The severe market environment began to test the multinational car company's China strategy, and the success or failure will soon come.
This year's Chinese auto market not only hurt manufacturers, but also tested the nerves of new owners. From the beginning of the year, there were frequent price cuts. The value of many new cars just bought has shrunk dramatically. More unfortunately, the purchase of a car will soon be worried about future warranty services and spare parts supply - the type of vehicle bought will be delisted.
Reports from CCTV International show that in the first half of this year, nearly 10 models have been suspended and withdrawn from the market. The most discontinued products are economical cars. Changan Ford's main car model, the 1.3-liter Carnival, first announced its suspension in February this year. Subsequently, Tianjin Yaw's Yacool 1.3L and Xiali 2000 were also suspended. The mid-range car market, which has been stable over the years, has also been broken. Due to the general sales volume, the Sonata 2.0 automatic standard model had to be discontinued.
Although the model changes occur from time to time, it is divided into active delisting and passive delisting. The active delisting is generally due to the upgrading of products, and the delisting of old products makes way for new products. The passive delisting is generally due to the poor performance of the model market, forced to withdraw from the market due to cost pressures.
Cao He believes that several domestic delisted models in the first half of this year are basically passive delisting.
The sudden increase in competition pressure in the Chinese auto market is one of the reasons for the delisting of vehicles. At present, China's auto market is still growing, but the speed has slowed down significantly. In the first seven months of this year, the growth rate of sales of Chinese cars remained at 27% or more, but this slowed down greatly compared to the 75% increase of the whole year last year.
Moreover, according to data from the same period, due to fierce competition, sales growth of automobiles is slightly lower than that of automobile production. As a result, inventory pressure of auto companies is further increased. The survival environment of manufacturers has become increasingly difficult. “The current fierce market competition is not expected before, and the Chinese auto market is transitioning to the international mature automobile market.†said Cao He.
Due to complicated reasons such as macro-control and holding money, the rapidly growing Chinese auto market is slowly cooling down, but Wang Xiaoguang, director of the Economic Operations and Development Research Office at the National Development and Reform Commission’s Institute of Economic Research believes that this cannot be said to be consumed by the Chinese market. The problem is that “the market still has more than 20% growth, and the problem is still in production. It can be said that the problems in production are reflected in consumption.â€
Although the multinational auto companies that have entered the Chinese market in three batches have developed their businesses in the first 20 years with the help of the rapid growth in new car demand in the Chinese market, the problem is that the Chinese strategies of these manufacturers have not been severely tested by the market. Under the pressure of reversal, the effects of those early strategic failures are emerging.
According to previous reports, due to a decline in sales, Shenlong Motor Co., Ltd. may lose as much as 300 million yuan this year. In the first half of the year, Shenlong sold 46,000 cars and trucks, a 10% decline from the same period last year.
In fact, as the earliest car joint venture in China, Shenlong, which was burdened with huge debt burden due to the pursuit of scale, had not profited for a long time. In 1999, the debt ratio of Shenlong was as high as 87%. In order to change this situation, the relevant state authorities agreed to convert Shenlong's debt to debt, which is the only joint venture that China has approved for debt to equity conversion.
Although in last year's great market environment, Shenlong achieved sales of more than RMB 10 billion thanks to its price strategy, Cao He believes that this year's continued price cuts will completely disorganize the method. "This is already cutting meat."
On July 16, Peugeot-Citroen Automobile Group (PSA) convened a board of directors in France. During the meeting, it passed a reorganization plan for Shenlong Motor Co., a joint venture plant in China. The board of directors set a minimum loss for Shenlong. More than 3 billion yuan in the goal.
Analysis of the industry, the bottom line of this loss will be far beyond.
Obviously, the golden era of rapid growth has passed. On August 18th, it has an absolute advantage in the Chinese market. Volkswagen expects that the growth rate of the Chinese market in the next 18 months will still be lower than the past two to three years. Bi Ruide, the president, has asked the company to cut costs and prepare for the drop in the price of Chinese cars.
Faced with early strategic mistakes, even large companies with superior capabilities such as Toyota, Ford, and PSA can hardly predict whether they can turn around. Cao He predicts that now is the key turning point. In the coming year, there will be a defeated player out. “After a hundred years of competition, the global automobile pattern has basically stabilized, but because multinational companies have different Asian strategies, China Strategy, the Chinese market will soon be divided and won."
In this fight between life and death, the first one to go out is probably the Chinese companies that had swarmed in 2003 and had no history of car production: After taking huge profits, they were hiding.