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The 2013 China Automotive Outlook Report released today by AlixPartners, a global business consulting company, points out that with the growth rate maintained at around 5% to 7% over the next five years and the mature Chinese auto market, the market landscape Rapid changes will determine the ups and downs of OEMs and parts suppliers.
Through interviews with more than 100 senior executives of domestic and multinational companies in the Chinese automotive industry, this research concerns the overall state of the automotive industry and the opportunities and challenges that the company faces in its operations.
The prospect of the vehicle plant is worrying?
In terms of production, the competition for the Chinese market share has become increasingly fierce, and the problem of overcapacity in local OEMs is still very serious. The average capacity utilization rate of China's automakers remains below 65%, while the industry's standard level of stabilizing profits requires an 80% capacity utilization rate. The success of global brands in China is evident: leading brands continue to increase their share of the market, while backward brands do not decline, and it is even more difficult to maintain the second and third line.
At home, Chinese brands are still struggling to maintain their share of the major car market, and are increasingly impacted in the long-term dominant low-end market. The sedan is still the largest-selling passenger car category.
However, surveys show that domestic automakers do not perform poorly in all categories. Traditionally, international automakers have gained an advantage in profitability in the SUV category, but this has been replaced by China’s own brand, Great Wall Motors.
Chinese brands began to try to solve the problem of weaker financial performance, and continue to increase the development of export business. The survey shows that the total export volume of local automakers will continue to rise in the next three years. The survey also predicts that domestic small-scale OEMs will be integrated to increase production capacity and cost-effectiveness, thus increasing their competitiveness.
AlixPartners' survey also showed that the success of the automaker's profit comes from transferring cost pressures to suppliers and distributors. By shifting the cost increase to the supplier (the latter's profit rate decreased from 8% in 2011 to 7.1% in 2012), the profit growth rate of pre-depreciation and amortization pre-interest rate for the entire vehicle factory over the same period was 6.9. % increased to 7.4%. At the same time, due to fierce price competition, the dealer's profit rate also fell from 4.7% to 2.2%.
Mr. Ivo Naumann, Managing Director of Alix Partners and head of the Shanghai Office, said, “Although in China, the total growth of the automotive industry at a CAGR slowed from 26% in 2009-2011 to 2010- In 2011, 9% of the profit before depreciation and amortization was reduced from 7% in 2011 to 6.8% in 2012; this recession cannot be generalized.â€
From an optimistic perspective, European automakers continue to dominate the luxury car market in China among global OEMs, of which German BMW and Audi are at the forefront and Mercedes-Benz is behind. Although the growth rate of luxury cars has slowed, the growth rate is still higher than the average of the overall market.
For many second-tier manufacturers, the Chinese market still uses a multi-platform, low-capacity operating model. The production platform of Chinese domestic automakers can rarely produce more than 100,000 vehicles, and it cannot satisfy the sales volume of more than 500,000 vehicles. On the other hand, the world’s leading production and manufacturing platform can produce millions of products on the same platform. Car. As the world’s leading automaker is about to implement the “super platform†strategy in China, Jennifer Li, director of AlixPartners, said, “China's local automakers have only three to five years to catch up with. The scale and cost level of the global production platform will otherwise face increasing pressure on revenue and profitability due to lack of cost and scale advantages."
The rapid emergence of the used car market
As more and more Chinese consumers are about to purchase a second car, this is expected to dramatically change consumer buying behavior and may be beneficial to market leaders. The used car market is rapidly expanding, and the car's expected resale value will become an important indicator for buying used cars. This will help strong brands with superior quality. In addition, the rapidly growing used car market also presents major opportunities for car dealers, as well as significant potential for additional profits.
In 2012, the sales ratio of used cars and new cars in China was 0.41:1, and in 2008, this ratio was only 0.11:1. AlixPartners expects that sales of used cars will be flat with new cars by 2020. Given developed markets such as Japan, the sales ratio of used cars and new cars is as high as 2.2:1, and the growth potential of the used car market in China in the long run is enormous.
Parts suppliers face changes
AlixPartners survey shows that fierce price competition has further deteriorated the supplier's living environment; 76.7% of respondents stated that price competition is the most severe challenge in 2013, compared with 54.2% of respondents last year. Concerns about price competition. In addition, respondents believe that price is an important “competitive weapon†for component manufacturers; compared to 20.8% in 2012/13, 47.6% of respondents in the 2013/14 survey hold this view.
To complicate the issue, more than 70% of domestic parts suppliers' capacity utilization rate is less than 80%, which has brought tremendous pressure on earnings.
In addition to its impact on automakers, the "super platform" strategy will also have a major impact on the supply of auto parts.
Mr. Ivo Naumann stated that "'Super Platform' will change the game rules in the industry, so that parts suppliers have to increase investment and establish closer relations with global automakers to continue to provide the manufacturing platform for OEMs. Parts."
"To achieve sufficient production scale and cost-effectiveness, Chinese automobile manufacturers and suppliers have not had much time left, but are also facing the crisis of losing market share. What needs to be done now is to act quickly and re-adjust themselves to meet Rapidly changing industry landscape."
Ms. Li Lihua said, “Chinese suppliers need to strengthen their global production layout and increase investment in engineering and supply support to meet the highly complex global design needs of their OEM customers.†The survey also pointed out that under the current limited global network, Chinese suppliers need to make overseas acquisitions to avoid being marginalized under global competition.
Japanese brands renew their efforts?
Although in the past five years, Japanese automakers’ market share in China has generally declined sharply, Japanese automakers have not yet to fade out of this important market. Instead, they are actively increasing auto production and local procurement in China. And R&D investment. AlixPartners expects that this will provide support for Japanese OEMs to regain some lost market share.
Among the top three OEMs in Japan, Nissan (Nissan) has gained the largest market share through its successful new brand strategy.
At the same time, due to tradition, Japanese suppliers only rely on supplying parts to Japanese automakers. This poses challenges to suppliers when the market share of Japanese cars declines. This also leads to Japan’s spare parts supply. The company actively cooperated with local Chinese and other global OEMs in China and achieved results. This trend has become increasingly evident and has further intensified the competition in the parts supply industry.
Growing Korean Brand
China became the main sales market for Hyundai Group, despite the slowdown in modern sales in other global markets.
The survey predicts that Hyundai will maintain double-digit growth in China in the next two to three years, and its market share in China will reach 9%-10%. It is worth mentioning that Hyundai has increased its available capacity in China and eliminated this obstacle in its past development. However, to achieve the expected growth, Hyundai still needs to establish a solid brand positioning, extend the product line, improve the vehicle portfolio, and reduce costs through localization and increased first-line investment.
Through its operations in China, the overall profitability of Korean suppliers has also grown strongly. The profit contribution rate of the Chinese business increased from 24% in 2011 to 27% in 2012. It is worth noting that the chassis manufacturer Mando and the bodybuilder Sungwoo all had 40% of their profits from China in 2012.
Like many Japanese suppliers, Korean suppliers are also expanding their customer bases. The Wanda, which had previously relied on the Hyundai Group for automobile sales, has greatly expanded its customer base and reduced Hyundai’s sales share from 61% in 2010 to 51% in 2012.
Mr. Ivo Naumann concluded that “despite the sluggish growth rate in the industry, the Chinese auto market remains the growth engine of the world and is also a priority for any OEM and supplier. With increasingly fierce competition and a rapidly changing industry landscape Achieving high earnings performance in previous years will be the main challenge for the future. The renewed efforts of Japanese automakers, low-production platforms, second-tier manufacturers’ vehicle models, and emerging second-hand car markets will become market developments. Important factors."