The Spring Festival in 2024 is a mixed blessing for the domestic auto industry.
On the one hand, the happy is reflected in the annual data - the China Association disclosed that in 2023, domestic automobile production and sales will achieve 301610,000 and 300940,000 units, up 11. y/y6% and 12%, record highs;
Among them, the production and sales of new energy vehicles reached 95870,000 and 94950,000 units, an increase of 358% and 379%。
However, entering 2024, worries emerge that in January 2024, the domestic market of passenger cars will achieve retail sales of 20350,000 units, down 139%；New energy vehicles fell even more, selling 66 in January80,000 units, down nearly 40% month-on-month, and some well-known big brands, including BYD, NIO, and Xpeng Motors, fell even more than 40% month-on-month.
This time, the sales suddenly plummeted, and it occurred during the first period of car buying by the first group before the Lunar New Year.
In this situation, BYD, Tesla and other leading companies began to take the lead in cutting prices, and other manufacturers had to follow up, so that the already thin profits were further depressed, and the operating pressure increased sharply. Among them, on February 18, the luxury electric vehicle brand Gaohe Automobile announced that it would suspend work for 6 months, falling to the point of seeking mergers and acquisitions.
On February 18, the first day of construction after the Spring Festival holiday, He Xiaopeng, chairman of Xpeng Motors, issued an internal letter to all employees, saying, "This year is the first year for Chinese auto brands to enter the 'sea of blood' competition, that is, the first year of the knockout competition." ”
China has experienced three years of rapid growth in the automobile industry, and now the opportunity period has passed, and after three years of booming production and sales, the domestic new energy automobile industry manufacturers are lined up and the competition is fierce.
Bottlenecks after the three-year opportunity period
Before the epidemic, the sales volume of the domestic auto market reached 28.88 million units in 2017, and began to decline to about 25 million units for three consecutive years.
Before the epidemic passed, the domestic auto market began to grow rapidly, and it took another three years to not only "regain lost ground", but also continue to grow, with sales exceeding 30 million units in 2023.
Judging from the data, on the one hand, the rapid development of new energy vehicles, the sales growth rate in the past three years has exceeded %. On the other hand, the contribution made by exports, for a long time, China's export of automobiles hovered around 1 million, but in the past three years, it has continuously exceeded the level of 2 million, 3 million, and 4 million, and last year's annual exports reached nearly 5 million.
This growth is partly due to the early development of the domestic new energy vehicle industry, but some experts believe that the rare "three-year opportunity period" has boosted this wave of growth.
Gong Min, head of automotive industry research at UBS China, said that during the epidemic, the global automotive industry lacked chips**, major manufacturers concentrated chips on high-value-added vehicles, and there were gaps in low-end cars and emerging markets, and Chinese car companies took advantage of the situation to enter these markets.
On top of this, there is the explosion of the Russian market. Because of the Russian-Ukrainian war, Russia has been sanctioned by Europe, the United States, Japan and other countries, and car brands have also withdrawn, making Chinese cars popular in the Russian market, and in 2023, the export of cars to Russia will soar by 5 times.
However, the growth effect of these periods of opportunity is slowing, and the China Association of Automobile Manufacturers expects to export 5.5 million vehicles in 2024, an increase of only about 10%, compared with more than 100% in the past three years.
The wave of price reductions for electric vehicles
These market changes are reflected in the car companies at one end, that is, the chill - China's new energy vehicle retail sales in January this year 6680,000 units, compared to 1.19 million units the month before.
Beijing's Anbang think tank said that with the intensification of market competition, the production expansion of new energy vehicles continues to intensify, and the "intensity" of competition in the industry is also rising rapidly. For large-scale consumer goods such as new energy vehicles, the result of intensified competition will inevitably bring market price reductions.
Around the Spring Festival, there was a "wave of price cuts" for new energy vehicles in China - Tesla's model 3 refreshed version from the previous 26140,000 yuan to 24590,000 yuan, a decrease of 1550,000 yuan, the starting price of the Model Y is adjusted to 25890,000 yuan, a decrease of 0.750,000 yuan; BYD launched the Honor Edition of the Qin Plus DM-i and Destroyer 05 models, both with a starting price of 7980,000 yuan, compared with the champion version, the price was reduced by 20,000 yuan and 220,000 yuan, almost the same as fuel vehicles of the same level.
Since then, many auto brands, including AVATAR, Leapmotor, FAW Toyota, Nezha Automobile, Ora, and Lynk & Co, have opened fancy **, in the form of time-limited insurance subsidies and time-limited deposit cash.
According to the analysis of Anbang Think Tank, this strategy of price reduction competition may have a negative impact on the long-term development of the electric vehicle market. With the decline of **, profit margins will also be squeezed, which will bring greater challenges to the development and production of electric vehicles. At the same time, it will also affect the EV strategy and future market share of automakers.
Cui Dongshu, secretary general of the China Passenger Car Market Information Association, wrote an article **, this year is a key year for new energy vehicle companies to gain a firm foothold, and the competition is destined to be very fierce. With the rapid increase in the penetration rate of new energy vehicles, the scale of the traditional fuel vehicle market is gradually shrinking, and the contradiction between the huge traditional production capacity and the shrinking fuel vehicle market has brought a more fierce battle.
The way out: overseas markets?
The flattening of the domestic market is not unrelated to the macroeconomic situation. The National Passenger Car Market Information Association will analyze the shrinkage of the automobile market during the Spring Festival, before the Spring Festival is usually the first period for the first group to buy a car, due to the property market, the first is not prosperous, the consumption mentality of residents is relatively conservative, the entry-level fuel vehicle market performance is weak, and the willingness to consume before the Spring Festival is particularly not strong.
In the eyes of many car companies, the overseas market is still where the increment lies.
Zhang Yongwei, vice chairman and secretary general of the China Electric Vehicle 100 Association, said at a public event that there is a big difference between China's auto market and overseas markets, and some companies with poor performance in the Chinese market have achieved great success in overseas markets, mainly because China's auto market has an early electrification transformation and the transformation speed of overseas markets is still relatively slow.
For example, BYD's best-selling ATTO3 (i.e., Yuan Plus in the domestic market) model in Germany began pre-sales in Europe in September 2022, with a starting price of 38,000 euros (300,000 yuan) at that time. At present, the lowest price of the same model in China is only 140,000 yuan. This means that after BYD's recent 15% price cut in Germany, its overseas market** is still much higher than that in China.
In order to seize overseas markets, Chinese car companies such as BYD and Chery have even begun to buy car carriers. In January, one of BYD's car carriers went to sea, a 200-meter-long behemoth that can load 7,000 passenger cars at a time, in addition, BYD also ordered two 7,000 parking spaces and four 9,200 parking space carriers.
But overseas markets are not all smooth sailing.
China's auto exports have grown too fast in a short period of time, impacting similar industries in destination countries and raising the head of protectionism.
In the EU, the main market, for example, 14 million people are directly or indirectly employed in the automotive industry, equivalent to 6 of the EU's employed population1%。According to the European Commission, Chinese-made vehicles account for 8% of the European electric vehicle market, and it is likely to increase to 15% by 2025. In October last year, the European Union launched a countervailing investigation into Chinese electric vehicles, which could raise its tariffs from the current 10% to at least 20%.
The U.S. has imposed an additional 25% tariff on Chinese car exports since the Trump era, and there are still voices calling on the authorities to plug the loophole for Chinese auto products to detour to Mexico to enter the U.S. market.
If the EU also imposes restrictions on Chinese cars, such as those in the United States, China may enter the European and American markets by investing and building factories overseas.
A number of Chinese automakers have revealed plans to build factories in Mexico and even the United States. In the first two months of 2024 alone, GAC Aion's Thailand plant officially started, with a planned annual production capacity of 50,000 units, and BYD signed a land pre-purchase agreement to build a passenger car plant in Hungary, which is expected to start production within three years.