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Basic Judgment of Automobile Industry Development in the Second Half of 2019: Negative Growth, Pushing China Sixth, De-inventory

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In 2018, China"s automobile industry declined for the first time in 28 years, and the data from early 2019 are still not optimistic. In addition, the current decline in economic growth, the Sixth Country and other factors also have a greater impact on the automotive industry. So will the market situation ease in the second half of the year? What other factors restrict the car market? Recently, Chen Shihua, Assistant Secretary-General of China Automobile Industry Association, gave a detailed description of the current development situation and future trends of China"s automobile industry at the 4th Riker Forum on Automobile Seats and Interior. The following is the record of his speech:
Good morning, ladies and gentlemen. I am very glad to have the opportunity to share with you some basic judgments on the current development of China"s automobile industry. My share today is divided into six aspects, the first is negative growth, the second is to promote consumption, the third is the current national environmental policy, the situation of Tzu Guo VI, the last is to inventory, subsidies and long-term prospects.
Reasons for Negative Growth of Automobile Market
In terms of the development of China"s automotive industry, China"s automotive industry has declined for the first time in 28 years since 2018, and the data from January to April of this year have also been published. The decline is still very large, exceeding double digits. In this case, we still have different judgments about the prospects of the development of China"s automobile industry. Some people say that it has reached the top, others say that there is still a high development space.
Specifically, it should be said that the automobile industry has experienced a very high growth stage until today. Before 2010, the growth rate of the automobile industry reached 24%, and from 2010 to 2018, it is in the process of declining growth rate, with an average annual growth rate of only 5.7%. I think this speed is also normal, because after all, the volume is very large, it is difficult to maintain such a high growth rate, so the decline in growth rate is a very normal phenomenon in the development process of large industries.

Of course, there are several reasons for the 18-year decline:
First, there has been a marked decline in economic growth. We know that China"s GDP had maintained a very high growth rate before, but now it is gradually declining. On the one hand, the country is adjusting the way of economic growth. Many of our extensive industries have developed very fast before, and we do not pay attention to environmental protection. Now, we are turning to environmental protection and other aspects. His development as a very important aspect, so the decline in this growth rate, in fact, has a direct impact on China"s automobile consumption.

According to the quarterly data, it is still good. In the second half of last year, the state approved a lot of basic electricity projects, such as high-speed rail, highway and real estate. These projects stimulated the growth of GDP at 6.4%. But we can see that the whole consumer market has not actually seen a very good growth. In the total retail sales of social consumer goods announced by the National Bureau of Statistics, automobiles have declined, and there is also a growth rate of gold jewelry, which also reflects the current worries of the whole consumer about the growth of our economy, and their disappearance. Lack of motivation and confidence. Although we have no money, but many people can afford cars, but now consumer confidence is insufficient, which is the most important factor affecting the current car market.
The second is the international factor. There are many indirect effects of trade. Many export-oriented enterprises are affected. There is also the situation in Iran. Iran"s political situation has fluctuated since last year. Now the models exported by China are no longer dared to be exported from the fourth quarter of last year. Iran is the largest country in China"s automobile export. One year"s export will go to Iran. Nearly 300,000 vehicles also have some impact.
The third is the rhythm of macro-policy implementation, including environmental protection and financial policies. In the first half of last year, many regions implemented environmental protection policies in a one-size-fits-all manner. In fact, so far, some places still do. Whether the enterprise is qualified or unqualified, it closes down first. After closing down, the quality of environmental protection has been improved, but the result of closing down is that the income of employees of these enterprises will be affected. But a little better, because in the second half of last year, the government focused on the inconsistency between top and bottom in the process of policy implementation, which has improved a lot.
In addition, there is the implementation of G6, which I think is the second major factor that will affect the car market in the context of economic growth.
We know that the Fifth National Day has been implemented since 2017. For more than two years now, the normal period of a standard switch should be 4 to 5 years. In fact, the execution time of this time is only two years. On the one hand, although many enterprises have not recovered their investment costs, on the other hand, from G5 to G6 need a long process of product verification and other technical preparations. In this case, many enterprises, especially China"s self-owned brand enterprises, are not ready enough. This year, including supply. Businessmen and others are in a very tense situation.
We know that there are 21 regions in the country now. To achieve the sixth year of the year, it is a very important moment for the current car market. Some enterprises are not ready enough. Some technologies can be used but the matching and validation can not keep up. Therefore, the implementation of the sixth year of the year will have the greatest impact on the car market in the coming months. Months can also be seen, production and wholesale data decline is very large, why? That"s because we dare not produce a lot of G5 cars now. If the provinces and municipalities that implemented G6 ahead of schedule did not stop, I believe that the data in May and June will be very ugly, because these areas are indeed storing a large number of G5 models.
Stimulating expectations of the car market also affect the decline of the car market. These two factors are not the most important. In addition, there are shantytowns, the impact of the real estate market, shantytowns this year"s plan fell by half compared with last year, about 3 million sets, shantytowns transformation, creating a large number of wealthy people, this factor has a certain impact on the car market.
For this year"s car market, as I just said, at the beginning of the year, the forecast for this year"s car market should be basically the same as last year. Without growth, there may be a decline of about 3%. But now there is a factor, our judgment is somewhat broken, trade development today, did not predict, if this factor can not be solved in the short term, I believe that this year"s car market decline of more than 5% should be very normal. So this year"s car market, it should be said that will not be particularly optimistic judgment.

Of course, now the whole car market, I think there is a low after high factor.Why can second half year go up high?Since last year, the government has made a minor adjustment to the macro-economic development of the automobile industry, including promoting infrastructure construction and easing financial policies, including reducing fees and taxes. There is a guarantee for the overall macro-economic growth.Without the impact of trade, I believe that in the first half of the year, after half a year"s adjustment, these factors will gradually play a stimulating role in the second half of the year, so it is judged that there will be some improvement in the second half of the year, although the current decline is more than 10%, the second half of the year will gradually narrow, not as high as the first half.Passenger cars belong to the characteristics of consumer goods, so now the consumption of ordinary people, high-income groups are relatively stable, car purchases are not affected, but this part of consumer groups accounted for a relatively low proportion, only about 20%, most of the consumers in the third or fourth line or even in rural areas.These consumers are more sensitive to the economy. In a bad economy, their demand for cars will be restrained to some extent.In addition, the growth of truck sector is not bad, thanks to several major policies, infrastructure investment was very fast last year, the engineering industry is very good, heavy truck is still very good, light truck is also affected by urban logistics, new energy vehicles, so light truck growth is also very fast.But in this case, the largest number of passenger vehicles did not increase, is actually a very worrying place.To promote consumptionThe original three wagons are investment, export and consumption, and the export market is not motivated enough at present.Second, promote consumption.The country is also looking for ways to boost consumption, especially in the auto industry.The previous policies of automobiles were very direct, such as the purchase tax was cut in half, the automobile went to the countryside, subsidies and so on. The state put out real money to promote the development of this industry.However, the six measures released on January 28 to promote automobile consumption are different from the previous ones. There is no money to promote the development of automobile industry.Especially for used cars, old cars scrap, in fact, there is not a lot of policy support.Second-hand car trading, we know that in fact is subject to a lot of factors, the scrapping of old cars, formal car companies actually do not have too much work to do, the value of income is very low, in fact, also do not earn money.After the car ownership of our country reaches 220 million, the old cars are scrapped every year, and the second-hand car trade cannot be solved, the industrial chain cannot operate in a good cycle. Only good operation can ensure the benign development of the automobile industry.I think the biggest policy feature is to liven up the industrial chain.Of course, after the announcement of the policy, there are many actions. For example, the large assembly of the system can be remanufactured and dismantled, and the previous policy has been greatly changed.In addition, like the second-hand car trade, there is another direction, how to sell the second-hand car?The number of second-hand cars traded each year has exceeded 10 million, which will be a big boost for new cars if they are exported to countries in Africa and southeast Asia.But this place, I think we should pay attention to two points: first, how to ensure the quality of used cars sold?If the quality problem cannot be guaranteed, I think it is actually unfavorable for the whole Chinese automobile industry. All the exported cars are scrap products, which has a great impact on the image of Chinese brands.On the other hand, as we all know, our country does not allow the import of second-hand cars, and there is no way to buy foreign second-hand cars.If the import of second-hand cars is opened, I believe many consumers may also buy second-hand cars from Japan and Europe. If this is the case, I think the import of second-hand cars will have a great impact on our new car consumption, so export should be carefully opened, which is the basic point of the association.Many people are concerned about whether there will be a consumption policy for cars?In terms of the automobile itself, there is no problem at all. After experiencing rapid development before, there was a decline for one or two years, which is quite normal, and there is no need to panic.We believe that it is a very good opportunity to eliminate some backward enterprises with weak competitiveness.However, the automobile industry has also undertaken a very important task of national economic development. Therefore, if our GDP growth rate drops sharply in the second quarter, I believe that our automobile industry will definitely shoulder the responsibility of economic growth.So in this case, it all depends on the country"s economic growth rate. In fact, from the first quarter of the data, it looks good, but from the April data, the industrial decline is very severe, other industries are also under great pressure, the GDP in the second quarter will not be as good as the first quarter.So it"s possible to pull the car industry, which ones?Recently, I have seen that guangdong province has begun to gradually relax the restrictions on the purchase of cars, with great economic pressure, and some regions will follow guangdong province"s gradual liberalization.Will there be policies at the national level?I don"t think there will be any short-term stimulus policy. After this policy is issued, it will only be effective in one or two years, and will not be effective in three or four years.Six countries to promote rationalSome of the 21 regions will be suspended in the sixth National Day of the year. If they are all implemented, some of the 21 regions will be designated as national key areas for environmental protection management and environmental protection guarantee.However, some regions are just following the wind and making some policies. Therefore, I think we should call these following regions. In key areas, we can encourage the purchase of cars from country 6 or country 5.Now the main environmental protection is not the problem of new cars, mainly in use, including oil products.Like some areas use inferior oil, very cheap, we are 7, it sells 5, I believe 5 oil is much worse quality than 7 oil.But ordinary people, especially truck owners, can save hundreds of thousands of yuan a year on fuel, not thousands.In recent years, China"s air quality has been greatly improved. Indeed, it has paid off.But the most important, the current truck diesel car management, diesel car is now the most important truck, I think the truck management, there are two aspects worth our attention, just mentioned an oil products, the second aspect is our car owners overload, the quality of the car is not good?Now the quality of the truck has been quite good, not much difference than the country, but the current owners in the use of the process, often overload, DORA, DORA is the result of emissions, the use of the safety of the car, bearing capacity and so on have a great impact, so this is very important.In those years, the development of the automobile industry, should have a clear understanding, now in many small details, has not paid special attention to, if the oil products do well, the overload treatment, environmental protection should be much better than now.The realization of the sixth National Day ahead of schedule in China will result in a lot of inadequate preparations, which is very detrimental to the industrial chain.In some regions, it is very difficult to implement vi directly. Foreign-funded enterprises are ok. Independent brand is a serious challenge.

Inventories remain highAs for inventory, the current inventory of dealers is very high. For ten consecutive months, the terminal inventory is at a high level.On the one hand, people are not so enthusiastic about buying cars. On the other hand, I think the current means of dealers" promotion is to cut prices.Different from before, ordinary people would like to reduce 5000 today, and then go to 4S shop tomorrow to see another 5000, they have been waiting, this is the case, this aspect is worth worrying about, I personally these days thinking about this problem, from the end of sales to the end of the vehicle, the most important means of competition is to reduce prices, price reduction results in vicious competition.

Previously, the price of the whole Chinese automobile industry chain has reached a balance. For example, what level is a car worth 100,000 yuan? What level is a car worth 150,000 yuan?However, if the automobile market drops significantly, some automobile enterprises, in order to survive and get more cash flow, use irrational means to substantially reduce the price, the drop may be quite high.It can also be seen that many vehicle enterprises, including sino-foreign joint ventures, offer discounts of up to 60%, and their prices have been greatly reduced.Once the price reduction becomes inertia, it will cause fatal damage to China"s price system, which is unfavorable for the development of the automobile industry.If you think about the motorcycle industry back then, the motorcycle industry was number one in the world in 1993.Why not?Because of these enterprises by means of price cuts, to market competition, the result of the price, he cut prices, lower retail enterprises, the level of the result of the pressure level, result in the quality assurance and the industry"s competitiveness will also be affected, so especially worried about now, in the case of the current difficulties of the auto industry, walk the old road of the motorcycle, is worth our vigilance.Of course, now the independent brand inventory pressure is greater, foreign brands are not easy life, like Mercedes Benz and BMW is still very good, but the general brand, including the independent brand pressure is very big.The inventory is basically more than 2 months.The new energy future is highly competitiveHealth subsidies, now the whole new energy vehicles, development is very fast, last year 1.25 million, this is a large scale.What is my opinion?The development of new energy vehicles is not the main pursuit of speed, the development of too fast is not good for the industry, as the saying goes, the radish fast don"t wash mud, such as the problem of spontaneous combustion of electric vehicles, there are five within a month this year, including nextev, tesla.In addition, our products must not pursue a high range of driving time. Some models are doing well, such as lingfeng, which has produced 400,000 or 500,000 vehicles.However, the emphasis here is that new energy vehicles are a global trend, the direction of development is no problem.Just now, the core competitiveness, and I think our country still have certain to improve, including the battery or other aspects now, do is good, the development of our country, in fact, like Europe, America, Japan, are now very concerned about the development of our industry, including electronics companies to European factory, everybody is very welcome, of course, foreign brands are purchasing our batteries, also produced a lot of the core of the enterprise.Before the direction of the policy, fully rely on subsidies, the next step of many policies, including the double integral, is now a passenger car, the second half to do commercial vehicles, other countries also doing 2021 to 2035 new energy vehicles industry planning, the planning, it should be said is very important, now points 6 team conduct extensive research, the planning should be in the second half of this year will come out, the second half of next year or a formal release.In the industry of new energy vehicles, the competition will be very fierce in the future. I believe there are several new forces in many automobile enterprises, and I don"t know if there are any new forces. The chances of survival are very small.

Say a few words for China"s automobile industry development prospects, is now 28 million, some people say that at the end, I personally don"t think so, because, after all, the auto industry development is based on population, there are 1.4 billion people, there are about 500 million families, now only 230 million cars, car ownership a lot of people don"t have a car, and there are many big cities, is in the state for purchasing, so the demand of the car will be a problem.Judging from the experience of automobile industry development in foreign developed countries, it is at the early stage of popularization that many people still have the demand, but they have not bought a car for the time being. Especially in the wide rural areas, there are many people who want to buy a car.So at this stage will increase, but growth will not be particularly high, particularly countries also is same, in the process of development, after a period of rapid growth, before also can appear 1, 2 years of volatility, like Japan, South Korea, Germany will appear this kind of fluctuation, the fluctuation is normal, is a good time.We have just experienced a few years of decline, is conducive to the backward enterprises, poor products to eliminate.The characteristics of the development of the car market are different. Before, many people bought their first car, depending on the appearance, the price and so on.In fact, now the whole car market has developed to today, many people are changing their purchase, buying a second or third car, this situation will look to the higher level of models.In addition, because be in, so the economic growth, the economy will be in the form of very sensitive, now to change, if the economy is bad, or is expected future income is not particularly good cases will be delayed, so now the economic downturn, for the redemption of the owner is also have certain influence, so now is not the same.Of course now includes the business model, including other second-hand car trading and so on, also in this stage, is also gradually to pay attention to.The business model should be said to be very immature. Many of them, like mobike, will not work. The plan for 2035 will mention the problem of business model innovation.

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