%E6%B5%81%E5%8B%95%E8%B3%87%E9%87%91%E5%8F%8A%E8%B3%87%E6%9C%AC%E8%B3%87%E6%BA%90) As of June 30, 2023, the Group's cash and bank balances were approximately RMB 5,600 million, an increase of approximately RMB 909 million from year-end 2022, with total loans and borrowings and lease liabilities amounting to approximately RMB 21,448 million, and the net gearing ratio significantly decreased to approximately 1,347.3% but remains high Liquidity and Capital Resources (RMB Million) | Indicator | As of June 30, 2023 | As of December 31, 2022 | Change | | :--- | :--- | :--- | :--- | | Cash and Bank Balances | 5,600 | 4,691 | +909 | | Loans and Borrowings, Lease Liabilities | 21,448 | 20,018 | +1,430 | | Net Gearing Ratio | 1,347.3% | 6,828.9% | Significant Decrease | - The Group will actively improve operating efficiency and consider various methods to enhance its financial position and reduce leverage[11](index=11&type=chunk) [Pledged Assets](index=37&type=section&id=%E6%8A%B5%E6%8A%BC%E8%B3%87%E7%94%A2) As of June 30, 2023, the Group's pledged assets were approximately RMB 9,648 million, an increase of approximately RMB 1,645 million from year-end 2022, serving as collateral for loans and borrowings used for daily business operations Pledged Assets (RMB Million) | Indicator | As of June 30, 2023 | As of December 31, 2022 | Change | | :--- | :--- | :--- | :--- | | Pledged Assets | 9,648 | 8,003 | +1,645 | - Pledged assets serve as collateral for loans and borrowings, used for daily business working capital[212](index=212&type=chunk) [Foreign Currency Investments and Hedging](index=37&type=section&id=%E5%A4%96%E5%B9%A3%E6%8A%95%E8%B3%87%E5%8F%8A%E5%B0%8D%E6%B2%96) For the six months ended June 30, 2023, the Group held no foreign currency investments and primarily conducted business in RMB, but used forward foreign exchange instruments and option foreign exchange instruments to hedge part of its foreign currency risk for future USD loan repayments - For the six months ended June 30, 2023, the Group held no foreign currency investments[199](index=199&type=chunk) - The Group uses forward foreign exchange instruments and option foreign exchange instruments to hedge part of its foreign currency risk for future USD loan repayments[210](index=210&type=chunk) [Employees and Remuneration Policy](index=37&type=section&id=%E5%83%B1%E5%93%A1%E5%8F%8A%E8%96%AA%E9%85%AC%E6%94%BF%E7%AD%96) As of June 30, 2023, the Group employed 7,093 staff in China, with staff costs of approximately RMB 441 million, and emphasizes human resources by offering competitive remuneration and benefit plans to attract and retain high-quality employees Employee and Remuneration Data | Indicator | As of June 30, 2023 | As of December 31, 2022 | | :--- | :--- | :--- | | Number of Employees (China) | 7,093 | 7,181 | | Staff Costs (RMB Million) | 441 (H1) | 459 (H1 2022) | - The Group offers competitive remuneration and benefit plans, including retirement benefits, work injury compensation benefits, maternity insurance, medical, and unemployment benefit schemes[213](index=213&type=chunk) [Future Outlook and Strategies](index=37&type=section&id=%E6%9C%AA%E4%BE%86%E5%B1%95%E6%9C%9B%E5%8F%8A%E7%AD%96%E7%95%A5) The Company will capitalize on market opportunities from NEV purchase tax subsidies and consumption recovery policies by strengthening management to improve operational quality, vigorously expanding used car export business, and actively assessing automotive dealership industry trends, focusing on new energy and new dealership model market opportunities - The Company will strengthen management and improve operational quality through refined assessment methods and a focus on per capita efficiency[214](index=214&type=chunk) - Leveraging existing store resources and channels, combined with favorable policies, market conditions, and logistics, the Company will vigorously expand its used car export business[214](index=214&type=chunk) - The Company will actively assess the development trends and directions of the automotive dealership industry, focusing on market opportunities under new energy and new dealership models, and selecting appropriate times to participate in dealership, maintenance, and related businesses of new entrants and domestic brands with significant growth potential[20](index=20&type=chunk)[214](index=214&type=chunk) - The long-term network expansion strategy will continue to focus on luxury automotive brands, deepen comprehensive cooperation with various OEMs (including new energy projects), strengthen strategic partnership status, and continuously optimize brand structure and store-level profitability[200](index=200&type=chunk) [Review of Interim Results](index=38&type=section&id=%E5%AF%A9%E9%96%B1%E4%B8%AD%E6%9C%9F%E6%A5%AD%E7%B8%BE) The Company's Audit Committee reviewed the unaudited condensed consolidated interim financial statements for the six months ended June 30, 2023, which were also reviewed by external auditor KPMG in accordance with Hong Kong Standard on Review Engagements 2410 - The Audit Committee, comprising three independent non-executive directors, has reviewed the interim financial statements[14](index=14&type=chunk) - The Group's external auditor, KPMG, has reviewed the interim financial statements in accordance with Hong Kong Standard on Review Engagements 2410 issued by the Hong Kong Institute of Certified Public Accountants[21](index=21&type=chunk) [Interim Dividend](index=38&type=section&id=%E4%B8%AD%E6%9C%9F%E8%82%A1%E6%81%AF) The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2023 - The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2023[215](index=215&type=chunk) [Post-Reporting Period Events](index=38&type=section&id=%E5%A0%B1%E5%91%8A%E6%9C%9F%E5%BE%8C%E4%BA%8B%E9%A0%85) Subsequent to the reporting period, Mr. Zeng Tingyi ceased to be an executive director and authorized representative, while Mr. Huang Junfeng was appointed as an executive director, and Ms. Fung Wai Sum, the company secretary, was appointed as an authorized representative - Effective July 31, 2023, Mr. Zeng Tingyi ceased to be an executive director and authorized representative of the Company[216](index=216&type=chunk) - Mr. Huang Junfeng was appointed as an executive director of the Company, and Ms. Fung Wai Sum, the company secretary, was appointed as the authorized representative of the Company[216](index=216&type=chunk) [Purchase, Sale or Redemption of the Company's Listed Securities](index=38&type=section&id=%E8%B3%BC%E8%B2%B7%E3%80%81%E5%87%BA%E5%94%AE%E6%88%96%E8%B4%96%E5%9B%9E%E6%9C%AC%E5%85%AC%E5%8F%B8%E4%B8%8A%E5%B8%82%E8%AD%89%E5%88%B8) For the six months ended June 30, 2023, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities - For the six months ended June 30, 2023, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[15](index=15&type=chunk) [Use of Proceeds](index=38&type=section&id=%E6%89%80%E5%BE%97%E6%AC%BE%E9%A0%85%E7%94%A8%E9%80%94) The Company completed a placement in June 2023, with net proceeds of approximately HK$56.34 million intended entirely for bank loan repayment; as of June 30, 2023, the funds were unutilized but have been fully utilized by the announcement date - The Company entered into a placing agreement on June 7, 2023, to place **122,560,000 shares** at **HK$0.48 per share**, raising net proceeds of approximately **HK$56.34 million**[224](index=224&type=chunk) Use of Placing Proceeds | Use | Percentage of Proceeds Used | Placing Proceeds (HK$ Million) | Actual Use as of June 30, 2023 (HK$ Million) | Unutilized Net Proceeds as of June 30, 2023 (HK$ Million) | | :--- | :--- | :--- | :--- | :--- | | Repayment of Bank Loans | 100% | 56.34 | 0 | 56.34 | - As of the announcement date (August 29, 2023), the aforementioned net proceeds have been fully utilized for their intended purpose[16](index=16&type=chunk) [Corporate Governance](index=39&type=section&id=%E4%BC%81%E6%A5%AD%E7%AE%A1%E6%B2%BB) The Company is committed to high standards of corporate governance, has adopted the Corporate Governance Code in Appendix 14 of the Listing Rules, and complied with its provisions for the six months ended June 30, 2023, with regular reviews planned to enhance corporate governance practices - The Group is committed to upholding high standards of corporate governance to safeguard shareholders' interests and enhance corporate value and accountability[23](index=23&type=chunk) - The Company has adopted the Corporate Governance Code set out in Appendix 14 of the Listing Rules and complied with its provisions for the six months ended June 30, 2023[218](index=218&type=chunk) [Directors' Securities Transactions](index=39&type=section&id=%E8%91%A3%E4%BA%8B%E9%80%B2%E8%A1%8C%E8%AD%89%E5%88%B8%E4%BA%A4%E6%98%93) The Company has adopted a code for securities transactions by directors, with standards no less exacting than those in Appendix 10 of the Listing Rules, and all current directors confirmed compliance for the six months ended June 30, 2023 - The Company has adopted a code for securities transactions by directors with standards no less exacting than those set out in Appendix 10 of the Listing Rules[226](index=226&type=chunk) - All current directors confirmed their compliance with the securities dealing code and the Model Code throughout the six months ended June 30, 2023[226](index=226&type=chunk) [Publication of Interim Results Announcement](index=40&type=section&id=%E5%88%8A%E7%99%BB%E4%B8%AD%E6%9C%9F%E6%A5%AD%E7%B8%BE%E5%85%AC%E5%91%8A) This interim results announcement is available on the HKEX and Company websites, and the full interim report containing all information required by the Listing Rules will be dispatched to shareholders and published on these websites later - This interim results announcement is available on the websites of Hong Kong Exchanges and Clearing Limited (http://www.hkexnews.hk) and the Company (http://www.zhengtongauto.com)[228](index=228&type=chunk) - The Company's interim report for the six months ended June 30, 2023, containing all information required by the Listing Rules, will be dispatched to shareholders and published on the aforementioned websites later[228](index=228&type=chunk) [Acknowledgements](index=40&type=section&id=%E8%87%B4%E8%AC%9D) The Board extends its sincere gratitude to the Group's management team and employees for their dedicated service and diligence, and to shareholders and business partners for their strong support of the Group - The Board sincerely thanks the Group's management team and employees for their dedicated service and diligence, and shareholders and business partners for their strong support of the Group[18](index=18&type=chunk)

Financial Performance - In 2022, the company's revenue was RMB 22,606,790, an increase from RMB 20,985,529 in 2021, reflecting a growth of approximately 7.7%[35] - The company reported a loss attributable to equity shareholders of RMB 296,285 in 2022, a significant improvement compared to a loss of RMB 3,622,131 in 2021[35] - The total liabilities of the company increased to RMB 27,508,315 in 2022 from RMB 25,589,165 in 2021, reflecting a rise of approximately 7.5%[36] - The group's net cash inflow from operating activities for the year was approximately RMB 159 million, slightly up from RMB 156 million in 2021[19] - The group's gross profit for the year ended December 31, 2022, was approximately RMB 1,587 million, an increase of about 28.4% compared to RMB 1,236 million in 2021, primarily due to increased new car sales and controlled sales costs[84] - The net loss for the year ended December 31, 2022, was approximately RMB 297 million, a decrease of about 92.1% from RMB 3,781 million in 2021, with a loss margin of approximately 1.3%[87] Assets and Liabilities - As of December 31, 2022, the total assets of the company were RMB 27,732,759, compared to RMB 26,129,786 in 2021, indicating a growth of about 6.1%[36] - As of December 31, 2022, the group's cash and cash equivalents were approximately RMB 734 million, an increase of about RMB 525 million from RMB 209 million as of December 31, 2021[19] - The group's current assets as of December 31, 2022, were approximately RMB 13,830 million, an increase of about RMB 1,039 million from RMB 12,791 million in 2021[90] - The group's current liabilities as of December 31, 2022, were approximately RMB 18,911 million, a decrease of about RMB 2,930 million from RMB 21,841 million in 2021, mainly due to a reduction in short-term loans[90] Sales and Distribution - The group sold a total of 56,264 new vehicles in the year ended December 31, 2022, representing a year-on-year growth of approximately 9.4%, including 45,334 luxury and ultra-luxury vehicles, which grew by about 14.2%[54] - New car sales revenue was approximately RMB 18,845 million, up about 10.9% from RMB 16,989 million in 2021, accounting for 83.4% of total revenue in 2022[74] - The sales of luxury and ultra-luxury brand vehicles generated revenue of approximately RMB 17,491 million, a year-on-year increase of about 13.0% from RMB 15,483 million in 2021, representing 92.8% of new car sales revenue[74] - The group achieved a total of 1,070,313 after-sales service instances in 2022, generating after-sales service revenue of approximately RMB 3,081 million[55] Inventory and Supply Chain - The group's inventory as of December 31, 2022, was approximately RMB 4,064 million, an increase of about RMB 1,415 million from RMB 2,649 million in 2021, primarily due to increased new car inventory based on market demand[20] - The average inventory turnover days for 2022 was 48.4 days, an increase of 16.9 days from 31.5 days in 2021, attributed to expanded operational scale and increased year-end inventory due to the pandemic[20] - The group's sales cost for the year was approximately RMB 21,020 million, an increase of about 6.4% from RMB 19,750 million in 2021, consistent with the rise in new car sales[75] Strategic Initiatives - The company aims to focus on luxury and ultra-luxury car brands, enhancing strategic partnerships with major manufacturers, including those in the new energy sector[25] - The company is actively adapting to market opportunities in the automotive distribution industry, particularly in new energy and new distribution models[25] - The company plans to expand its used car business and explore opportunities in the new energy service industry, aiming for higher gross profit returns[107] - The company is actively seeking collaboration opportunities with other established new energy dealers to facilitate business transformation and upgrade[41] Corporate Governance - The board of directors consists of six members, including three executive directors and three independent non-executive directors[121] - The board has established an independence assessment mechanism to enhance board efficiency and identify areas for improvement[132] - The company has implemented a training program for newly appointed directors to ensure they understand the business and regulatory responsibilities[134] - The company has arranged directors' and officers' liability insurance to protect its executives from legal actions arising from company activities[126] Employee and Management - As of December 31, 2022, the company employed 7,181 staff, a decrease from 7,760 in the previous year, with employee costs for the year amounting to approximately RMB 985 million[104] - The company has adopted a competitive compensation and benefits plan to attract and retain high-quality employees, including a four-tier training system for staff development[110] - The company emphasizes maintaining competitiveness and risk resistance as it transitions from a private enterprise to a state-owned enterprise management mechanism[47] Market Trends - The penetration rate of new energy vehicles in the Chinese market reached nearly 30% in 2022, indicating a significant shift in consumer demand[40] - The automotive industry in China saw a year-on-year increase of 11.2% in production and 9.5% in sales, with total passenger vehicle production and sales reaching 23.83 million and 23.56 million units, respectively[40] - The company anticipates a strong rebound in automotive consumption in 2023, driven by economic recovery and increased domestic demand[111]