The automotive industry is becoming new

Weilai Jianghuai factory assembly workshop. (File photo)

In the context of repeated covid-19 epidemics and supply chain shortages, in the past 2021, The production and sales of China's automobile industry have achieved slight growth. What is particularly encouraging is that major changes have taken place in the industrial structure, new energy vehicles have ushered in a major outbreak, and production and sales have both exceeded the 3 million mark.

In the new year, in the face of policy adjustments and market changes such as the liberalization of passenger car stock ratios, the decline of subsidies for new energy vehicles, and the rise in raw material prices, China's automobile industry should adhere to innovation-driven, actively respond to supply chain uncertainties in the tide of intelligent and electrification changes, seek progress in stability, and promote high-quality development.

Passenger car stocks are more open to innovation than letting go

After a five-year transition period, passenger car stocks are about to be liberalized.

On 27 December 2021, the National Development and Reform Commission and the Ministry of Commerce (MOFCOM) issued the Special Administrative Measures for Foreign Investment Access (Negative List) (2021 Edition), which, from 1 January 2022, in the field of automobile manufacturing, the restriction on foreign ownership in passenger car manufacturing and the restriction that the same foreign company can establish two or less joint ventures in China to produce similar vehicle products are abolished. Previously, China has abolished the foreign ownership restriction on new energy vehicles in 2018 and the foreign ownership restriction on commercial vehicles in 2020. The abolition of the restriction on the share ratio of passenger cars means that China's automotive industry has completely opened up to the outside world.

"The liberalization of the passenger car stock ratio has little impact on the automotive industry." Dong Yang, vice chairman of the China Electric Vehicle Hundred Association, said that at present, China's auto market competition has been very sufficient, and the change in the equity ratio of joint ventures does not necessarily increase the brand power and competitiveness of enterprises, nor will it reduce much operating costs, which is not a threat to independent brands. If the foreign party increases the equity ratio of the joint venture and wants to share more of the profits, the corresponding thing is that when the Chinese side is needed to play more role, it may not be conducive to mobilizing the enthusiasm of the Chinese side. Therefore, the two parties to the joint venture will also be more cautious about the change in the equity ratio.

From the current point of view, there are already 3 joint ventures involved in the adjustment of the share ratio in 2022. One is Shenzhen Denza New Energy Automobile Co., Ltd. Daimler and BYD have signed an equity transfer agreement, after which they will hold 10% and 90% of the shares of the joint venture respectively. The other is Dongfeng Yueda Kia. Dongfeng Motor Group Co., Ltd. will divest directly from the joint venture. In addition, according to the agreement, BMW will also complete the capital increase and share expansion of BMW Brilliance in 2022. In previous years, the news that Daimler wanted to increase its stake in Beijing Benz has yet to be further confirmed.

"In the first year of the opening of the joint venture share ratio, there will be no more major changes except for the changes in the share ratios of several joint ventures that have already been agreed." Xu Haidong, deputy chief engineer of the China Association of Automobile Manufacturers, explained that this is because the share ratio is bound by the contract, and the contracts of other joint ventures have not expired; at the same time, the change of the joint venture share ratio requires a long period of business negotiations, involving more factors, and it is not a simple matter to adjust.

Cui Dongshu, secretary general of the National Passenger Vehicle Market Information Joint Association, believes that "the liberalization of the stock ratio not only reflects that China's automotive industry has a better market environment for reform and opening up and fair competition according to law, but also makes it easier to fully stimulate market vitality, forcing domestic car companies to deepen reform, accelerate innovation, promote the transformation and upgrading of China's automobile industry, and become bigger and stronger."

Subsidies do not change the growth trend

What completely exceeded everyone's previous expectations is that in 2021, China's new energy vehicles will usher in explosive growth, production and sales will both break through the 3 million mark, and the market penetration rate will exceed 13%. However, a notice of 30% subsidy decline issued by the Ministry of Finance and other 4 departments has caused people to worry: can new energy vehicles continue the rapid growth trend of the previous year?

According to the new subsidy scheme, pure electric vehicles with a cruising range greater than 300 kilometers and within 400 kilometers will be subsidized by 0.91 million yuan in 2022, which is 0.39 million yuan less than in 2021. Pure electric vehicles with a cruising range greater than 400 kilometers will receive a subsidy of 12,600 yuan in 2022, a decrease of 0.54 million yuan over 2021. At the same time, the subsidy amount of plug-in hybrid models (including range extended models) in 2022 is 0.48 million yuan, which is 0.21 million yuan less than in 2021.

"The subsidy decline is expected first, the second is that the range is not large, the difference of several thousand yuan, in general, enterprises should be able to gradually cover the part of the decline through the product scale effect." In Cui Dongshu's view, the key to promoting the sales of new energy vehicles is to improve product strength. He expects that with the advancement of technology and the improvement of market recognition, the production and sales of new energy vehicles this year are expected to reach a scale of 6 million units, corresponding to a penetration rate of about 22%.

Although the CAAM is expected to have 1 million fewer vehicles than the Association, Dong Yang said that from a market perspective, the target of achieving 5 million vehicles this year is worth looking forward to. There are three reasons: First, it has passed the technical barrier. At present, the driving range and safety performance of new energy vehicles in China have been basically solved, and the technology to deal with the problem of winter mileage is also relatively mature; the power battery has generally reached the world's advanced level, and the special chassis design and production are the world's leading. The second is to pass the cost barrier. The price of China's power batteries has taken the lead in reaching the international expectation of 0.1 US dollars per watt-hour, under the premise of less government subsidies, most Chinese companies have a marginal contribution to the production of new energy vehicles, and some companies have real profits. The third is to pass the market barrier. Private users account for more than 80% of the market, and the recognition of new energy vehicles by various consumer groups has generally increased significantly. In addition, the construction of charging and replacing facilities is also keeping up with the pace of development of new energy vehicles.

"The decline in subsidies does not mark the decline in the competitiveness of new energy vehicles, but will promote the development of the industry to be more mature and more stable." Tao Lin, tesla's global vice president, said that with the complete withdrawal of subsidies, new energy vehicles will enter a stage of real competition by product strength, which is a good thing for the entire industry and consumers.

Supply chain tension may be difficult to solve in the short term

"Lack of core and less electricity" is a hot word in China's automobile industry in 2021. Because of the "lack of core", many factories were forced to stop work and production, and the new forces of car manufacturing had to lower the delivery expectations of new cars, even volkswagen, Ford, Honda and other auto giants were not spared; because of the "battery shortage", car companies had to send people to squat in the Ningde era. When the pressure of the supply chain is transmitted to the end market, there are no new cars for 4S stores to sell. To this end, He Xiaopeng, chairman of Xiaopeng Automobile, poured bitter water, "Xiaopeng P5 is most affected by chip shortage."

"Due to the uncertainty of the epidemic and the long-term cyclical nature of the chip industry, the chip shortage problem in 2022 may continue for some time, but the severity will be alleviated." Liu Zongwei, an associate researcher at Tsinghua University's School of Vehicles and Vehicles, said that this is mainly due to the capacity adjustment of chip companies and the increase in the experience of vehicle companies in dealing with chip shortages.

Continuous preparation to deal with supply chain uncertainties and ensure a certain degree of flexibility is a very important experience measure for car companies. Yang Ming, president and CEO of Beijing Mercedes-Benz Sales Service Co., Ltd., told reporters, "First of all, we deploy relevant response work from the entire system level to ensure that the entire production system has flexibility; secondly, based on the customer's wishes, without affecting the vehicle safety function and complying with relevant regulations, we deliver some vehicles according to customer needs, and improve the vehicle functions as soon as the corresponding spare parts are in place; third, we flexibly adjust the vehicle configuration, optional accessories, etc. to meet the customer's car needs." 。

Unlike the reasons for the tight supply of chips, the "less electricity" is more caused by the rise in raw material prices. Dong Yang pointed out that in the past one or two years, the price of nickel, cobalt and lithium, the main raw material of power batteries, has been rising, mainly due to the epidemic affecting the normal mining and transportation of raw materials, coupled with the fact that the energy metal itself is not very rich, so the contradiction between supply and demand is prominent. In his view, the price of raw materials may continue to rise this year, which requires vehicle companies to take measures in advance.

"At present, China's auto industry has entered a new stage of innovation-driven and green development, and the driving force of enterprise development, the ecology within the industry, the relationship between production enterprises and supply chains and sales ends, and the government's thinking on managing the development of the automotive industry are undergoing profound changes and facing many new challenges." Dong Yang pointed out that many successful experiences in the "follow development" stage are no longer applicable, and even become obstacles to innovative development. He suggested that both vehicle companies and parts suppliers, as well as government management departments, need to establish new concepts and new ideas to cope with the new challenges of the new stage. (Economic Daily reporter Yang Zhongyang)