In this ever-changing industry, what is "good" and what is "inferior".
Author | Ding Yi
Edited by | Wenliang
A major automotive reshuffle of survival of the fittest is taking place.
From the blossoming of a hundred flowers in 2015 to the withdrawal of many brands from the market in recent years, China's new energy vehicle market has evolved rapidly in just a few years, and this situation may be further aggravated in the next few years.
Recently, the April automobile sales of domestic new energy automobile enterprises were released, AND's sales increased by 313% year-on-year to 106,000 units, and the sales volume exceeded 100,000 for two consecutive months, but the product sales of new car manufacturers declined to varying degrees, and did not exceed 10,000 vehicles. As for the reason for the decline in deliveries, many new car manufacturers are due to tight supply chains.
This may be an accident under the influence of the epidemic, but it reflects the fragile side of new car manufacturers. Under the influence of the epidemic with an uncertain outbreak time, no one guarantees that the same situation will not happen again, and if it is repeated, it will once again dampen most car manufacturers.
Tight supply chain is only one of the reasons affecting the progress of car manufacturing and car sales, Xiaopeng Automobile CEO He Xiaopeng once predicted that there will be only 2-3 new car manufacturers with real influence in the future.
Survival of the fittest is a manifestation of the progress of the industry, but there is no clear standard answer to the industry's definition of what is "excellent" and what is "inferior".
In the face of the ever-changing industry landscape, how do new car manufacturers cope with the challenges? What are the characteristics of the company to survive to the end, and how can the supply chain change after the number of OEMs has dropped sharply?
Differentiation, always the core competitiveness
A few years ago, Baoneng's Qoros auto asked: Do we need a new car brand? On its website, it replied: "The world doesn't need another new car company, it just needs a car company that is different." ”
Although Qoros' ending is not too good – its two car-making investment projects in Kunming were removed by the Yunnan Provincial Development and Reform Commission because they were two years overdue, it is certain that for any car company, the pursuit of differentiation and the creation of differentiated products has become one of the common goals.
The Wuling Hongguang MINI EV was once popular with the market for its extremely low price and ability to meet the city transportation, beating Tesla to win the global electric vehicle model sales championship. This also proves to a certain extent that finding a blank market in a highly competitive industry and launching a distinctive product can indeed bring more sales and market attention to a car company.
However, after a number of car companies then set their sights on this market and launched a variety of models similar to the positioning of Wuling Hongguang MINIV, the sales of Wuling Hongguang MINI EV declined. According to the data released by the Association, in January 2022, the sales volume of Wuling Hongguang MINI EV fell by 52% year-on-year.
Pursuing differentiation may help car companies run faster than competitors in competitions, but in the absence of sufficient endurance, once competitors launch similar products, the distance between the two sides will be closer.
What might be the endurance to support a car company to run faster and farther?
Nezha Automobile told New Intelligent Driving that it believes that a car company must have three elements: core competitiveness, product definition ability, user operation and digital capability. Among them, Nezha Automobile interprets its core competitiveness as products, user experience and user services that are truly recognized by the market. An investor who pays attention to the new energy vehicle market also expressed similar views to the new intelligent driving.
Looking at reality, most of the new car-making forces have been labeled differently and continue to attract potential users as one of the selling points.
For example, Weilai Automobile's power exchange service is its distinctive feature and has won the support of many users, but earlier, Better Place, the world's first company to provide power exchange services, still closed down after multinational operations; Ideal Auto entered the new energy vehicle market with a range increase route because it understood the pain point needs of some groups.
However, the repeated outbreaks of the epidemic in many places, the increase in raw material prices, and changes in the consumption environment have all contributed to the fluctuation of the delivery of new car products to a certain extent. However, Nezha Automobile believes that this is a normal phenomenon, and under the background of production capacity determining the market, the sales volume and delivery volume ranking of car companies are full of accidents.
"Only when the policy advantages such as new energy subsidies, purchase taxes, and licenses disappear, can we more intuitively reflect the advantages and disadvantages of different car companies in the new energy vehicle market."
Volkswagen asked CEO Zhang Renjie to give the answer from the perspective of the supplier.
Zhang Renjie believes that it is very important for OEMs to build an ecologically intelligent platform, which is likely to help car companies occupy a monopoly position in the industry. In his eyes, ecological intelligence not only includes cars, but also includes mobile phones. Taking Douyin as an example, a sustainable ecological intelligence allows users to produce and consume content, and also allows third parties to achieve mutual benefit through content marketing.
However, Zhang Renjie also pointed out that it is difficult to achieve this at present, and it is necessary for the main engine factory to really change the existing thinking and design software or hardware from the perspective of user demand.
The number of car companies has decreased, and suppliers have accelerated their internal rolling
After communicating with a number of OEMs, new intelligent driving found that most of the car brands will disappear in the future has almost become a consensus. This in turn involves the retention of suppliers who are mutually beneficial to the OEMs.
Zhang Renjie told The New Intelligent Driving that whether it is an oem or a supply chain, an industry monopoly situation will be formed in the future, and 2-3 companies will divide most of the market share.
As the number of OEMs decreases, the chances of suppliers receiving OEM orders will decrease accordingly. Therefore, in the automobile manufacturing process, the initiative of the main engine factory may be much greater than now.
In the process of cooperation between OEMs and suppliers, the payment of acceptance drafts is an unwritten industry rule. In the past and now, this credit-based settlement method has accompanied the development of China's automotive industry.
Usually, the payment cycle of the main engine factory is "1+3+6": "1" refers to the main engine factory and the parts supplier to start cooperation, and the main engine factory will issue an acceptance draft at the end of the month. After 3 months of issuance of the acceptance draft, the OEMs will pay the supplier for the goods, and the supplier will usually receive the acceptance bill for a period of 6 months.
In OEMs, trading with acceptance bills of exchange can reduce the cost of capital to purchase more parts, and for suppliers, it can increase product sales and speed up capital turnover. This is an ideal state that benefits both parties, but when OEMs are in an existential crisis in the future, the credit that underpins this state may disappear, and the possibility of defaulting on payments to suppliers will increase.
In the downturn of the domestic automotive industry in 2019, many new car manufacturers were on the verge of closure, and industry insiders at the time estimated that at least hundreds of car brands had the risk of defaulting on supplier payments.
In the process of automobile production and manufacturing in China, OEMs usually dominate. In order to enter the cooperation list of large OEMs, most suppliers must endure the price reduction, heavy penalties and arrears of OEMs.
Many suppliers have failed due to the arrears of the main engine factory for half a year or even more than one year, or affected the normal operation of the company.
In recent years, a number of industry reports have shown that the average profit margin of auto suppliers is about 6%. When the number of car companies decreases, the oversupply buyer's market may accelerate the collective roll-in of suppliers and further compress the living space.
New Intelligent Driving learned that at present, the living conditions of some suppliers are becoming increasingly severe, and an international Tier 1 has not obtained domestic market orders in the past two years, if this situation continues, they may face the danger of withdrawing from the Chinese market.
Zhang Renjie believes that software suppliers can only be eliminated from the market if they expand the application field of products and increase the number of products that can be purchased by OEMs. Following this logic, Volkswagen Ask has recently been undergoing business transformation and upgrading and exploring new business directions.
Inevitable market outcomes
In recent years, many companies from different fields have participated in cross-border car manufacturing. They all share the same characteristics - throwing a lot of money, attracting talents from all over the world, and uniting all parties to try to divide the vast new energy vehicle market.
We can't predict the fate of new car manufacturers in this era, but today's vigorous car-making scene is very reminiscent of a car-making period 20 years ago, which is very similar to today's situation.
In 2000, the Fifth Plenary Session of the Fifteenth Central Committee officially adopted the "Proposal of the Central Committee of the Communist Party of China on Formulating the Tenth Five-Year Plan for National Economic and Social Development", which clearly encouraged cars to enter the home and vigorously developed the public transportation industry.
At that time, most of China's automobile companies were state-owned, and the relaxation of car-making conditions prompted a large number of enterprises to pour into the automotive industry, which may also be the first cross-border car manufacturing period in China's automobile market.
In the era of traditional enterprises such as tobacco, alcohol and electrical appliances, traditional entity enterprises were one of the first line of car-making: Yunnan Hongta Group in the tobacco industry, Wuliangye Group in the liquor industry, and Bird Group in the mobile phone industry have all built cars through acquisitions or cooperation with automobile companies. Among them, home appliance companies are like today's Internet companies, accounting for half of the total number of cross-border car manufacturing companies.
Midea, Oaks, Xia Xin, Xinfei, Green Cole, Xiao Duck and other home appliance companies have announced the manufacture of cars, investing hundreds of millions of yuan to acquire automobile companies to obtain passenger car production qualifications, and Midea has acquired a number of automobile companies and built its own automobile factories in many parts of the country.
There is no difference with the scenery when the car was announced, but in the past few years, most of the cross-border car manufacturing enterprises have poor sales due to insufficient control of automobile production and sales links, and can only stop investing in stop loss and no longer produce cars. For example, in 2004, Oaks Automobile had more than 120 car dealers and outlets in the country, but the total annual car sales were only more than 2,000, and more than a year after it announced the construction of the car, Oaks Automobile had no choice but to delist.
Among the cross-border enterprises, only Xinfei's automobile business has developed and grown and survived so far, and its product type has been expanded to insulation vehicles, vaccine transport vehicles, motorhomes, etc. due to refrigeration trucks related to the main refrigeration business.
It is worth noting that during that period, it also successfully stepped out of geely, BYD and other automobile companies.
Although the past time span is 20 years, the market environment, car manufacturing entities, and product types are different, and the development trend of China's new energy vehicle market cannot be completely judged, but these two periods are in the macro environment of great market demand, government policy encouragement, and relaxation of car manufacturing conditions, which has certain reference significance.
As many industry insiders predict, there will be fewer car brands in the future. Zhu Huarong recently said bluntly: "This is not a judgment but a law, and there is no need for so many brands in the world." ”
According to statistics, in 2018, there were more than 60 new car-making forces in China, but some of them could not launch mass production cars for a long time, or did not get market recognition after product release, most of them have disappeared in the dust of history, and there are less than 10 new car-making forces that are still active. With the decline of subsidies for new energy vehicles and the intensification of market competition, more new energy vehicle brands may be eliminated.
Today's development trend of China's automotive industry is like the american auto market that was pressed to accelerate.
In 1890, fuel vehicles flourished in the United States as a new type of transportation. According to statistics, in 1900, 75 million permanent residents of the United States land, at least 1900 car brands were born. But 40 years later, 94% of U.S. car sales have been divided between GM, Ford, and Chrysler, and a large number of car brands have collapsed or been merged by auto giants.
The above real cases, ancient and modern, Chinese and foreign, all point to the same point - the world does not need a particularly large number of car brands, especially in the face of the uncertainty brought about by the repeated epidemics.
The other side of innovation, dying
Wang Chuanfu, chairman of BYD Group, once concluded at the Sequoia Technology Summit that electric vehicles are the first half and smart cars are the second half.
These are two of the hallmarks of the automotive industry' transformation and the two exams that all OEMs need to pass. The biggest difference between the two exams is that the former clarifies the clearance criteria for all candidates, while the latter allows candidates to find answers on their own.
In the electrification examination, a large number of automotive brands have slowed down the pace of electrification and withdrawn from the historical stage, while new independent auto brands have seized the opportunity to go global. In the intelligent exam without standard answers, all OEMs are groping forward.
For what is intelligent, why is intelligent so defined, how to achieve intelligence and other issues, the answers of OEMs and suppliers are different, which means that the final answer needs to be continuously tested by the OEMs and suppliers. The cost of the experiment is the consumption of time, the demise of some OEMs and suppliers, and the reshaping of the automotive industry.
Innovation and demise always come together.
END
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