The price war in China's auto market continues to escalate, with about 150 models cutting prices in the first five months of this year, which has had an unhealthy impact on the entire industry chain.
Automakers' price reduction strategies: In order to cope with fierce market competition, many automakers are competing for market share by launching new entry-level models with lower prices and lowering prices. Pressure on the industrial chain: The price war has made car companies more demanding on cost control, which in turn exerts greater pressure on suppliers. Some car companies require suppliers to lower prices, shorten R&D cycles, and even imitate competitors' products, which is not conducive to long-term technological innovation and healthy industrial development.
Pursuit of short-term profits: In order to quickly occupy the market in the price war, some car companies launch new cars without complete functions, and plan to achieve follow-up functions through OTA (over-the-air download technology) upgrades. While this approach may attract consumers in the short term, it can damage brand image and consumer trust in the long run. Adjustment of competitive strategy: The competition between car companies has shifted from simple price competition to competition in technology, brand, service and other aspects. However, excessive price wars may cause automakers to ignore these investments, which will affect long-term development.
Lag of national standards: The industry is concerned about the lag of national standards in some areas, believing that this may restrict the innovation and development of the automotive industry. For example, in the field of new energy vehicles, with the rapid development of technology, the existing national standards may no longer be able to fully meet the needs of new models. Low standards: In addition, some people are concerned that the national standard is not too high in some aspects, which may affect the level of safety and quality in the automotive industry. For example, in battery safety, vehicle communication, etc., if the standard is too low, it may lead to safety hazards and quality problems.
The Ministry of Industry and Information Technology (MIIT) issued the "Key Points of Automotive Standardization Work in 2024": In order to improve the relevant regulations and safety standards of the automotive industry and cope with challenges such as price wars, the Ministry of Industry and Information Technology (MIIT) issued the "Key Points of Automotive Standardization Work in 2024". This point aims to continuously strengthen the top-level design and improve the automotive technical standard system; Focus on strategic emerging areas and accelerate the development of key and urgently needed standards; and deploy a standard system in frontier fields. Strengthen regulation and self-discipline: In addition to the guidance and support of government departments, the automotive industry also needs to strengthen its own regulation and self-discipline. Car companies should consciously comply with relevant regulations and standards to ensure product quality and safety; Suppliers should also actively cooperate with the needs of car companies and jointly promote the healthy development of the industrial chain.
The world's top 10 automotive suppliers are also facing tremendous pressure and challenges in the face of fierce price reductions from OEMs. The ongoing price war in China's auto market has had a profound impact on the entire industry chain, which is negative and far-reaching.
The price war has led OEMs to shift the pressure to suppliers in order to make up for their losses
Suppliers are under pressure while continuing to squeeze costs to companies further upstream, creating a vicious circle. This cycle not only compresses the profit margins of the entire industrial chain, but also ignores the quality and safety that should be paid attention to.
When all the starting points revolve around survival, and all behaviors become short-term and profit-oriented, it is indeed difficult to have enough energy to focus on quality and safety. However, this practice is undoubtedly a thirst-quenching exercise, and in the long run, it will not only damage the brand image and consumer trust, but also have a serious negative impact on the healthy development of the entire automotive industry.
In order to meet this challenge, the entire industry chain needs to work together to find a healthier and more sustainable way of development. First of all, the government should strengthen regulation and formulate more reasonable and stringent standards and regulations to ensure the quality and safety of the automotive industry. Second, OEMs and suppliers should strengthen cooperation to jointly respond to the challenges brought about by the price war, and improve the competitiveness of the entire industry chain through technological innovation and cost control. Finally, consumers should also improve their awareness of self-protection and choose automotive products with reliable quality and safety guarantees.
Some of the deep-seated problems in the automotive industry
These problems stem from the fierce competition in the market and the need for cost control. In this environment, the relationship between OEMs and suppliers seems to have become more strained, and some unfair competition methods, such as imitation and cutting corners, have also begun to appear.
Reducing costs and increasing efficiency is an important goal, but it should be achieved in a reasonable way, such as technological innovation and management optimization. However, some car companies choose to reduce costs through improper means, such as copying suppliers' core products, which not only damages the rights and interests of suppliers, but also has a negative impact on the healthy development of the entire industry chain.
When an accident occurs, suppliers react more positively than car companies, which also illustrates some of the extreme measures that suppliers can take in the face of pressure. While these measures may help reduce costs in the short term, they can cause serious damage to brand image and consumer trust in the long term. In the automotive industry, while pursuing speed and cost control, the key link of vehicle life cycle testing is ignored and compressed. Although the intelligent driving function is not a rigid need for everyone, safety is the basic need of every consumer, and for automotive products, safety performance must not be compromised.
The whole life cycle test of the whole vehicle is an important means to ensure the safety performance of the vehicle, the purpose of which is to ensure that the vehicle can maintain stable and reliable performance in various road and driving conditions, and can protect the safety of passengers to the greatest extent in the event of an accident. However, the current neglect and compression of this link in the industry has undoubtedly increased the safety risk of automotive products.
For new brands such as Xiaomi, they have won the attention of the market through rapid iteration and continuous innovation, but at the same time, they also face the challenge of how to ensure product quality and safety performance. While pursuing speed and innovation, new power brands should pay more attention to the testing and verification of the whole life cycle of products to ensure that each product can meet high standards of safety performance requirements.
For foreign brands, they face stiff competition from local brands in the Chinese market
In order to maintain market share and competitiveness, they also need to continuously accelerate product development and time to market. However, while pursuing speed, they should not neglect to ensure the safety and performance of their products. With reasonable planning and arrangement, foreign brands can achieve faster product development and time-to-market on the premise of ensuring product safety and performance.
At present, the automotive industry is facing fierce competition at the same time, but also facing the problem of lagging national standards and low standards. This has led to some gray area practices that some car companies may adopt in the pursuit of profit and speed, and these practices have affected the healthy development of the industry to a certain extent. In front of the national standard, it is true that no one dares to openly cross the line, because that would involve illegal acts. However, due to the lag and low standards of the national standard in some areas, it does give some car companies the opportunity to play the side ball. This not only affects the interests of consumers, but also damages the image and credibility of the industry.
In response to this situation, the key points of automotive standardization work in 2024 released by the Ministry of Industry and Information Technology are a positive signal. This will help to further improve the relevant regulations and safety standards of the automotive industry, and improve the quality and safety level of the entire industry. Before the new regulations are implemented, OEMs and suppliers should consciously comply with existing regulations and standards, and strive to improve product quality and safety performance.
At the same time, enterprises and individuals in the industry should also realize that conscience is the cornerstone of enterprise development. Only by sticking to our conscience can we be invincible in the fierce market competition. This is not only responsible for consumers, but also responsible for the enterprise itself and society.