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Special Report

July 28, 2015
 

Discussion in Chongqing: Reshaping the Automobile Industry under the New Norm

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Written by: Suhail Nasir
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After two days worth of talks, the 6th Global Automotive Forum wrapped up on June 10th at the Chongqing Yuelai International Convention Center. With the topic of “Mega Change: Reshaping an Industry”, the event included several proactive and insightful discussions over the course of the forum.

The Industry is facing a Major Turning Point



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Following many years of rapid growth, the Chinese automotive market, which makes up 40% of the total, has stopped its strong increase due to the effects of the new economical norm. The industry has entered a new era and is experiencing major changes, highlighted during the 2015 Global Automotive Forum.

As Mr. Zhang Baolin, Vice President of Changan Automobile explained it, “the growth of the industry is falling and auto manufacturers are producing at less than 80% of capacity, less than 50% for some local brands. This phenomenon has existed for eight months with auto companies lowering their prices and maintaining high inventory levels. Moreover, the market growth will remain lower than 3%, potentially halting altogether. And more and more local governments have issued car-purchase restrictions. The number of cities with these restrictions will reach 30 in the next 3 to 5 years. All of these factors will exacerbate the changes of the market”.

Mr. Xu Heyi, President of BAIC Motor Corporation., Ltd., pointed out that this tipping point in the industry is different from what people have described before: “It has internal and external drivers. Internally, the industry faces the bottleneck of automotive technology. Namely, the environmental standard requirements for emission, the power per liter of the car engine and NVH technology are all approaching their limits. Thus, greater input will not lead to higher profit. Externally, the new economical norm in China has caused economic growth to fall as the consumption structure of the automobile has increased. The negative impacts of a growing auto industry on the environment impact have also become more obvious. Ultimately, demand for automobiles has slowed.”

“With market circumstances getting worse, the automobile industry must adapt”. Mr. Xu predicted that more than 20% and potentially one-third of the automotive companies in China will be out of the game. He believes that the industry is entering a very tough period of time.

“Does that mean the auto industry is failing? Not really. The contrary could be true. Under the pressure of energy and environment issues, innovation will bring many new opportunities to the long-history auto industry.”

 Mr. Wang Xia, the Chairman of China Council for the Promotion of International Trade Automotive Committee, said that with the applications of new technology, the “car” is no longer just a driving tool. “It has become more of a fashionable tech product. This has created a new era for the development of the auto industry. New energy along and connected passenger vehicles appear to be integral parts of the future in the auto industry. Undoubtedly, this industry is at an inflection point where it could possibly take off to new heights. It is our responsibility to seize this opportunity to make China’s auto industry not only larger in size but also technologically stronger”. Mr. Wang’s idea was well accepted by the attendees.

Mr. Xu Heyi believes that the introduction and application of new energy and Internet technology will be integral to the promising future of the automobile industry. “BAIC has changed from a traditional producer to a producer + innovative solution provider”.

Mr. Liu Weidong introduced the idea that Dongfeng is upgrading its production process. Driven by the Internet and advancements in auto technology, Dongfeng is reforming, keeping the concepts of new energy, intelligentization and modern thinking at the forefront. Dongfeng is also dedicated to international cooperation while attempting to enter the global market.

Mr. Zhang Baolin, the President of China Changan Automobile Group and Vice President of Changan Automobile, said: “In the Internet+ era, the auto industry is experiencing four big changes: customers are paying more attention to the user experience, auto products are becoming technologically smarter, the industry is becoming less vertical, and the business model is being diversified.” Mr. Zhang also pointed out that quality should always be the priority for local companies as they innovate and design new technologies. “The companies should always fulfill the need of the clients and embrace the Smart+Connected era”.

-Published on page#20 July-2015 edition of MOBILE WORLD Magazine





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