Regulating disorderly competition in the automobile industry: moderate management, flexible guidance


Zhang Yiwen

In the past year, the production and sales of both broke 30 million Chinese automobile industry, so that countless people are proud, nine consecutive annual sales of the world's first new energy vehicles is so that many people sigh "win numb." However, in the new node of the road to the automobile power, if you want to bloom all the way, China's automobile industry also needs to "cool down".


A few days ago, Xin Guobin, vice minister of the Ministry of Industry and Information Technology, said at a press conference that under the common concern of the whole society, the development of the automobile industry last year was full of bright spots, but it is still necessary to clearly recognize the multiple adverse factors existing inside and outside. In the field of new energy vehicles, there are still some disorderly competition behaviors, and some localities and enterprises still have blind and repeated construction of new energy vehicle projects, which need to be attached great importance.



Blind investment leads to waste


"The development of China's auto industry, on the one hand, relying on new energy vehicles to change lanes' racing 'to achieve a global leading position, on the other hand, it is full of enterprises and local governments based on short-term interests caused by blind investment." Fu Yuwu, honorary chairman of the China Automotive Engineering Society, lamented that the biggest pain point of the current new energy automobile industry is repeated construction and serious internal volume, which requires the industry and local governments to reflect deeply.


In recent years, driven by the "dual wheels" of policy and market, new energy vehicles have undoubtedly become the "sweet cake" in the eyes of many people. At the same time, the technical barriers to new energy vehicles are relatively low, giving many new enterprises opportunities for development. Therefore, many cross-border participants such as real estate, Internet and capital big coffee compete to enter this field. Among them, Xiaomi, Huawei, Meizu and other enterprises have injected new vitality, new thinking and new models into the transformation of the automotive industry. However, it cannot be ignored that the so-called cross-border car manufacturing of Evergrande, Baoneng and other enterprises has caused great waste to the development of the industry.


In the past, there were early "deaths" of new forces such as Singularity Automobile and Sailin Automobile, and the struggles of car companies such as Weima Automobile and Aichi Automobile, and there were more "car making cars" of Hengchi Automobile and Baoneng Automobile. The phenomenon of blindly building cars is common in the field of new energy vehicles, and the number of new energy vehicle enterprises in the peak period is as many as hundreds. Only in 2023, Weima Automobile, Hengchi Automobile, Tianji Automobile, Love Chi Automobile, self-tour home and other car companies have successively reported layoffs, production suspension, unpaid wages and other news, entering the countdown to elimination.


In addition to some enterprises on the car manufacturing "top", some local governments in the pursuit of short-term GDP growth is also deeply involved. In this regard, Zhang Hong, a member of the expert committee of the China Automobile Circulation Association, said that some local governments in the field of new energy vehicles hold an investment mentality of "rather than gamble and lose N times, not to miss one", and the scale of the research and development and production of new energy vehicles is insufficient, leading to the breakdown of the capital chain. Miao Wei, a member of the Standing Committee of the CPPCC National Committee and deputy director of the Economic Committee, also pointed out in his new book "Lane Change Racing: China's Road of New energy Vehicles" that some local governments pursue GDP growth, are willing to attract investment and attract enterprises to invest in local factories, and do not care about car sales in the local area.


"Many companies are playing capital, telling stories, showing PPT, and want to go on a track, without technology, will not operate, and cannot grasp the product, resulting in a burst of thunder." Some local governments are blindly impulsive and pursue short-term interests, which is also the main reason for this round of overheated investment and repeated construction." Fu Yuwu bluntly said that the blind investment and repeated construction of some localities and enterprises have greatly wasted land resources, social capital and human resources, and it is also a great consumption of industrial development.


At the same time, the problem of overcapacity caused by enterprise shutdowns and project shutdowns is also becoming more and more concerning. According to Global Data, in 2023, China's auto industry has a capacity of 48.7 million vehicles, but the capacity utilization rate is only 59%, and the overcapacity problem is prominent. Song Zhiping, president of the China Association of Listed Companies, previously said publicly that at present, China's exports of "new three" - photovoltaic, power batteries, new energy vehicles are in a serious surplus, which is related to the state of industry competition. In this regard, Wang Qing, deputy director of the Market Economy Research Institute of the Development Research Center of The State Council, believes that the current problem facing China's automobile industry is mainly structural overcapacity, that is, the contradiction between fuel vehicle production and production capacity is more prominent, and new energy vehicles are basically matched at present. "According to the current growth trend of new energy vehicles and the existing capacity, there is a relative surplus of new energy vehicles, but the problem is not particularly prominent." After deducting some rotten and ineffective capacity, the growth of effective capacity and demand for new energy vehicles is currently more matched." 'he said.


There is a mess to be fixed


Of course, in addition to the great waste of resources caused by blind investment in the industry, the disorderly competition behavior in the market has also become increasingly prevalent recently. Shi Jianhua, deputy secretary-general of the China Electric Vehicle 100 Association, told reporters that the disorderly competition in the automobile market represented by the price war and marketing war is becoming more and more obvious.


The 2023 price war destined to be recorded in the history of the development of new energy vehicles has a wide range and deep impact. Although many car companies have called for avoiding disorderly price competition, they have no choice but to join the war. Previously, Deng Chenghao, vice president of Changan Automobile and CEO of Deep Blue Automobile, said at the 2023 World New Energy Vehicle Conference: "The price of new energy vehicles has far deviated from the value and sold cabbage prices." The price war of new energy vehicles is even more fierce than that of fuel vehicles." Not long ago, Stellantis Group chief executive Officer Donald Weiss also expressed concern about the price war in a conference call. "If prices are cut directly, regardless of the actual cost, it will trigger a race to the bottom that will eventually lead to a 'river of blood' in the entire industry." 'he said.


However, the price war cycle did not end with the arrival of the New Year, and a new battle has begun. On January 1, Tesla announced an insurance subsidy of 6,000 yuan for the rear-drive version of the Model 3, and launched a low-interest financial policy, allowing the purchase of Model 3/Y to save up to 23,000 yuan. On January 12, Tesla once again updated the preferential policy, adjusted the price of the Model 3/Y rear-wheel drive version and the long-life version, and lowered the range of 6,500-15,500 yuan. Ideal Car also announced on January 11 that it will update the configuration of its L series models, and the 2024 model will be released and delivered in March, while launching the preferential activities for 2023 models. In addition, Nezha, zero Run and other car companies have also announced promotional policies. Huachuang Securities research report believes that because the price of joint venture vehicles and the price of electric vehicles are still not in the end, it is expected that car companies will continue the price pressure in 2023 in 2024.


In addition to the price war, the "war of words" of various car companies has also been hot. Great Wall, BYD reported incidents, extended range and intermixing debate, AEB against each other, electric vehicle driving winter test controversy... These famous scenes let many consumers sigh that the most high-end business wars often use the most simple means.


This side says "lack of basic cognition", there is "what is the urgency of non-industry", and there is a third party interrupting "noisy", and the people are busy eating melons.


In addition to the round after round of executive space debates, there is also an endless stream of exaggerated marketing. The so-called "the best SUV within 5 million yuan" and "the best SUV within 10 million yuan" are constantly advertised, and empty talk and big talk have become the usual propaganda means of many car companies. Not long ago, Zhu Huarong, chairman of Changan Automobile, criticized: "Hundreds of thousands of dollars of cars must say tens of millions of dollars. There's no bottom line in advertising anymore. It's a terrible industry." In this regard, Fu Yuwu also lamented: "China's auto industry has gone through 70 years of history, the industry should create the concept of industrial prosperity, but now it is full of impetuous atmosphere." In the market environment of the new energy vehicle market, we need more practical, industrial and innovative enterprises."


Under such chaos, many new energy vehicle companies are Mired in the mire of "selling well but not making money". Although China's new energy vehicle market has always maintained a high growth trend, there are only a handful of car companies that have truly achieved profitability. At the recent press conference, Xin Guobin also stressed that: "Most new energy vehicle companies, especially those based on domestic sales, have not yet achieved profit." Wang Qing believes that in 2024, the size of the new energy vehicle market will continue to increase, and the higher the sales of car companies, the lower the cost of amortization, and the profit level will naturally rise. Even so, I am afraid that many car companies will take the initiative to give up this part of the increased profits in order to increase market share. Therefore, overall, the actual profitability of car companies in 2024 will remain at the current level.



Enterprise: Early warning and guidance


As early as 2022, the Ministry of Industry and Information Technology has put forward the problem of repeated construction of new energy vehicles. At that time, Xin Guobin mentioned that new energy vehicles have become the tuyere industry, attracting a lot of technology and capital to this industry, and some local governments also have the desire to transform and upgrade, under the combined effect of various factors, there are blind investment and repeated construction in some provinces and cities. These problems are developing problems, and with the growth and maturity of the industry, these problems will be gradually digested and solved. This time, the Ministry of Industry and Information Technology is clear, to take effective measures to solve the problem of disorderly competition, blind investment, and repetitive construction.


The change of attitude from "doing nothing" to "taking effective measures" is enough to prove that the disorderly competition behavior of the current automobile industry has aroused great attention from the government. But should it be treated? How to cure? Wang Qing believes that it is necessary to distinguish between the two main bodies of enterprises and local governments and take different governance measures.


"Behind these disorderly competitive behaviors, or the competition of enterprise product force. At present, the trial and error cost of the entire industry is becoming higher, and the trial and error space is becoming smaller, which requires enterprises to plan and manage the future technology route and investment more lean, and the practice of exchanging market share through a simple low-price strategy is not long-term." "Companies have to realize that they can only be truly successful in the long run if they rely on competitive products to gain users' favor," said Fang Yinliang, a global managing partner at McKinsey. As the main body of innovation, enterprises have the responsibility and obligation to establish an orderly and healthy competition order, put an end to "suicide" attacks, but jointly promote the industry to product, technology, service "volume".


In addition to corporate autonomy, government guidance is also essential. "Disorderly competition in the market must be strengthened by the government. In the vicious competition, product standards, quality problems may occur. And disorderly 'roll' will lead to car companies do not make money, this model is not sustainable." Wang Qing said, "Enterprises should play the market function, with the 'hand of the market' to adjust; In the face of unreasonable price competition strategies, false propaganda and other disorderly competition behaviors, the government must strengthen the guidance, warning and guidance of enterprises."


Shi Jianhua also believes that the nature of disorderly competition is market behavior, the government should not intervene too much, more or by encouraging enterprises that dare to assume social responsibility and comply with market order, guide and create a good business atmosphere.


More importantly, at the current stage of rapid development of China's automobile exports, the guidance on export investment of independent brands is crucial. It is understood that at present, some independent brands go to sea to adopt the so-called "quasi new car export" model, that is, for some overseas regions that have not opened official sales channels, some car manufacturers choose to complete the insurance on the vehicle in the country, to achieve compliance with the identity of used cars cross-border trade. This model is obviously difficult to ensure the quality of after-sales service for overseas consumers, damaging the overseas image of independent brands. Wang Qing stressed that the government needs to pay great attention to the overseas competition strategy of independent brands, and can not let the wind of disorderly competition blow overseas, otherwise it will not only destroy the overseas market ecology, but also greatly damage the overall image of China's independent brands and product competitiveness.


Government: Calm down and let go


Of course, behind the capacity expansion and blind construction of many enterprises, it is not difficult to see the figure of local governments leading and following investment, and they have played a role in fuelling the situation. Therefore, in addition to guiding the healthy development of enterprises, it is also important to restrain the blind investment impulse of local governments. Shi Jianhua stressed that repeated construction and blind investment belong to government behavior, and effective intervention should be carried out on local governments.


To restrain local governments, the first thing is to "cool down". Automobile industry chain is long, wide range, industrial project investment of billions of yuan, some local governments in order to attract investment, will also give land, manpower and other elements of support. If individual local governments are allowed to invest impulsively, it will not only cause the loss of resources, but also affect the micro-decision-making of enterprises. "Some enterprise projects do not make money, but with local government subsidies, they make money. Once the local financial resources are tight and the funds cannot arrive, enterprises will not be able to operate normally, and many rotten factories and idle capacity will appear." Wang Qing said. He believes that in order to fundamentally solve the problem of impulsive investment by local governments, we should start with assessment, taxation and other aspects to weaken the impetus for investment. Miao Wei also said: "To avoid the occurrence of overcapacity, the most direct way is to manage the industrial funds of state-owned enterprises and local governments, control the blind investment impulse of specific departments, prohibit state-owned enterprises and the government to build, invest, and endorse large shareholders for enterprises."


In fact, in response to the investment chaos in the field of new energy vehicles, the National Development and Reform Commission issued the "Regulations on the Management of Investment in the Automobile Industry" (hereinafter referred to as the "Regulations") in 2019, and auto enterprises and provinces that do not meet the capacity utilization rate are not allowed to build new capacity expansion projects. In 2022, the National Development and Reform Commission further clarified that it will strictly implement the "Regulations", strengthen the cleaning up and rectification of illegal projects of new energy vehicles, and investigate and deal with violations such as pre-construction without approval, batch and zero construction, and batch and construction in accordance with regulations; Standardize the merger and reorganization of vehicle enterprises, promote the withdrawal of backward enterprises and ineffective production capacity, and build an industrial pattern with reasonable layout, orderly development and efficient operation. In 2023, the National Development and Reform Commission repeatedly mentioned the chaos of repeated construction, stressing that it is necessary to adhere to the "national chess game" and strengthen the overall layout of new energy vehicle productivity.


However, Fu Yuwu said that China's new energy vehicles have entered a new stage of development, no longer the era of hundreds of thousands of cars, millions of cars, the government must make fundamental adjustments in management measures, "alone can not be managed." In his view, the government needs to be more proactive in its regulatory approach to the market. Wang Qing also said that although restrictive measures such as strictly controlling the entry of new subjects and controlling the expansion of production capacity can play a role in restricting repeated construction and blind investment, they will also have a negative impact on the development of the industry. "Once the total sluice is closed, it will also lead to a decline in the competitiveness of some enterprises in the rising period because of capacity control and the entry of new subjects, which is not a good thing in the long run." 'he said.


Therefore, flexible guidance is a must. Wang Qing believes that the so-called "flexibility guidance", that is, under the premise of controlling the total capacity, open the entry of market players, who will produce, where to produce, what way to produce, are left to the market to decide. Only by fully mobilizing the vitality of the market can idle capacity be activated through mergers and reorganizations, market clearance and other means to enhance effective production capacity. Among them, it is particularly critical to open up the capacity conversion of fuel vehicles and new energy vehicles, which can protect the capacity of new energy vehicles in the rapid development of new energy vehicles while preventing the risk of structural overcapacity.


"In the end, whether there are three or five new car manufacturers left in the new energy vehicle market, or about ten Chinese companies will not be too many." But are all other car companies dying? I don't think so. In the process of internationalization, Chinese auto companies need more coordination, cooperation and restructuring to form a larger group with the competitiveness of multinational companies." Fu Yuwu said that the government let go, and the market to promote the emergence of more group enterprises, in line with the law of the market.


China Automotive News, February 8, 2024