The current situation of China's automobile market
As for the current situation of China's automobile industry, there are two perspectives, the macro perspective and the micro perspective. From a macro perspective, China joined the World Trade Organization on December 11, 2001, and foreign manufacturers have entered the Chinese market one after another, making competition further fierce; from a micro perspective, companies are faced with the situation of having to cut prices and are on the verge of losing money.
my country's automobile import tariffs have been lowered since China joined the WTO. This is to fulfill its WTO obligations and to further encourage competition and optimize the Chinese market. At the end of 2004, China's weighted average tariff level was reduced to 8.9. On July 1, 2006, my country's automobile import tariff was reduced to 25%. This is all to fulfill WTO obligations. At the same time, as early as the 1980s, China had already formed a chaotic situation with nearly a hundred automobile companies. Therefore, when the country reduces tariffs, it will reduce the sales price of foreign automobiles in the domestic market, making them more competitive, thus making some The selling prices of relatively backward domestic enterprises will be relatively high, forcing them to withdraw from the market to achieve the effect of optimizing the market.
With China's reform and opening up, many foreign companies have entered China and established joint ventures, which are essentially exchanging technology for the market. There are Volkswagen, Peugeot, Toyota, Mercedes-Benz, BMW and other companies here. According to data from 2000, 97% of China's automobile market share belongs to joint ventures, while more than 20 domestic companies only account for 3% of the market share. It can be said that Chinese automobile companies are surviving in the cracks.
On November 22, 2004, Dongfeng Peugeot implemented a sales strategy of price reduction and compensation, causing an uproar in the Chinese automobile industry. From one aspect, it reflects the fierce competition in China's automobile market in recent years. Many manufacturers have also had to introduce price reduction strategies, which is undoubtedly a misfortune for enterprises. Statistics in 2004 show that China's automobile industry suffered losses of as much as 16%.
In addition, after joining the WTO, China has successively launched tariff reduction expectations, canceled import quotas, implemented the "Automobile Brand Sales Management Measures", the automatic license registration method for imported vehicles, and the complete vehicle characteristics method. Implementing taxation policies and allowing foreign businesses to enter the automotive service trade field are undoubtedly a big challenge for Chinese companies.
Analysis of the current situation of China's automobile market
In 2004, China's automobile production accounted for 7.91% of the world's total production, and its sales accounted for 8.41% of the world's total sales. Comparing numbers, we know that China is a country that imports cars. In theory, lowering tariffs is beneficial to consumer welfare. However, most imported cars are high-end cars. For this group of consumers, they don't care about the price of the car, but the social status the car brings. In other words, with a higher price, relatively few people will buy it, which will make this product relatively scarce in life and make consumers feel greater satisfaction. This is a vanity effect unique to high-end cars.
Statistical data from January to May 2006 show that cars with a displacement of 1.6 liters and below accounted for 54.22% of the total car sales. This data shows that China's car sales are dominated by low-end cars. The sales volume of mainly low-end cars is inseparable from China's consumption level. In 2004, China's per capita GDP was US$1,270, which means that ordinary families can afford cars, but they only buy low-end cars. For these consumers, buying a car is a relatively large consumption, so the demand elasticity will be relatively large, that is, a slightly higher price will cause more consumers to choose not to buy a car. Therefore, if the selling price and consumption tax of low-end cars are lower, the welfare of consumers will increase even more, and it will increase a lot.
Statistical data shows that from January to May 2006, the top ten companies in China's automobile sales sold 2.4917 million vehicles, with a market share of 83.77, a year-on-year increase of 0.59 percentage points. The top ten are: SAIC, FAW, Dongfeng, Changan, BAIC, Chery, Hafei, GAC, Geely and JAC. Remember, we are focusing on two companies, Chery and Geely. They are representatives of China’s independent R&D companies.
The products of these two companies are concentrated in low-end cars, and in a market like China, a developing country, low-end cars are in demand by the public and are the best-selling ones. The following data also illustrates this point. The production and sales of Chery, Geely and Brilliance increased by 72.15, 55.62 and 62.11 respectively year-on-year.
In 2004, China's car ownership was 21 vehicles/1,000 people, while the world average was 133 vehicles/1,000 people. In terms of market saturation, China’s market is not yet saturated. The foreign prices of European and American models in 2004 are: Peugeot 307 (2.0L) 190,000 yuan, Passat V6 (2.8L) 230,000 yuan, Audi A6 (2.4L) 280,000 yuan, BMW 325i23 Ten thousand yuan; in China, these figures are 192,000 yuan, 320,000 yuan, 395,000 yuan, and 40.8 yuan respectively. Therefore, the Chinese market is a market with excess profits.
Strategy of Chinese automobile companies
First of all, in a competitive market, if a company wants to occupy a favorable position in the competition, it must reduce its production costs according to the supply and demand relationship in the competitive market. It is undoubtedly the most fundamental strategy. We consider both technology and labor aspects.
For China's automobile industry, its technology is probably at the level of foreign countries 30 years ago, so we can consider the introduction of technology. Because patent protection lasts for 30 years, our companies can introduce more advanced technologies at very low prices. Judging from China's factor endowments, China is a labor-intensive country. For China's current automobile companies, they are in a labor-intensive production mode, so the replacement rate of capital for labor is relatively large. When considering the introduction of past Western technologies, the price ratio of capital to labor is smaller than the substitution rate of capital for labor. , so it is efficient to introduce past Western technologies.
Speaking of China’s labor force, China’s labor force is very cheap compared to other countries in the world. China's labor price is 0.9 US dollars per hour, which is 1/3 that of Mexico, 1/9 that of South Korea, 1/21 that of the United Kingdom, 1/25 that of the United States, and 1/37 that of Germany. Therefore, Chinese automobile companies can use local materials, and China's middle-aged labor force is absolutely surplus. Of course, for the young workforce, they have good learning ability and good training potential, because there is no sunk cost for them to accept new technologies, and there is no lock-in effect on technology. There is no doubt that this employment relationship is good for automobile companies and labor: companies can get cheap and malleable workers; workers can get a good and stable job. The welfare of both parties is increased, and both parties benefit. Due to the layoffs in China in the 1990s, there are many relatively skilled but older technicians. These people are cheap labor. For each laid-off person, they will no longer demand a high salary. Once they do not find a high-paying job, it also means that they will also lose their current lower-paying job, because they do not know others Did you choose this low-paying job? So these laid-off workers can be hired as technical personnel by emerging companies. This is why the costs of emerging private automobile companies are very low. First, they have Western technology that they can introduce. Technically, private companies have no sunk costs. Second, China has a lot of surplus labor, which is very cheap, but many of them are also Due to the more skilled personnel who were forced to lay off their jobs.
But for Chinese companies, reducing production costs is not enough. Under the market economy system, although the West does not think that we are a market economy, the market is an invisible hand that regulates the behavior of producers and consumers. Therefore, for manufacturers, if they want to know the choices of consumers, they must understand the invisible hand of the market, that is, do market research. There are two aspects here: macro and micro. From a macro perspective, investigating the sales share of various models on the market will help manufacturers make decisions about which models to produce and how much to produce. On a micro level, consumers have preferences for a specific car model, so that consumers can allocate production costs.
Ten years ago, China's automobile companies were very small. They were so small that apart from joint ventures with foreign automobile giants, they basically could only produce agricultural vehicles.
Now, with the U.S. auto giant on the verge of bankruptcy, Chinese auto companies are all "ready to make a move" and there is a lot of talk of acquiring foreign brands. Do Chinese car companies really have the ability to acquire foreign car brands? My answer is that Chinese auto companies, whether it is Shanghai Automobile, FAW, or Dongfeng Motor, simply do not have the ability to acquire foreign brands, let alone acquire foreign auto companies that are in difficulty.
A few years ago, SAIC Motor went to South Korea's Ssangyong Motor to steal the "bottom". After investing a huge amount of money, Ssangyong Motor finally fell into bankruptcy due to poor management and filed for bankruptcy protection to avoid bankruptcy. If SsangYong is really bankrupt and liquidated, SAIC will lose about US$550 million in overseas mergers and acquisitions, which also means that the funds invested by SAIC Motor in the past few years will be lost. Earlier, the dispute between SAIC and Nanjing Automobile over the acquisition of the Rover brand and production lines had caused the two companies to suffer heavy losses. Now SAIC Motor has paid a huge price for the acquisition of South Korea's SsangYong Motor.
Judging from the acquisition failure experienced by Shanghai Automobile, Chinese automobile companies really do not have the ability to achieve international operations, whether it is international brand operations or corporate operations.
Integrating into the international automobile industry is the inevitable path for Chinese automobile companies in the future. However, how to take this path is a strategic question that the Chinese automobile industry must answer seriously.
So how should China’s automobile industry develop? I give the following suggestions:
1. Overcome the impetuous mentality and objectively evaluate yourself
Seeing that the three major American automobiles, General Motors, Ford, and Chrysler, are in a desperate situation, including Toyota Motor, which faces a historical future. losses, Chinese auto companies have an undercurrent of mentality of "going out" to buy bargains. The media occasionally spread rumors that domestic auto companies will go out to acquire a certain brand. The rumor is not groundless, at least it represents what some people think. If you cannot understand yourself objectively and rationally, rumors may make some people mentally impetuous and think that they are really capable of going out to make acquisitions. At this time, I really advise those who have already had the idea of ??"going out", especially those who already have the decision-making power, to think about it at night and weigh their own priorities.
To put it bluntly, Chinese car companies simply do not have the conditions and capabilities to go global. There are two factors that need to be considered here. First, the international market has not accepted Chinese brands at all. Chinese cars have not yet been recognized by consumers in the international market. If you struggle in a market with no room for survival, it can only be It is a dead end; secondly, Chinese car companies do not have the ability to conduct international management at all. Even if they acquire a brand or company, they do not have the ability to successfully operate internationally. In addition to huge losses like Shanghai Automobile, the final recovery It's just a pile of rubbish.
2. Three steps for the development of China’s automobile industry
1. The domestic automobile industry must undergo secondary integration
The characteristics of China’s automobile industry are that enterprises Small in scale, large in number, and not strong in strength. After the integration in the past few years, a large number of agricultural vehicle companies have been eliminated, and the remaining car companies have been divided into two categories. One is FAW, Second Automobile Works (Dongfeng Motor), and Shanghai Automobile, which already have leading positions in the country. etc. It is a pity that the reason why this type of car companies can occupy the leading position in the domestic market is because they all choose joint ventures with European, American and Japanese global car giants. They do not use their own brands and can only be regarded as OEMs; there are also Chery, Geely Automobile and others have developed entirely by relying on their own differentiated positioning and market efforts. Although these types of cars already have a certain market share, unfortunately they are all at the low end of the market and have weak financial strength. Moreover, with the consumption level of domestic consumers, With the continuous improvement of automobile sales, there is a risk that the market will be gradually compressed like motorcycles.
From the perspective of the competition rules of the industrial market, the number of automobile companies in China is still too large, and resource allocation is severely duplicated and separated. Industrial efficiency and quality are still at a very low level. The industry must be optimized through further integration. Allocate resources, improve industrial efficiency, and catch up with international standards.
2. Develop and expand independent brands to accumulate strength.
Nowadays, all domestic automobile giants are selling other people’s brands, so going global is just empty talk. Without your own brand, what can you do to go global? Therefore, whether it is FAW, Dongfeng, SAIC or other domestic local car companies, they must first have their own brand before they can talk about going global.
When looking at international automobile giants, they all began to gradually embark on the path of international development after their domestic markets became bigger. This development path is actually the law of industrial development, and Chinese automobile companies are no exception.
China's automobile companies must create their own brands and develop with the further expansion of the domestic automobile consumer market to become brands acceptable to domestic consumers. They must take the lead in expanding their own brands in the domestic market and save money. strength. The so-called strength here includes the accumulation of capital, but also the accumulation of technology and management capabilities.
3. Achieve internationalization by "encircling the countryside from the cities"
Mao Zedong led the Communist Party of China to continuously expand its territory through the revolutionary line of "encircling the cities from the countryside" , finally defeated the Kuomintang Chiang Kai-shek, achieved the true reunification of China, and established New China. This route is very worthy of reference and reference by Chinese car companies.
As China’s economic strength and cultural soft power develop and grow, brands from China will gradually become more attractive internationally. If Chinese car companies can also achieve higher levels of product technology and quality If the level is no less than that of European, American and Japanese car companies, then it can be completely accepted by foreign consumers. This is the prerequisite for Chinese car companies to go global. Under this premise, Chinese car companies can first gradually open up markets in developing countries, and then like Japan's Toyota, Honda and other cars, make great efforts to attack the high-end markets of Europe and the United States, thereby achieving true internationalization.
As a very mature industry, although the old giants are facing extinction, this does not mean that Chinese car companies can easily go out and occupy foreign markets. It is destined to be a long and long road. A tough journey. Complying with the laws of industrial development, practicing internal skills, building independent brands, accumulating strength, making breakthroughs in key areas, and advancing comprehensively should be the development logic for Chinese car companies to go global.
China's automobile industry has undergone some major changes in a short period of time. These changes have had a significant impact on our automobile manufacturers. The first change is that market demand is falling. I personally think that the growth rate will stabilize at 6 to 7 in the future. The second structural change has resulted in very good consumer demand. We spent two to three years building a 1.6-inch small-displacement car, and now demand exceeds supply. We showed two new small-displacement cars at this auto show. I believe they will be hot sellers when they are launched in the future. The last change is that now is a good time for independent brands to learn technology and management from abroad and integrate global talents. Due to the special time of this auto show, I don't think it is worse than any other auto show. We also want to launch the concept of our own brand in China, and we must make high-quality cars.
China has a car market with a production and sales of 10 million, and car manufacturers from all over the world are here. We should study our unique Chinese technology and Chinese unique market principles to effectively improve ourselves