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How to deal with the overcapacity while the auto sales slipping?

From:Internet Info Agency 2019-07-30 17:26:57

As of the end of June, the sales of Chinese auto market continued to decline for 12 months. Most of the mainstream auto companies are also facing a double decline in profits and sales, and the pressure on business operations has increased; there are also many non-mainstream auto companies struggling to survive. How to solve the problem of overcapacity in China?

How to deal with overcapacity?

In fact, the reasons for overcapacity cannot be judged from one side alone, especially under the institutional characteristics of China. There are four reasons for overcapacity in enterprises, industries, local governments and markets. Against the background of long-term high-speed economic growth since the reform and opening up, Chinese companies, including industrial institutions, are overly optimistic about market expectations, leading to blind investment and increasing capacity expansion of automobiles and related industries.

The problem of overcapacity has not been presented in the past one or two years. However, after the automobile industry entered a new stage in the past two years, many problems have been further exposed and emerged.

Previously, Yu Yujie, deputy dean of the National Development Research Institute of Peking University, mentioned in the report that the solution to overcapacity relied mainly on industrial transfer, market self-adjustment and appropriate government policy guidance. China's overcapacity is mainly divided into two major reasons: cyclical overcapacity and industrial transformation. For cyclical overcapacity, it can be automatically adjusted through the cyclical adjustment of the market itself; overcapacity caused by industrial transformation refers to the structural overcapacity that occurs in a country during industrial upgrading, and it is necessary to accelerate the process of the upgrade of the industry with appropriate guidance.

Although China is currently in a critical period of energy structure transformation (transition from traditional energy to new energy), traditional energy is still dominant, and it is not considered to be overcapacity caused by industrial transformation. More is due to the current economic depression, the market demand is sluggish and other cyclical reasons for further overcapacity is the main reason. However, enterprises must also make pre-judgments and plans in advance in the transformation of industrial structure and development trends.

For the reasons for the above-mentioned overcapacity in China, the specific countermeasures for the current governance of this problem in China are mainly as follows:

Closing, suspending, merging, transforming

According to the data released by the China Automobile Association, the production and sales of the Chinese auto market have shown a year-on-year decline for 12 consecutive months. In the first half of the year, the production and sales of automobiles were 12.132 million units and 12.323 million units respectively. The production and sales volume decreased by 13.7% and 12.4% respectively over the same period of the previous year. Among the 25 mainstream car companies, the overall completion rate of target sales in the first half of the year was 40.8% (the regular completion rate should be around 45%), and the completion rate of more than half of the enterprises was less than 40%, and the completion rate of some enterprises was less than 30%.

In response to the above situation, currently three major independent automakers of Geely Automobile, Great Wall Motor and SAIC Group have lowered their sales targets by about 10%. In addition, due to the continued decline in sales in the car market, the profitability of most car companies is not good.

Some non-mainstream auto companies have actively or passively reorganized their operations from the beginning of this year to adjust the production structure.

Close: Korean automakers represented by Beijing Hyundai and Dongfeng Yueda Kia mainly adopt the strategy of closing the factory. Beijing Hyundai has five factories in China with a total production capacity of about 1.65 million. Last year, Beijing Hyundai sold a total of 766,000 vehicles in China. At present, Beijing Hyundai is indeed in a state of severe overcapacity. In March this year, it decided to close the first plant. Dongfeng Yueda Kia will temporarily close a manufacturing plant in Yancheng, Jiangsu, and plans to start producing electric vehicles at this plant by the first half of 2021.

Suspension: The problem of BAIC YINXIANG has erupted since last year, and the factory has been in the stage of production suspension since then.

Transformation: Since last year, BAIC Group has adjusted its industrial structure, product structure and industrial chain. Among them, BAIC will transfer its Beijing branch to Beijing Benz and become the third factory of Beijing Benz. In the future, it will become the production base of Mercedes-Benz high-end new energy vehicles.

Resource integration, synergy between car companies

Dong Yang, executive vice president of China Association of Automobile Manufacturers, said that lack of cooperation is an important shortcoming between Chinese car companies. In the current market environment, cooperation between Chinese automakers should be strengthened.

Play synergies and build alliances to cope with the tough competition in the market.

Last year, the three auto giants, FAW, Dongfeng and Changan, took the lead in establishing strategic cooperation, and cooperated in four areas: technological innovation, automobile full-value chain operation, expansion of overseas markets and exploration of new business models. In addition, traditional car companies, Internet companies, mobility service companies and new energy vehicle companies have begun to cooperate in various fields. Cooperation with new energy vehicle companies has also expanded from the earliest OEM production to deep cooperation in research and development, procurement and sales.

In the end: When the sluggish auto market encounters industrial transformation and upgrading, there will be a large number of auto companies operating in poor condition. Zhu Huarong, president of Changan Automobile, once said that in the next 3-5 years, the closure and transfer of car companies will no longer be any news. Faced with the uncertainty and complexity of the market, the cooperation between automakers would help to achieve a win-win situation.

Editor:Wang Jingya