China's auto industry: Looking for the Tongtian Tower

“The 2007-2009 conference is another good year for the auto industry. By 2011 or so, the Chinese car market, including used car trading, will reach 8 million cars, of which independent brands can account for 40% or even half.”3 On July 7, in Beijing, Wu Yanfeng, general manager of the National People's Congress on behalf of FAW Group, predicted the prospects for independent brands of the Chinese auto industry in the next 5 to 10 years.

The statistics just released gave him a footnote: Last year, China's sales of passenger cars (including cars, SUVs, and MPVs) reached 5.18 million, of which 3.83 million were passenger cars, and its own brand sold 980,000, or 26%. Although 74% of them were created by Xiali, Geely, and Chery on mini-cars and economic cars with extremely low profit margins, this low-end advantage did hold back the multinational companies’ full control over the Chinese market, making them difficult to find in China. Build the base of the sales structure of the pyramid product, and was forced to constantly give up profits.

However, people in the industry generally believe that this does not mean that China's own brands have entered a period of rapid development. On the contrary, the next three years may be the death of Chinese auto makers. In China, from the government to the company's powerful propaganda offensive against its own brands, foreign brands that have gained deep popularity are accelerating localization and intensifying the penetration and squeeze of the Chinese market.

Crazy development concept

Automobiles are capital-intensive and labor-intensive coexisting industries. With the development of independent research and development and the deepening of investment in brands, Chinese auto companies have found that they need a lot of funds to overcome the difficulties of the core technology, but the accumulation of profits has increased. The harder it is.

Under the tenet of "not madly developing and dying," Chery is desperately trying to target 2 million astronomical targets with a passion and debt-to-equity ratio that is much higher than that of its global counterparts. It is reported that cumulative loans from the National Development Bank have reached as much as tens of billions of yuan, and the total amount of loans from other commercial banks is as high as 670 billion yuan. At present, the company is still applying for a new 20 billion yuan loan.

For all Chinese domestic auto brands, the only killer that quickly expands sales is still the price war that was used by home appliance companies that year. However, their ammunition is not much. According to statistics, of the 270,000 vehicles sold by Chery in 2006, nearly half were QQ, of which the lowest-end models with less than 30,000 yuan accounted for the vast majority. This car has little profit. This has caused concern in the industry because FAW Group expects to have a profit of RMB 6 billion when it is also to reach a scale of 2 million cars. In fact, Chery’s high debt will last for many years.

Li Shufu, who had all his personal assets in the auto industry, had completed initial accumulation during the previous blowout of the industry, but now he does not know what the future will be. From the earliest point to Zeng Peiyan, “please give us a chance for a private company to fail” and openly confide to the media, “I will lose out someday.” Even after the “Property Law” has been established, Li Shufu still believes that the overall atmosphere is private. Unfavorable business development. Last year, the car was designated as a surplus industry, and Geely’s four bases for the expansion were rejected.

Lifan, which entered the industry last year, is now trapped in difficulties. After investing billions of yuan of its own funds into the ranks of automobile production, it knows that there is no follow-up capital invested in R&D and operation. The advanced factory is just a pile of steel. Our reporter met with Yin Mingshan, its chairman, after the opening of the CPPCC session. In the rain, he hurriedly said, “The support of the Ministry of Commerce has given us several cards and the 863 project has only a million yuan in loans. ”

Will these guerrillas rushing in the front line kill the bleeding road or die in the trenches? No one dares to assert. However, the large gradient of development in the Chinese region has provided a buffer for the advancement of the Chinese automobile industry. Even if the former people died on the beach, there are always people who will rush forward.

China's first light commercial vehicle champion Jianghuai Group’s first car is expected to be listed in the second half of the year. Jiang Yanhuai (7.94, -0.25, -3.05%) Zuo Yanan, the chairman of the Group, prepared 3,500 mu of land for this purpose two years ago and finally went to the catalog early this year.

For Jianghuai Group, although commercial vehicles are good, they are already close to the ceiling of the market. Without the use of cars that are still very profitable in the past two years, companies can't be big, and they will sooner or later be merged into other groups. Zuo Yanan believes that Jianghuai must now embark on this road to the sky. “If you are a car, you are already on the path to risk. If you don’t make a car, where is the road?”

The regular army in the Chinese market began to start fully last year. FAW's Pentium, SAIC's Roewe, and GAC's independently developed mid-size sedan will also be available. The three best-performing joint ventures in China are the most financial, material and human resources in China. The main force.

However, no shortage of resources is a double-edged sword. On the one hand, it is possible to implement strategies in a calm and calm manner, and on the other, it will be less motivated by lack of worry. For them, there is still a good time not to build a Tongtian Tower.

Who is making money?

Currently, China FAW Group, which has the strongest independent research and development capability, now has the design capabilities of an ordinary engine and a 1.6L economy car. Yan Yanfeng said that the “Eleventh Five-Year Plan” can overcome the problems of the transmission. Even so, there is too much need to rely on foreign technology in the whole process of independent development of Pentium, Red Flag and Weizhi.

The lack of core technology and the time pressure make China's auto brands have to undergo a process that is not much different from the current Wenzhou shoe-making enterprises in the initial stage of development—outsourcing research and development of the most profitable models and core components. I own a brand factory. Then the multinational parts companies and design companies became the biggest winners in this Sino-foreign war. They can get on top of each other and eat the cream of the Chinese auto market growth.

Take Canadian Magna Corporation as an example, they have set up 10 subsidiaries and 4 factories in China to provide Chinese automotive companies with systems ranging from power-driven, body and chassis to vehicle R&D and project management. And services, including almost all the technical points of the entire process of automobile manufacturing. They have made it clear that the 21st century has shifted its growth from the United States and Europe to Asia, especially China and Japan. According to the company, they will have a new entity established in 2007. "This will be a year in which China's turnover has grown tremendously."

The appetite will not be much larger than Magna's smaller parts giants, from Bosch, Delphi, Weston, Denso, Wanda, and Hankook Tire. Compared with joint venture brands with long-term cooperation foundation and large-scale supply, a relatively small number of local brands do not have much negotiation bargaining power on bargaining. The only thing that can be done is promised with future long-term procurement contracts.

Another war has begun in various public relations companies in China, aiming at autonomous car brands, because they learned that they have prepared a lot of public relations fees for building brands. “The effect of spending these public relations expenses is mostly not for consumers, but for leaders of competent ministries and commissions,” said a public relations company boss.

The value of the brand

Chen Qingtai, deputy director of the Development Research Center of the State Council, told this newspaper that “many companies are trying to create a brand out of thin air by “fudge”, but the brand is a long-term accumulation of corporate technology, R&D, innovation, integration, and marketing capabilities. The crystallization of cultivation is the external expression of profound connotation and strong soft power. It is the recognition that consumers have gained through consumer experience. Brands that don't have intensional things and wear gorgeous tiger skins can only be paper tigers without power.”

“The purchase of cars is determined by economic conditions rather than ethnic sentiments, so during the “Eleventh Five-Year Plan” period, individual consumers’ purchase of cars will be dominated by international brands.” Yan Yanfeng believes.

“However, the core meaning of brand autonomy is that you can independently decide in what way to sell the product—especially the huge market overseas.”

However, this still cannot bring about the accumulation of profits. Local brands that have made a fortune in the Chinese market have to work for people for quite a long time. In order to open up the gap in the market, they had to rely on foreign cooperation to obtain a sales network at the initial stage, and at the same time, pay the price of building an after-sales service system. After seeing how Japanese and Korean cars made money for local prophet dealers, overseas smart people had already made up the idea of ​​a Chinese car.

At the American Automobile Dealers Association Exhibition (NADA) in Las Vegas in late January, a company called ChamcoAuto exhibited several unknown Chinese cars, and there were more than 200 dealers in the first two days. Registration indicates to see. They said that by the middle of this year, it would be possible to establish a Chinese car sales network with 150 U.S. dealers. However, these cars may have to be re-registered in the U.S. and it is impossible to completely autonomy.

This company, which was formed only by elites from several walks of life last year, believes that the cheap Chinese cars will bring great profits to American sellers, and now it is necessary to grasp the nodes themselves.

The role of the government

Perhaps Chinese companies will inevitably sacrifice their lives on the road to independence, and will not experience a heroic defense of the Moscow style of war. These brands will have no way to occupy the market in their own land and even overseas. Many of them actually only want to compete in the nine-death market. Among them, to discuss a fair death.

Wang Haoliang, chairman of the Nanjing Automobile Group, directly asked the government in the motion. "We hope the country will give us support like Chery. We need a policy bank like China Development Bank to give us a loan of 2-3 billion."

However, he knows that relying on policies to foster enterprises with international competitiveness will ultimately depend on institutional innovations. “To win the support of commercial banks, we must first reform to a diversified company, and in the future, in the form of shares and operating system. It should be the most active and open the door to domestic private capital and international capital.” Wang Haoliang told the newspaper that at present, Nanjing Auto has established a number of companies in Nanjing to participate in the preparation of the company’s MG MG to prepare the company’s specific preparatory joint-stock companies. Recognized by the local government and the National Development and Reform Commission.

What is the current most desired policy for Chinese car manufacturers? Li Shufu's answer is, "What I want is a competitive environment that is fair, open, and fair. I can't compete in the same starting line. You can't go halfway. Someone wants you to stop and let others run first."

Coincidentally, Zuo Yanan said, "I hope the government will provide a fair and non-discriminatory policy."

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