* This article is the original content of "Sanlian Life Weekly"
After the start of this year, a price war that has spread from parts to the whole country has caused shock in the automobile industry. The reasons behind it are complex, driven by the withdrawal of subsidy policies and the upgrading of emission reduction standards, but fundamentally reflect the imbalance of the supply and demand structure of the automobile market. On the one hand, the production capacity is released too quickly, and on the other hand, the demand is relatively insufficient. Mixed with the impulse of local governments to fight for the economy, and some car companies are blindly optimistic. These factors add up to make the car market in 2023 quickly slide into the era of "big reshuffle". Some car companies have come to the edge of the cliff – price cuts are just the prelude to this battle.
Text | Zhang Congzhi
Behind the price cut
This year’s car market was first stirred by a group of posters that went viral online in early March.On the poster, the title "The Strongest Car Purchase Discount Season in Hubei Province History Opens" was printed. Government and enterprises jointly subsidized, covering dozens of models from the seven major brands of Hubei Dongfeng Automobile GroupAmong them, the most eye-catching is Dongfeng Citroen C6, with an astonishing subsidy of 90,000 yuan. Dongfeng Citroen is a joint venture brand between Dongfeng Group and French Citroen, which belongs to the French car. In recent years, the transformation has been slow and the decline has been full. Users made jokes and said: "210,000 C6 is old-fashioned, 120,000 C6 is mature and stable." But only by buying a car locally in Hubei and getting a local license plate can you enjoy this policy.
For a while, the local car 4S shops in Wuhan were as lively as a vegetable market, and many outsiders also came to hear the wind. The previously unsalable cars in the hands of dealers were quickly cleared, and local consumption was revived. It seemed that everyone was happy.
But Li Hongtao, the dealer in Suzhou, couldn’t sit still. He was the general manager of Suzhou Century Automobile, and he had more than a dozen 4S stores in the local area, which was considered the industry leader. As soon as the news of the price cut in Hubei came, the orders in his store were quickly affected, and some consumers saw that prices had started to be reduced elsewhere, or even cancelled their orders, and planned to wait and see for a while.
But Li Hongtao, the dealer in Suzhou, couldn’t sit still. He was the general manager of Suzhou Century Automobile, and he had more than a dozen 4S stores in the local area, which was considered the industry leader. As soon as the news of the price cut in Hubei came, the orders in his store were quickly affected, and some consumers saw that prices had started to be reduced elsewhere, or even cancelled their orders, and planned to wait and see for a while.
On March 8, 2023, the car purchase discount season began, and the sales of Dongfeng cars increased. The picture shows an endless stream of customers coming to see the car and buy a car. (Photo | Visual China)
Century Motor was founded by Li Hongtao’s father in 1998, and then gradually grew. Li Hongtao, who was born in 1982, belongs to the second generation of succession. In fact, he also has several sub-brands of Dongfeng Group, such as Dongfeng Fengxing and Dongfeng Qichen, which sell fuel vehicles, and the operation has become increasingly difficult in recent years. However, this round of price reduction of Dongfeng Group is limited to Hubei, so they cannot enjoy the policy dividend, but because they belong to the same company, they have been more obviously affected. Li Hongtao, as a dealer, can only communicate with the main engine factory on the one hand to see if he can get some price reduction measures, and on the other hand, he can also go to the local commerce bureau to see if he can get the policy."To be honest, the local government has issued a lot of promotion policies in the past two years, and everyone knows the situation."
However, this was like a poker game. After Hubei, various places began to follow up one after another, especially several provinces with large automobile industries, such as Jilin Province and FAW Group, which also provided government and enterprise subsidies, covering all products such as FAW Hongqi, FAW Liberation, FAW Pentium, FAW Volkswagen, and FAW Toyota, with preferential quotas ranging from 10,000 to 20,000 yuan. Sichuan Province and Chongqing also claimed to have spent hundreds of millions of yuan to subsidize consumers’ car purchases to stimulate local car consumption.Some leading automakers originally said they would not participate in the price reduction, but ultimately failed to withstand market pressure and introduced disguised price reduction measures.In just a few weeks, almost all mainstream automakers have been involved, forming a price stampede.
In the past two years, there have been too many variables in the automobile market, one moment is "lack of cores", raw material prices have increased, and the other is epidemic control.
Li Hongtao’s life was not easy, he closed some stores and cut some investment plans. By the second half of last year, everyone was finally optimistic. After all, the epidemic was coming to an end, businesspeople had high expectations for the recovery of the economy, and with the stimulus of subsidy policies, the car market was already looking to pick up. But from a rational analysis, Li Hongtao did not dare to be too optimistic."After all, cars are a large consumption, and there are many policies to be withdrawn this year, which will definitely have an impact on the market. We thought there might be a half-year or a few quarters of adjustment period, but we didn’t expect it to be so fast. As soon as the year began, the price war broke out in an all-out way."
Li Hongtao’s life was not easy, he closed some stores and cut some investment plans. By the second half of last year, everyone was finally optimistic. After all, the epidemic was coming to an end, businesspeople had high expectations for the recovery of the economy, and with the stimulus of subsidy policies, the car market was already looking to pick up. But from a rational analysis, Li Hongtao did not dare to be too optimistic."After all, cars are a large consumption, and there are many policies to be withdrawn this year, which will definitely have an impact on the market. We thought there might be a half-year or a few quarters of adjustment period, but we didn’t expect it to be so fast. As soon as the year began, the price war broke out in an all-out way."
The automotive industry is experiencing a revolution, and many automakers feel a strong sense of crisis.
In the opinion of Wang Du, assistant president of the China Automobile Dealers Association, this price war is a symptom, essentially reflecting the structure of a serious imbalance between supply and demand in the automobile market.
"Our association warned last year that the main contradiction in the auto industry after the epidemic is the contradiction between excessive capacity release and relatively insufficient demand. One side is too fast, the other is too slow, supply and demand do not match, and the impulse of the production department is difficult to restrain, because whether it is the enterprise or the local government, it has to start work, trying to make up for the losses of the epidemic for several years, but the demand has not returned." According to the China Automobile Dealers Association, the total retail sales of passenger cars in the first quarter of 2023 was only 4.29 million, down 13% year-on-year, even lower than the same period last year in the context of "epidemic + lack of cores". Among them, the retail sales of fuel passenger vehicles 2.97 million, down 23% year-on-year; the retail sales of new energy passenger vehicles reached 1.32 million in the first quarter, an increase of 23%. Sales of major brands, especially fuel vehicle brands, halved in the first quarter.
"Our association warned last year that the main contradiction in the auto industry after the epidemic is the contradiction between excessive capacity release and relatively insufficient demand. One side is too fast, the other is too slow, supply and demand do not match, and the impulse of the production department is difficult to restrain, because whether it is the enterprise or the local government, it has to start work, trying to make up for the losses of the epidemic for several years, but the demand has not returned." According to the China Automobile Dealers Association, the total retail sales of passenger cars in the first quarter of 2023 was only 4.29 million, down 13% year-on-year, even lower than the same period last year in the context of "epidemic + lack of cores". Among them, the retail sales of fuel passenger vehicles 2.97 million, down 23% year-on-year; the retail sales of new energy passenger vehicles reached 1.32 million in the first quarter, an increase of 23%. Sales of major brands, especially fuel vehicle brands, halved in the first quarter.
Cars used to be expensive in China, making it difficult for ordinary people to reach them. The real takeoff of the domestic car market was that after entering the 21st century, cars gradually became mass consumer goods. This process was actually accompanied by several rounds of price cuts.
For example, in 2004 and around 2009, mainstream brands had a round of sharp price cuts. The difference this year is that local governments have played an important role in this wave of price cuts, which has also aroused doubts in the industry. Li Hongtao also said that in the past, OEMs may choose to take the initiative to cut prices because a certain car is not selling well or the inventory is too high. Now many car companies are forced to cut prices, not simply for product structure reasons.
For example, in 2004 and around 2009, mainstream brands had a round of sharp price cuts. The difference this year is that local governments have played an important role in this wave of price cuts, which has also aroused doubts in the industry. Li Hongtao also said that in the past, OEMs may choose to take the initiative to cut prices because a certain car is not selling well or the inventory is too high. Now many car companies are forced to cut prices, not simply for product structure reasons.
"Ode to Joy" stills
"
The price war itself is not a bad thing. In the end, the market will play a regulatory role, the survival of the fittest, and promote the healthy development of the industry. But once the government goes down, other local governments will also go down, and the national unified market will not exist.
In the end, whichever place has the money, the enterprises there are more likely to survive, which directly interferes with the market order.
"Wang Du said to this magazine.
On March 17 this year, the China Automobile Dealers Association also issued a document questioning the promotion behavior of the local government in Hubei, arguing that it only subsidizes local automobile production brands, which is unfair and has also led to consumers in other regions holding coins for purchase, resulting in a significant decrease in the turnover of automobile 4S stores.
According to the data released by the National Passenger Car Market Information Association, from March 1 to 19, 2023, the retail volume of the passenger car market was 700,000, down 8% year-on-year and 4% month-on-month.
The price war itself is not a bad thing. In the end, the market will play a regulatory role, the survival of the fittest, and promote the healthy development of the industry. But once the government goes down, other local governments will also go down, and the national unified market will not exist.
In the end, whichever place has the money, the enterprises there are more likely to survive, which directly interferes with the market order.
"Wang Du said to this magazine.
On March 17 this year, the China Automobile Dealers Association also issued a document questioning the promotion behavior of the local government in Hubei, arguing that it only subsidizes local automobile production brands, which is unfair and has also led to consumers in other regions holding coins for purchase, resulting in a significant decrease in the turnover of automobile 4S stores.
According to the data released by the National Passenger Car Market Information Association, from March 1 to 19, 2023, the retail volume of the passenger car market was 700,000, down 8% year-on-year and 4% month-on-month.
But the sequelae of the price war in March continue to affect the auto market today.
Li Hongtao said that now not every province or every city has policies, and even every district and every town has different policies. For example, in Suzhou, Mudu Town in Wuzhong District said that buying new energy vehicles can subsidize up to 10,000 yuan. After a period of time, Xiangcheng District next to it took out tens of millions of yuan to engage in digital promotions. "Every place is using their brains, it’s very messy." Li Hongtao said that recently, there are rumors that Wuhan will have a wave of supplementary promotions for Dongfeng series products. A car can get a discount of 5,000 to 8,000 yuan. Many companies that do major customer channels try to transfer a branch to Wuhan. After eating the local policy, they sell a wave of cars and then translate the car back.
Li Hongtao said that now not every province or every city has policies, and even every district and every town has different policies. For example, in Suzhou, Mudu Town in Wuzhong District said that buying new energy vehicles can subsidize up to 10,000 yuan. After a period of time, Xiangcheng District next to it took out tens of millions of yuan to engage in digital promotions. "Every place is using their brains, it’s very messy." Li Hongtao said that recently, there are rumors that Wuhan will have a wave of supplementary promotions for Dongfeng series products. A car can get a discount of 5,000 to 8,000 yuan. Many companies that do major customer channels try to transfer a branch to Wuhan. After eating the local policy, they sell a wave of cars and then translate the car back.
The "knockout round" begins
In this price war, the most vocal is undoubtedly the fuel vehicle in the joint venture brand.
China’s car sales exceeded the 10 million mark in 2000, and the growth rate has accelerated since then, reaching a historical peak in 2018, with annual sales exceeding 28 million, but it has since begun to decline, and has basically remained at the level of 25 million vehicles in recent years. Although the decline does not seem large, if you look closely at the structure inside, the changes are amazing. Wang Du said that in the past, the market mainly sold fuel vehicles, but last year the sales of fuel vehicles have dropped to more than 14 million vehicles, that is, the market share of nearly 10 million vehicles per year has been taken away, and the process is accelerating.
China’s car sales exceeded the 10 million mark in 2000, and the growth rate has accelerated since then, reaching a historical peak in 2018, with annual sales exceeding 28 million, but it has since begun to decline, and has basically remained at the level of 25 million vehicles in recent years. Although the decline does not seem large, if you look closely at the structure inside, the changes are amazing. Wang Du said that in the past, the market mainly sold fuel vehicles, but last year the sales of fuel vehicles have dropped to more than 14 million vehicles, that is, the market share of nearly 10 million vehicles per year has been taken away, and the process is accelerating.
NIO’s new model es6 on display at the NIO Shanghai Center flagship store (photo taken in August 2019) (photo by Gao Yuwen/Visual China, photo by Gao Yuwen)
"This year’s price war is not a simple trade-off – I don’t buy a Toyota, I buy a Volkswagen or a Mercedes-Benz, and everyone shares a cake, but if you share more, I will share less.Now, another person suddenly ran out. He called the new energy vehicle. He came to cut away a large piece of cake, and the fuel truck naturally panicked."Wang Du believes that the logic of the market has completely changed, and the automotive industry is entering the knockout stage – a century-old change in the automotive industry.
Li Hongtao’s company now has annual sales of 600 million to 700 million yuan, which has declined significantly in recent years.A few years ago, they had switched from fuel vehicles to new energy tracks, and won several major new energy brands in the Great Wall and Geely series, including Wei brand, Ola, and JK. Only the Dongfeng series still had some fuel vehicles left, focusing on the special vehicle market.The first new energy brand that Li Hongtao won was Weimar Automobile, which was in 2021. At that time, Weimar was still in the first echelon among the new car-making forces. Its founder was Shen Hui, who had served as a director and vice president of Geely Holding Group. He led the team to complete Geely’s acquisition of Volvo, and later served as the chairperson of Volvo China. In terms of car-making, it can be said that Li Hongtao did not bet on this treasure. Weimar reported that its capital chain was broken in the second half of last year, and its factories in Huanggang and Wenzhou have been basically shut down this year.
Traditional fuel vehicles have a sense of crisis, and the new energy vehicles that have risen strongly in recent years are not safe. "Last year, new energy grew rapidly, but the reshuffle also began quietly. In addition to Weimar, Aichi and Skyrim were about to collapse.Several new brands that were going to be launched last year, such as Light Orange Times, Modern Automobile, including Hengda’s Hengchi Automobile, are also out of the picture after painting the cake. "Li Hongtao said.
"Walking Toward the Wind" stills
Who will survive? Ma Jun, a professor at the School of Automotive Engineering at Tongji University, believes that everything is uncertain, and no one dares to predict who will win now. On the contrary, everyone thinks they have a chance, and the market competition is bound to be more intense. Ma Jun was born in 1970 and obtained a doctorate in vehicle engineering in Germany. He later held positions in well-known automobile companies such as mainland Germany, BMW, and Audi. He was in charge of Audi’s market development business in China. He told this magazine that the history of automobiles is closely related to the industrial revolution. From the Age of Steam to the current era of intelligence, automobiles have gone through a total of four eras, but now this era is the most unpredictable and insightful.
"In the past, when a car company decided to develop a new model, it usually used a five-year cycle. That is to say, it had to predict the life and consumption habits of the people in five years, as well as your technical route and production capacity. How can anyone say that I can predict what the world will be like in five years?"Ma Jun introduced that the process of vehicle development is now completely changed, and the iteration is getting faster and faster, making it difficult to analyze users or technology trends.In the past, the automobile industry was relatively closed, and the pattern and players were relatively fixed. But now, all kinds of new players are pouring in, and many places are rushing to launch many projects, and consumers are suddenly presented with too many choices. "In the short term, consumers benefit from it, but in the long-term development of the industry, this is not entirely a good thing."
This year’s round of price wars actually originated from Tesla’s price cuts at the beginning of the year, which eventually spread from the new energy sector to the fuel vehicle market.
As the most profitable car company in the industry, Tesla’s use of price weapons has been handy. In April 2023, at the China Electric Vehicle 100 Forum, Xu Changming, deputy director of the State Information Center, said that the current price of the auto industry is determined by leading companies. For example, in 2022, Tesla’s bicycle profit exceeded 10,000 US dollars, equivalent to nearly 70,000 yuan. Even if the price is reduced by 30,000 yuan, there is still a profit margin of 40,000 yuan. Last year, BYD, the world’s largest new energy vehicle company by sales, also made a bicycle profit of nearly 9,000 yuan. Except for these two, most car companies have very thin profits and are even selling cars at a loss.
As the most profitable car company in the industry, Tesla’s use of price weapons has been handy. In April 2023, at the China Electric Vehicle 100 Forum, Xu Changming, deputy director of the State Information Center, said that the current price of the auto industry is determined by leading companies. For example, in 2022, Tesla’s bicycle profit exceeded 10,000 US dollars, equivalent to nearly 70,000 yuan. Even if the price is reduced by 30,000 yuan, there is still a profit margin of 40,000 yuan. Last year, BYD, the world’s largest new energy vehicle company by sales, also made a bicycle profit of nearly 9,000 yuan. Except for these two, most car companies have very thin profits and are even selling cars at a loss.
On May 9, 2020, customers learned about Model 3 cars at the Tesla Center in Shanghai
Look at this year’s overall data to know how much the automotive industry has "rolled": according to statistics, in January to February 2023, the income of the automotive industry was 1.2847 trillion yuan, a year-on-year decrease of 6%; the profit was 41.40 billion yuan, a year-on-year decrease of 42%; the profit margin of the automotive industry was 3.2%, lower than the average profit margin of 4.6% for the entire industrial enterprise.
Wang Du said that there is also a deep-seated problem that has always existed in the domestic auto industry – high inventory.
"High inventory is the root of all evil," Wang Du said with certainty, "because high inventory can easily lead to price confusion. Some companies will sell at a reduced price when their inventory is high, and their profits will be thinned. In the end, the entire industry will not make money."Due to the stimulus of the subsidy policy last year, the market demand was overdrawn in advance, and the production capacity of automakers in various places was released too quickly. This year, the inventory in the hands of dealers has reached a very high level.According to the statistics of the China Automobile Dealers Association, from January to March this year, the inventory coefficients of Chinese automobile dealers were 1.8, 1.93 and 1.77 respectively, and the inventory level was above the warning line of 1.5. Wang Du revealed that there are about 3 million vehicles in the hands of dealers in the whole industry. According to the average price of 170,000 yuan a car, more than 500 billion yuan of goods are pressed on dealers.
"High inventory is the root of all evil," Wang Du said with certainty, "because high inventory can easily lead to price confusion. Some companies will sell at a reduced price when their inventory is high, and their profits will be thinned. In the end, the entire industry will not make money."Due to the stimulus of the subsidy policy last year, the market demand was overdrawn in advance, and the production capacity of automakers in various places was released too quickly. This year, the inventory in the hands of dealers has reached a very high level.According to the statistics of the China Automobile Dealers Association, from January to March this year, the inventory coefficients of Chinese automobile dealers were 1.8, 1.93 and 1.77 respectively, and the inventory level was above the warning line of 1.5. Wang Du revealed that there are about 3 million vehicles in the hands of dealers in the whole industry. According to the average price of 170,000 yuan a car, more than 500 billion yuan of goods are pressed on dealers.
Since Toyota Group promoted the lean production model to the world, automakers have pursued low inventory or even zero inventory to maximize turnaround efficiency.
However, this does not prevent the OEM from strongly suppressing the dealers – in the licensing model, they are the relationship between Party A and Party B, and suppressing the inventory is actually occupying the capital pool of Party B. The first is the price, the guide price and the price margin of the car are basically determined by the OEM – the OEM’s control of the price system is related to the order of the sales network and brand perception. In addition, one of the things the OEM likes to do is to press the task to the dealer. "For example, how many car lifts you complete, I will give you a ladder policy; how many end point sales you complete, I will give you a ladder policy, which is actually to tie you to death." Li Hongtao said, "When the market makes money, dealers are of course willing to accept this gameplay, but they have not made money in the past few years. He sold me the car and I don’t want it anymore, so he can’t suppress us. The game between the two sides is also increasing. Some dealers simply quit the network or switch to new energy."
However, this does not prevent the OEM from strongly suppressing the dealers – in the licensing model, they are the relationship between Party A and Party B, and suppressing the inventory is actually occupying the capital pool of Party B. The first is the price, the guide price and the price margin of the car are basically determined by the OEM – the OEM’s control of the price system is related to the order of the sales network and brand perception. In addition, one of the things the OEM likes to do is to press the task to the dealer. "For example, how many car lifts you complete, I will give you a ladder policy; how many end point sales you complete, I will give you a ladder policy, which is actually to tie you to death." Li Hongtao said, "When the market makes money, dealers are of course willing to accept this gameplay, but they have not made money in the past few years. He sold me the car and I don’t want it anymore, so he can’t suppress us. The game between the two sides is also increasing. Some dealers simply quit the network or switch to new energy."
"Driving My Car" stills
Compared with fuel vehicles, the sales system of new energy vehicles is different. Many new forces have learned from Tesla’s direct sales model and sold cars online.
After the customer places an order, the car factory starts to schedule production again, and after a month or a few months of production, the customer pays the full amount to pick up the car, so the inventory problem is not prominent. Brands like Xiaopeng and Jikrypton that Li Hongtao cooperates with are no longer on the account of their dealers. The cars are sold on the manufacturer’s app, from order placement to delivery, all online. They just provide services and earn a service fee from the car company, not the price difference like in the past.Li Hongtao said that it is actually difficult for dealers to make money by selling cars, and the majority of profits are provided by providing follow-up services such as repair and maintenance.
After the customer places an order, the car factory starts to schedule production again, and after a month or a few months of production, the customer pays the full amount to pick up the car, so the inventory problem is not prominent. Brands like Xiaopeng and Jikrypton that Li Hongtao cooperates with are no longer on the account of their dealers. The cars are sold on the manufacturer’s app, from order placement to delivery, all online. They just provide services and earn a service fee from the car company, not the price difference like in the past.Li Hongtao said that it is actually difficult for dealers to make money by selling cars, and the majority of profits are provided by providing follow-up services such as repair and maintenance.
"The color of the traditional car company’s plan is very strong, and it is sold according to the production. No matter what the market is like, Mr. produced it, and then pressed the dealer to sell it. If it doesn’t sell well, I will give you a discount."Wang Du said that now the logic of the market has changed, and the relationship between car companies and dealers has also changed, because everyone is facing a matter of life and death. In addition, the automobile industry is related to the lifeline of the local economy, and many local governments have had a strong impulse in recent years to let car manufacturers speed up because they have to consider their own GDP and employment issues."But it’s precisely at this time that you can’t suppress the company too much. Originally, people still have tens of billions of yuan in sales a year. If you press hard, the company is gone, and you can’t make it up no matter how much you want."
"City of Angels" stills
Search for new space
During this year’s "May Day", Li Hongtao went to Uzbekistan, Bangladesh and Russia to visit the local automobile market. This year, he cooperated with a state-owned enterprise and officially obtained the qualification for second-hand car export. He plans to open his hands and feet to go overseas.In the past two years, China’s auto exports have risen sharply. Last year, it dumped Germany and a few months ago this year, and Japan became the world’s largest exporter of passenger cars. Going out is the general trend.
"Ode to Joy" stills
Li Hongtao introduced to this magazine that in the past, new car exports were all done by OEMs themselves, such as SAIC, Great Wall, and Chery. The export scale was very large, but they were all in the form of authorization or agency, and rarely in the form of trade.
In other words, dealers can’t get involved in it, and it is not legal. But the "Belt and Road Initiative" market has developed rapidly, and foreign small batches and scattered orders have gradually poured in. In the past two years, the competent authorities have opened up channels and issued more than 100 used car export licenses across the country. It is said that used cars are used cars, but most of the new cars that go out are brought up by dealers from the main engine factory. The people in the middle are mainly traders in Tianjin Port (the main port for China’s automobile import and export). In the past two years, dealers like Li Hongtao who do brick and mortar stores have had a difficult time and have begun to join them.
In other words, dealers can’t get involved in it, and it is not legal. But the "Belt and Road Initiative" market has developed rapidly, and foreign small batches and scattered orders have gradually poured in. In the past two years, the competent authorities have opened up channels and issued more than 100 used car export licenses across the country. It is said that used cars are used cars, but most of the new cars that go out are brought up by dealers from the main engine factory. The people in the middle are mainly traders in Tianjin Port (the main port for China’s automobile import and export). In the past two years, dealers like Li Hongtao who do brick and mortar stores have had a difficult time and have begun to join them.
It is actually better to make money by exporting than by selling new cars at home.
There is a saying that the same car can be priced more than $9,000 higher abroad than at home, and many automakers now rely on foreign sales to make up for domestic losses.The reason why Li Hongtao is optimistic about exports is that the acceptance of new energy products abroad is increasing, and on the other hand, the quality of China’s new energy vehicles is indeed good. From price to configuration, from car to battery, and battery life, the advantages are obvious.However, after walking around, he sighed: "The Chinese are really capable of’curling ‘. Basically, as long as a market is taken by domestic people, it will be very’curled’ within a year or two. It is not only people in the automotive industry who are running overseas. Now the economic environment is not good, which has a great impact on foreign trade exports. The exports of many industrial products are shrinking. These people want to transform and want to get involved in new industries. When they see that the momentum of automobiles is good, they all come over." Since last year, people in consumer electronics, cross-border e-commerce or international logistics have come to Li Hongtao.
There is a saying that the same car can be priced more than $9,000 higher abroad than at home, and many automakers now rely on foreign sales to make up for domestic losses.The reason why Li Hongtao is optimistic about exports is that the acceptance of new energy products abroad is increasing, and on the other hand, the quality of China’s new energy vehicles is indeed good. From price to configuration, from car to battery, and battery life, the advantages are obvious.However, after walking around, he sighed: "The Chinese are really capable of’curling ‘. Basically, as long as a market is taken by domestic people, it will be very’curled’ within a year or two. It is not only people in the automotive industry who are running overseas. Now the economic environment is not good, which has a great impact on foreign trade exports. The exports of many industrial products are shrinking. These people want to transform and want to get involved in new industries. When they see that the momentum of automobiles is good, they all come over." Since last year, people in consumer electronics, cross-border e-commerce or international logistics have come to Li Hongtao.
On October 31, 2022, a batch of automobiles was prepared for export to overseas markets at the Taicang Port Terminal in Suzhou City, Jiangsu Province.
Is the domestic market really reaching a ceiling?Everyone’s opinions are quite different. Some people think that it has reached the ceiling and will continue to decline in the future, while others think that there is still a lot of room for growth. Ma Jun is a centrist. He thinks that it will be difficult for China’s auto market to grow significantly in the future, but there is still room for micro-growth.Because the per capita car ownership in China is not high, and the vast rural areas, the road resources are getting better and better, and the country is also promoting rural revitalization, so there is still demand in the rural market to release. In addition, with the rich use of cars, the demand of women and the elderly is also growing.
Zhou Lijun, president and chief analyst of the Yiche Research Institute, mainly does user research. He dismisses the "new four modernizations" of automobiles (that is, electrification, networking, intelligence, and sharing) that car companies have talked about in recent years. He believes that this has instead made many car companies blindly follow the trend and mess up.He put forward a set of user "new four modernizations" theory, that is, middle-aged, feminized, single and aging, corresponding to the consumption needs of four sub-groups of people.He analyzed to this magazine that the growth of the automobile market is highly consistent with the demographic trend – after China’s automobile sales entered the 21st century, especially after 2008, they maintained a rapid growth of nearly 10 years, mainly relying on the "post-80s" people, who will have the demand to buy cars in the two stages of life of marriage and childbirth. After the "post-90s", the population size continued to decline, and there were more and more people who married late and had children or even did not marry or have children, and the overall automobile consumption demand also began to decline. Therefore, China’s automobile market peaked around 2018, and then the overall trend was downward.But he believes that China’s auto market will instead usher in a new "golden decade", because the new consumer group will not only unleash new demand, but also greatly increase the purchasing power of carsIn the past, products of about 100,000 yuan were the main models in the market, and products of more than 250,000 yuan will dominate in the future, which makes many new technologies and configurations available, thus releasing more industrial opportunities.
"The First Half of My Life" stills
As the car market slumped, practitioners began to habitually look forward to a new round of bailout policies. "The data in the first quarter fell very quickly, but in fact it was not as severe as in previous years. When the previous purchase tax halving policy was cancelled, the data fell even more severely. And now there is a lack of demand, and once the policy is withdrawn, it is equivalent to pouring cold water on the other side." Wang Du said that as an industry association, they have also made suggestions to the relevant departments very seriously, hoping that the policy can be extended for a period of time, and there is a transition period, but it has not been implemented for various reasons. "We think that the stimulus policy is actually not a good way. Just like people taking medicine, if the medicine is taken too violently, it will cause damage to the body."
Canceling the car purchase restriction policy in big cities is a much-discussed approach in the industry.
"Why limit purchases in the city? The main starting point is to solve the traffic congestion problem. In the past, there was a pollution problem, but now there is no pollution problem in the use of new energy vehicles. We have always called on the government to use scientific methods, economic means, and legal procedures to solve the congestion problem, rather than preventing people from buying cars." Wang Du said, for example, collecting taxes, because congestion is not blocked every day or every time. It is only blocked at a specific time period and in a specific area. If you enter the congested area during this time period and occupy road resources, then you can pay a little money. If you are not willing to spend money, you can also choose public transportation. In this way, the government has tax revenue, which can be used to further improve the public transportation system, roads, and parking facilities, and a virtuous circle can be established. They have estimated that by relaxing or even canceling the purchase restriction, it is expected that in the past five years, the country can increase the sales of passenger cars by about 1 million, accounting for about 5% of the sales of passenger cars, which will increase the total retail sales of social consumer goods by about 0.5% and GDP by about 0.3%.
"Why limit purchases in the city? The main starting point is to solve the traffic congestion problem. In the past, there was a pollution problem, but now there is no pollution problem in the use of new energy vehicles. We have always called on the government to use scientific methods, economic means, and legal procedures to solve the congestion problem, rather than preventing people from buying cars." Wang Du said, for example, collecting taxes, because congestion is not blocked every day or every time. It is only blocked at a specific time period and in a specific area. If you enter the congested area during this time period and occupy road resources, then you can pay a little money. If you are not willing to spend money, you can also choose public transportation. In this way, the government has tax revenue, which can be used to further improve the public transportation system, roads, and parking facilities, and a virtuous circle can be established. They have estimated that by relaxing or even canceling the purchase restriction, it is expected that in the past five years, the country can increase the sales of passenger cars by about 1 million, accounting for about 5% of the sales of passenger cars, which will increase the total retail sales of social consumer goods by about 0.5% and GDP by about 0.3%.
In addition, with the gradual saturation of domestic car ownership, the scale of the used car market is also expanding.
Wang Du expects that this year, the number of used cars traded in China will reach more than 20 million, which is on par with new cars. "In developed markets like Europe and the United States, the ratio of used cars to new cars has reached 2.5:1, and the transaction volume of used cars is much larger than that of new cars. In the past two years, the policies of the domestic used car market have been introduced one after another, and after the transaction is gradually standardized, we think this market will continue to expand."Wang Du also cautioned that the active second-hand car market is actually good for new cars"Because most cities, such as Beijing, now have more than 60% replacement demand, you have to sell an old car to buy a new one. If the circulation of used cars is smooth and they can be sold at a relatively good price, more people will be willing to sell old cars and buy new ones, thus accelerating the circulation and circulation of the automobile market and forming an endogenous driving force for market development."
Wang Du expects that this year, the number of used cars traded in China will reach more than 20 million, which is on par with new cars. "In developed markets like Europe and the United States, the ratio of used cars to new cars has reached 2.5:1, and the transaction volume of used cars is much larger than that of new cars. In the past two years, the policies of the domestic used car market have been introduced one after another, and after the transaction is gradually standardized, we think this market will continue to expand."Wang Du also cautioned that the active second-hand car market is actually good for new cars"Because most cities, such as Beijing, now have more than 60% replacement demand, you have to sell an old car to buy a new one. If the circulation of used cars is smooth and they can be sold at a relatively good price, more people will be willing to sell old cars and buy new ones, thus accelerating the circulation and circulation of the automobile market and forming an endogenous driving force for market development."
(This article is published in the 21st issue of "Sanlian Life Weekly" in 2023. Click on the cover picture at the end of the article to place an order with one click)
Typesetting: Yutong/ Review: Same