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The heavy protection has created a high profit margin in the Chinese auto market, which has brought huge profits to the Chinese auto giants that are favored by the competent authorities, but this is not enough to make them face the next challenge.
2003, get ready in China!
Everyone wants to enter the Chinese automotive market, from the multinational giants to local private enterprise owners. The blowout market in China's auto market that began in 2002 was still strong in 2003, and its momentum will continue at least until 2004, and no one questioned this assertion.
Data from the China Association of Automobile Manufacturers shows that in the first 11 months of 2003, 400,5311 automobiles were sold, an increase of 36.38% year-on-year; 3,147,546 were sold, an increase of 32.20% year-on-year. The annual production of automobiles is expected to reach 4.2 million, of which cars will exceed 2 million, and a total of more than 50 new models will be launched. These figures not only contrasted sharply with the stagnation of the global auto industry, but also made the experts optimistic about the forecast (about 20%) at the beginning of 2003 was underestimated across the board. In terms of quantity, China’s auto market has been ranked fourth in the world.
The enormous potential of the Chinese market is consistent with the strategy of many multinational auto companies to reduce production costs and increase market competitiveness, and a new round of strategies for optimal allocation of resources on a global scale will coincide. An upsurge of investment and capital increase reached in 2003. The peak.
Expanding China's investment and production capacity and strengthening its competitiveness in China is a common strategy of all multinational giants that have invested in China: German Volkswagen announced a huge investment plan of 6 billion euros, and DaimlerChrysler will invest in cooperation with BAIC. 1 billion euros for the production of Mercedes-Benz sedans, heavy trucks and engines. Ford chairman and chief executive Bill Ford made a commitment to increase investment in China by US$1 billion in Beijing. General Motors chairman and chief executive officer Wagner announced at the end of 2003. Cadillac made domestic and Shanghai GM's capital increase plans for doubling in 2006. Toyota, BMW, and Mercedes-Benz, which used to sell cars in China but not cars, have also bet.
Of course, the most interesting is Dongfeng Motor Co., Ltd., a joint venture between Dongfeng Motor Group and Nissan Motor Co., Ltd., a company with a registered capital of 16.7 billion yuan. This joint venture has an unprecedented depth and covers the core of Dongfeng Motor. Car assets.
Not only that, China’s domestic capital has not concealed its love for the auto industry. Kelon, BYD and other powerful private companies have invested in the auto industry across industries, and Great Wall Motor’s successful assault has been listed in Hong Kong. Zhejiang Ningbo Huaxiang Group, China Such as auto parts companies, such as the Fitch Group, have transformed into full vehicle companies through acquisitions or backdoors. And on this list there are more familiar names: Midea, Xinfei, Oaks, Sany, and even Wuliangye Group. According to statistics, in Zhejiang Province, where the private economy is developed, except for Geely, which has achieved a full vehicle production catalog, there are currently 28 private enterprises entering the vehicle manufacturing industry. On the table of the National Development and Reform Commission, there are 40 applications from Zhejiang's private enterprises to obtain a full-automobile production catalog.
The average profit rate of cars in the world is around 5%, and the average profit margin of luxury cars is only 8% to 10%. In China, this ratio is 30%. Not only the profits are extremely high, but also the phenomena of queued purchases and even price increase purchases that have not been seen in China have suddenly appeared in a considerable number of automotive specialty stores. On the other side of the ocean, in the United States, the country with the largest automobile production and consumption, GM is using loan interest discounts to attract car buyers.
China's ultra-high profits in the automotive market and its distinctive features in the international market have come from China's consistent protection policies for the domestic automobile industry. Ma Yu, a research fellow at the Ministry of Commerce, said that the Chinese auto market looks beautiful, but in fact it is a completely distorted market. “In the case of domestic car prices that are at least 20% higher than international car prices, we must also increase the price line. This is not a distorted market. What is it?â€
It is worth noting that the prosperous situation is not balanced. In 2003, the overall supply was in short supply. Only the imported high-end cars were increased, and most of the economical cars were reduced prices. In particular, local manufacturers such as Geely and Chery had too high targets set at the beginning of the year. It is difficult to complete the sales plan. "Unbalance resulted from misjudgments, and it is always thought that the cheaper the better it is to sell. The judgment of the car entering the family is too optimistic, so there is an excess of economical cars," said an industry source.
In 2004, the era of competition has not really begun
2004 will still be a relatively high growth year for the automotive industry. For most joint ventures, the market will continue to grow at a high rate of around 25%. There is a lot of room to enter the stage of price competition that is not profitable. This year, the global giants will continue to improve the entire supporting system in China and reinforce the foundation in China so as to pave the way for the future to achieve the goal of exporting a large number of models.
The strategy of major giants in China has quietly changed. Unlike the previous model, it will be different from the previous model. Now it will start the competition of the full range of models. However, due to the increase in investment and the expansion of production capacity, it may cause phased output to exceed demand. The situation. Therefore, 2004 is still an integration year. This adjustment will start from aspects such as product structure, marketing promotion and price profit. “The phenomenon of queuing by fare increase will be relatively weakened,†said one person in the industry.
However, all auto makers need to pay attention to their long-term vision. Due to the buoyant market and excessive profits, due to China’s protection of the domestic auto industry, this industry is far from entering the real competition era.
There are two major types of auto companies in China. One is the large-scale state-owned enterprises that the competent authorities are most concerned about, especially the so-called "big three" (ie, FAW Group, SAIC Group, and Dongfeng Group). These large state-owned enterprises are already linked to each other. There are strong joint venture partners in the area; second, independent vehicle manufacturers, such as Chery and Geely, that are not seen by the competent authorities, started out as low-end economic models, and attempted to gain a foothold in areas where joint ventures have not yet entered.
In the new year, both companies will be under increasing pressure.
The first is policy pressure. The new automobile industry policy, which has not yet emerged in the year 2000, has always been a destabilizing factor for companies other than the “big three†companies. It is even more plausible for domestic companies who are interested in getting into cars. . The draft policy began to be revised by the National Development and Reform Commission on April 28, 2003, and is expected to be introduced this year.
Ma Kai, director of the National Development and Reform Commission, once said that it will promote the merger and acquisition of domestic small car manufacturers and support bigger and stronger car companies. According to informed sources, for the current problems of overheated investment and lax approval in the auto industry, strict regulations will be made to regulate the auto production order, severely crack down on various irregularities in auto production and management, and accelerate survival of the fittest; Access thresholds for the automotive industry will be raised at an unprecedented rate; cracking down on "sell shells" to prevent duplicate construction.
As a result, in the new policy, the government’s examination and approval of vehicle projects, and the Sino-foreign joint venture automobile project in which the Chinese party’s controlling share ratio is not less than 50%, will not change significantly in the current automobile industry policy. Adhere to the 50% share of the Chinese vehicle manufacturing project in the bottom line and the vehicle manufacturing project to implement the examination and approval system. For these principles, the integration of multinational companies to further deepen their business in China has played a role of delay. Foreign-funded enterprises have also made quite a few remarks.
However, for large state-owned companies, this is good news. The Blue Star Group and SAIC Group, which broke out at the end of 2003, were eager to acquire South Korea's Ssangyong Motors. It will also unveil the answer in 2004. In this battle of competition, the orientation of the competent department is clear. In fact, the attitude of the competent department on the matter reflects precisely that it has a realistic understanding of the future of the joint venture, which may not be stable, and thus SAIC acquired the Ssangyong merger with a view to “three Big "opens up another possible development path.
In spite of this, in 2004, foreign-funded enterprises were also able to show their talents. In the second half of 2003, the "Administrative Measures for Auto Finance Companies" and "Implementation Rules for Auto Finance Company Administrative Measures" were promulgated. SAIC General Motors Financial Co., Ltd. , Toyota Motor Finance (China) Co., Ltd. and Volkswagen Finance (China) Co., Ltd. were “accepted†at the end of the year. The large-scale joint venture not only opened up a brand new business field in China, but also helped its own marketing. And will greatly enhance the competitive advantage.
The second pressure comes from the competitive pressure after the WTO entry commitment is gradually in place. 2004 was the last year of China’s national automobile industry after China’s accession to the WTO. By January 1, 2005, China will completely remove quotas for automobile imports. License management; and by July 1, 2006, the automobile tariff rate eventually fell to 25%, and parts were reduced to 10%. In this last year, foreign auto companies will start increasingly fierce competition in the Chinese auto market, preparing for the elimination of imported auto quotas and tariff cuts by 2005.
After the fulfillment of the WTO commitments, foreign capital will become more and more powerful in the joint venture. Under the protection of the government, not only small and medium-sized automobile companies will survive, that is, they will be large-scale state-owned enterprises. Since it is difficult to form core competitiveness, the days may not be Better than. The dilemma of large-scale state-owned enterprises is that due to the deepening of multinational companies’ business in China, their independent competitiveness is becoming stronger, and the form of joint ventures is not the preferred strategy of multinational companies from the very beginning. It is only an expedient measure for them. At the end of the transitional period of accession to the WTO, the pace at which multinational corporations seek sole proprietorship will grow faster and faster. Large state-owned enterprises are facing the embarrassing situation that they have been thrown away without forming core competitiveness.
For independent auto companies, they will always be in minefields due to intellectual property disputes with foreign investors. In 2003, Toyota v. Geely. Although Geely won, the overall pressure on the Chinese auto industry has not been slightly. Less. The Chery and SAIC clutches have not yet been clearly stated, but the reason Chery left SAIC is not unrelated to GM's pressure on SAIC. Because SAIC and GM are joint venture partners, and General Motors accused Chery of infringing intellectual property rights, SAIC had to give up Chery. Chery’s choice is not too many. It is difficult to operate independently, and it is not impossible to leave SAIC and then merge it with FAW.
In the long run, the joint venture’s future lacks clear expectations. Although the original intention of the joint venture is to “market-for-technology,†the Chinese joint venture over the years has only obtained a large sum of money from huge sales profits. "There is no progress," said a car veteran. In the years of rapid growth, what the Chinese automotive industry desperately needs, such as its own brand, technology and intellectual property rights, and a sound corporate governance structure, that is, the ability to dance with wolves after the market is opened in the future, remains worrying.
In particular, in the past two years, various local autos have been competing for automobile projects. In order to rob speed, the automobile industry industrial policy announced in 1994 banned the production of KD (Integrated Parts) production, which has become increasingly popular since 2002 and gained momentum in 2003. Such as Beijing Hyundai Sonata, FAW Volkswagen Audi A4, FAW Car M6, Changan Fords Mondeo, until recently listed domestic BMW 3 Series 5 series and mini-car SPARK. This will not only be of no help to China's entire vehicle industry, even the "secondary goal" of China's automobile authorities - to promote the development of China's spare parts enterprises through the production of joint venture vehicles - is also in the distant future. Some even The danger is "a huge disaster."
The facts are not optimistic. Due to the relative closure of the market, China’s auto industry has enjoyed extremely high profits. The high profits have led domestic companies to settle for short-term interests and have not made any progress. This has led the competent authorities to rely on the market for joint ventures. The idea of ​​technology, enhancing China’s R&D capabilities and thus the core competitiveness cannot be realized. Since the quotas are allocated by the government, although the volume is increasing, it can artificially cause supply shortages. This is the administrative force that dominates the entire automotive industry. Another ridiculous point is that the market's closedness has also caused international car manufacturers and domestic manufacturers to collude in maintaining this excess monopoly profit. The head of a multinational car giant in the United States once claimed that it is absolutely impossible to fight a price war in China.
China’s protection policy has created a strange circle: Protection and closure have led to high profits in the domestic auto industry, and high profits have led to investment in all areas. The competent authorities originally believed that there were serious scattered, chaotic, and poor conditions in the Chinese auto industry, and it was the dream of policymakers to accelerate the concentration of the auto industry. Ironically, high profits have played a role in protecting scattered, chaotic, and poor, and the competent authorities have used repeated construction and accelerated centralized development as a basis to make every effort to use high-tech entry barriers to make capital out of the industry. Private capital cannot enter the door, which in turn allows higher profits to be maintained for a longer period of time. Under this situation, the impetus for enterprise integration and innovation is still insufficient.
Therefore, if you do not let go of market access, you will never be able to come up with true industrial concentration. “Who can eliminate such a high profit rate?†asks Ma Yuxi, a research fellow at the Ministry of Commerce.