The Matthew Effect is intensifying—urgent action is needed to elevate independent brands.

“The pandemic has accelerated the survival-of-the-fittest process among automotive companies.” Recently, Wang Xia, Chairman of the Automotive Industry Committee of the China Council for the Promotion of International Trade and Chairman of the Automotive Industry Chamber of the China Chamber of International Commerce, once again emphasized that market competition in the second half of 2020 will become even fiercer.
Data shows that in May, the market concentration among the top 10 automakers reached 61.8%, with each company capturing a market share of over 11% at its highest. As a result, this year’s "mid-year assessment" has become particularly challenging for major automotive enterprises. From January to May this year, automobile production and sales totaled 7.787 million and 7.957 million units, respectively, representing year-on-year declines of 24.1% and 22.6%. Although the full first-half figures have yet to be released, the significant drop in auto production and sales is already confirmed. Recently, at the China Automotive Industry Development Symposium hosted by the China Association of Automobile Manufacturers, Wu Wei, Director-General of the Industrial Development Division at the National Development and Reform Commission, analyzed that this year’s auto market is marked by intensifying differentiation among market players, growing uncertainties and mounting difficulties, as well as a continuous decline in capacity utilization rates. "At the same time," Wu added, "international markets are experiencing noticeable volatility, putting the automotive industry ecosystem under considerable strain. Coupled with complex global geopolitical dynamics and the ongoing impact of the pandemic, the market outlook remains highly uncertain."

In the first half of this year, the challenges faced by domestic brands continued to intensify. According to Xu Haidong, Deputy Chief Engineer of the China Association of Automobile Manufacturers, sales of Chinese-branded passenger cars from January to May totaled 2.264 million units, a year-on-year decrease of 32.5%. Their market share was 37.1%, a 2.8 percentage point decrease. The shrinking market share of domestic brands stems from shifts in market demand brought about by a new round of consumption upgrades. According to reporters, in May of this year, domestic luxury car sales increased by over 20% year-on-year, while demand for models priced under 80,000 yuan was sluggish. "This demonstrates, from one perspective, that people's pursuit of health, safety, and quality of life is directly reflected in car consumption. It can be said that the epidemic has triggered a shift in consumption, opening up new opportunities for product quality and brand upgrades." Wang Xia believes that it is imperative for domestic brands to rise and break through the price ceiling.

At the recent 2020 China Automotive Chongqing Forum, Zhu Huarong, Party Secretary and Chairman of Changan Automobile, stated that new trends in industry competition are emerging, with over 1,000 dealerships facing closures, mergers, and reorganizations. While some domestic brands may struggle to recover, leading domestic brands are experiencing rapid growth. "In the future, many new technological applications will transform global business models. The automotive industry must weather the short-term pain and embrace this new round of technological change," Zhu Huarong stated. You Zheng, member of the Standing Committee of the Party Committee and Deputy General Manager of Dongfeng Motor Corporation, believes that China's automotive industry still has room for growth and will enter a new stage from scale growth to high-quality development. The COVID-19 pandemic has accelerated the pace of digitalization, creating a new opportunity for Chinese brands to break through into the high-end market.
"The automotive industry is currently experiencing a converged development trend, with 'five transformations' integrated into one vehicle, and one vehicle connecting 'four networks.'" You Zheng further explained that, based on digital technology, lightweighting, electrification, intelligence, connectivity, and sharing are all integrated into a single vehicle, connecting the road, energy, information, and financial networks. During the pandemic, new retail in the automotive industry has also quietly developed. In You Zheng's view, accelerating the transition from traditional vehicles to new eco-friendly vehicles and strengthening brand upgrades will be the path for Chinese independent brands to break through from the low- and mid-range to the high-end market. Previously, the China Association of Automobile Manufacturers predicted that if the overseas epidemic is effectively controlled in the second quarter of this year, China's auto market sales in 2020 may decline by 15% year-on-year. If the overseas epidemic cannot be effectively contained and the impact extends to the third quarter or even longer, China's auto market sales in 2020 are expected to decline by 25% year-on-year. "In the post-epidemic era, the automotive industry will face more uncertainties and challenges. Major factors such as the restoration and reconstruction of the supply chain and the reshaping of consumer information have increased the difficulty of the challenges. This will be a huge stress test, forcing the automotive industry to re-evaluate itself and the market," said Wang Xia.

Reprinted from Sina Auto

Email:
info@adtfm.com

Phone:
021-20532053

Address:
2nd Floor, No. 150 Jindian Road, Pudong New Area, Shanghai