Hong Kong Stock Connect exit combined with plummeting net profit: Beijing Automotive's dilemma and the path to break through

On March 9, 2026, the Shenzhen Stock Exchange officially announced the removal of Beijing Automotive (01958.HK) from the Stock Connect program. Mainland investors can now only sell existing holdings and are no longer able to purchase shares through this channel. This “exit” from the capital market has become a focal point of the company’s ongoing operational difficulties. Almost simultaneously, Beijing Automotive’s 2025 profit warning continued to ferment, with net profit attributable to shareholders expected to be only 110 million to 130 million yuan, representing a collapse of 86.4% to 88.5% compared to 956 million yuan in 2024. A liquidity crisis in the capital market, coupled with a performance “collapse” at the operational level, has sharply pushed this traditional automaker with deep joint venture roots into the spotlight of public opinion.

Reviewing this double crisis, it is clear that this is not an accidental fluctuation in performance but the inevitable result of long-term issues such as heavy reliance on joint ventures, delayed transformation, and weak自主品牌 (independent brands). Being removed from the Stock Connect appears to be a regulatory adjustment by the exchanges, but in reality, it directly reflects the ongoing decline in the company’s market value and stock liquidity, with underlying problems already foreshadowed.

According to the joint rules set by the Shanghai, Shenzhen, and Hong Kong Exchanges, the core conditions for delisting from the Stock Connect include insufficient market capitalization and liquidity. Specifically, the stock must have an average daily market value of at least HKD 4 billion over the past 12 months, maintain a reasonable turnover rate, and be highly correlated with the Hang Seng Composite Index. Once removed from the index, it is highly likely to be delisted from the Stock Connect. On February 13, 2026, Hang Seng Index Company announced that Beijing Automotive, due to its market cap falling out of the top 96% of the Hong Kong main board, was officially removed from the Hang Seng Composite Index. This adjustment paved the way for its removal from the Stock Connect on March 9.

Data vividly illustrates Beijing Automotive’s capital market predicament: as of the effective date of delisting, its share price closed down 3.41% at HKD 1.70, with a total market value of HKD 13.626 billion. Although this market cap appears to exceed the HKD 4 billion threshold, its average monthly market value over the past 12 months has fallen below the core standard for Stock Connect inclusion. In February 2026, the average monthly turnover rate was only 0.9%, far below market averages, indicating persistent low trading activity and meeting the delisting criteria. The “vote with your feet” in the capital market is essentially a rational response to the company’s ongoing operational deterioration.

Beijing Automotive’s profit warning on February 10, 2026, revealed three main reasons for the sharp decline in net profit in 2025: a significant drop in revenue from Beijing Benz, continued sluggishness of自主品牌 (independent brands), and increased investment in transformation. These three factors point directly to long-standing operational issues, with Beijing Benz, the profit pillar, being the primary source of the “bleeding,” becoming the main burden on performance.

According to Beijing Automotive’s March 5 disclosure, Beijing Benz’s revenue in 2025 was €16.72 billion, down 23.12% year-over-year; after-tax operating profit was €1.5 billion, down 38.6%; and total comprehensive income was €1.519 billion, down 36.81%. Notably, this marks the third consecutive year of declining revenue and net profit: in 2023, revenue fell 9.4% and after-tax profit dropped 17.8%; in 2024, revenue declined 3.4% and net profit fell 18.5%. The peak was in 2022, with revenue reaching €24.82 billion and after-tax net profit €3.65 billion. In just three years, profits have nearly halved.

Sales decline is the direct cause of Beijing Benz’s revenue shrinkage. According to Mercedes-Benz Group’s global sales reports and industry statistics, in 2025, Mercedes-Benz delivered a total of 575,000 passenger vehicles in China, a 19% decrease year-over-year, reaching a decade-low. Beijing Benz’s domestic model sales also fell 19% year-over-year, with total annual sales exceeding 550,000 units—lagging behind competitors like BMW and Audi and hitting a new low for itself. The model mix heavily relies on three main fuel models: E-Class, GLC, and C-Class, each selling over 120,000 units annually. However, as demand for fuel vehicles continues to decline, their growth momentum is waning. Meanwhile, its new energy vehicle (NEV) lineup, including the EQ series (EQA, EQB, EQE, etc.), performed poorly, with monthly average sales below 500 units. In 2025, NEV sales accounted for only 8.1% of Mercedes-Benz’s China sales, far below competitors like BMW and Audi. The lag in NEV transformation has become a critical weakness, causing Beijing Benz to fall behind industry shifts.

The profit decline of Beijing Benz directly impacts Beijing Automotive’s overall performance. Data shows that in 2025, Beijing Benz contributed about ¥6.1 billion in profit, a sharp drop from over ¥7 billion in 2024. This decline caused a significant drop in Beijing Automotive’s net profit. More concerning is that Beijing Automotive’s dependence on Beijing Benz runs deep—long-term, Beijing Benz has contributed over 90% of the company’s profits. This single-profit structure leaves Beijing Automotive vulnerable: when Beijing Benz’s performance falters, the entire company loses its core profit support, greatly weakening its risk resistance.

If the “bleeding” in the joint venture segment is an external shock, then the persistent weakness of自主品牌 (independent brands) reflects Beijing Automotive’s insufficient internal capacity to generate self-sustaining growth. The company has attempted to break through development bottlenecks via自主品牌, but has failed to develop core competitiveness over the years. In 2025, the group’s自主品牌销量 (sales volume) was 1.07 million units, up 5.6% year-over-year. While this appears to be growth, the quality of this growth is questionable—自主品牌 (independent brands) remain heavily loss-making, with some factories even reducing capacity, becoming a heavy financial burden.

Financial data further reveals the predicament: according to Beijing Automotive’s 2025 third-quarter report, as of September 30, net profit attributable to parent was only ¥51.28 million, down 98.35% year-over-year; operating cash flow was ¥2.401 billion, but sharply down from ¥18.065 billion in the same period of 2024. The ongoing losses in the自主板块 (independent segment) are continuously consuming the group’s cash reserves. Industry analysts note that, amid the mainstream shift toward electrification and intelligence, Beijing Automotive’s自主品牌 (independent brands) lag behind in core technology R&D and product iteration, widening the gap with leading companies like BYD and Tesla. High-endization progress is repeatedly hindered, preventing the creation of effective profit growth points, leading to an embarrassing situation of “growing revenue without increasing profit.”

It’s worth noting that Beijing Automotive has attempted self-rescue. In 2025, the company launched the “Three-Year Leap” initiative, increasing R&D and marketing investments. Among these, Beijing Off-road has delivered impressive results: in 2025, sales exceeded 200,000 units, with the “Box” model delivering 147,000 units, up 72% year-over-year; the BJ40 series remains a leader in the rugged off-road market; the extended-range version sold 38,000 units in 8 months, topping niche markets. The “off-road + electrification + intelligence” strategy has gained market recognition. However, overall, these investments have not yielded the expected benefits at the group level and have instead further squeezed profit margins. The profit warning indicates that increased market spending, new model launches, brand building, and channel expansion are key reasons for profit decline. This blind transformation approach reflects strategic confusion—without breakthroughs in core technology or product strength, simply pouring money cannot produce substantial breakthroughs and only worsens financial strain.

The dual blow of being delisted from Stock Connect and plunging profits is triggering a chain reaction, further worsening Beijing Automotive’s operational difficulties. In the capital market, liquidity contraction is inevitable: mainland retail investors can no longer increase their holdings via Stock Connect, only sell existing positions. Some analysts estimate that future trading volume could decline by 30-50%. Simultaneously, the company’s financing ability weakens; losing the Stock Connect channel makes refinancing more difficult and costly—an especially heavy blow for Beijing Automotive, which needs substantial funds for its NEV transformation. Some market opinions even suggest that the delisting and liquidity drying up could be a prelude to privatization at a low price.

However, looking ahead, Beijing Automotive still has opportunities to turn things around. Despite the decline, Beijing Benz’s overall financial structure remains stable, providing a foundation for ongoing operations and transformation investments. Although自主品牌 (independent brands) are weak overall, Beijing Off-road’s transformation has shown promising results. The group still possesses extensive channels and production capacity, and policies supporting green transformation and NEV expansion—such as Beijing’s three-year increase in NEV quotas—offer a favorable market environment for its NEV layout.

The key to breaking the cycle lies in whether Beijing Automotive can truly break free from its dependence on joint ventures and address its weaknesses. On one hand, it needs to accelerate Beijing Benz’s NEV transformation, optimize its model lineup, reduce reliance on fuel vehicles, and enhance the competitiveness of NEV models to stabilize profits. On the other hand, it must focus resources on core technology R&D and product quality for自主品牌, learning from Beijing Off-road’s “user-oriented” transformation and “listening to advice” R&D approach, to accelerate electrification and intelligence, build a competitive product matrix, and cultivate new profit growth points.

For Beijing Automotive, this double crisis is both a “darkest hour” and a “push for transformation.” In an industry entering deep water, no company can rely solely on its past heritage. Only by actively breaking the path dependence, addressing technological and product shortcomings, can it escape current operational difficulties and regain recognition from capital markets and consumers. Otherwise, it risks being gradually eliminated in the industry reshuffle.