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Text｜Jiang Xiaohua

Last week, there was no more debate about whether involution was a good thing or a bad thing. At the highest-level monthly meeting in our village, involution was specifically defined.

The meeting pointed out the need to strengthen industry self-discipline, prevent "involutionary" vicious competition, strengthen the market survival of the fittest mechanism, and smooth the exit channels for backward production capacity.

Here, involution is clearly defined as vicious competition.

Is this sentence lethal? Of course it is. At least my ears, which hate the word "volume", should finally be at peace. I guess no blind PR department will use this meaningless word in the speech for the boss anymore, and there will no longer be a few car companies arguing like children about whether involution is good or not, and what kind of involution is considered a good involution.

However, there are still several obvious difficulties in implementing this instruction.

For example, how to implement this statement in order to strengthen industry self-discipline.

In China, industry associations certainly have a lot of industry support functions, but what they lack most is industry management, industry supervision, etc. I have talked about this in several articles.

For example, the weekly chart release that caused a lot of controversy last week.

To put it bluntly, when Ideal was leading in sales, it released a weekly sales chart of other car companies to highlight its market leading position, which made many competitors unhappy.

In this matter, if we are talking about publishing authoritative data, it is indeed not something a company should do. Even if your data has a certain source, you should not be the first unit to publicly release this data.

However, if you want to ask if there are any clear prohibitions or penalties in the laws and regulations, there are generally not. If this matter needs to be coordinated, it should be coordinated by the industry association. As long as you are in my industry association, everyone forms a convention, and naturally you need to be forced to follow it. Or you can stay outside the industry association. Generally speaking, ordinary Chinese companies will not choose this.

But the industry does not have this convention, so we can only see, as everyone sees, that several companies have quarreled to a very ugly level.

This is still a small matter.

To put it more broadly, even if industry associations want to make a difference in the fight against involution, they must at least start from the current actual market situation and distinguish between vicious competition and healthy competition. They must certainly not intervene in every matter that arises. Otherwise, they will not be able to manage it all, and they will not be able to manage it well.

For example, the core issues of internal circulation now lie in several points.

First, some companies took advantage of economies of scale to lower prices, causing most companies to sell at a loss and a significant decline in industry profit margins and health.

Second, some companies sell at an unreasonable loss.

Third, some companies are clearly unable to maintain their sales scale for various reasons, but they still continue to produce products that exceed their sales capacity, resulting in a large backlog of inventory vehicles.

Fourth, some companies enter the market quickly and at low cost through obviously unreasonable and unfair means.

Fifth, the overall supply in the domestic market is indeed in excess.

As an industry association, it is unlikely that you can manage each one of them. You just need to grasp the crux of the matter and manage it simply and clearly.

For example, in the process of development of new energy vehicles, the greatest damage to the industry is the collapse of the value system of new and used cars.

For a product as valuable as a car, the lack of a relatively complete value system for used cars is a huge harm to both the industry and consumers.

Then, a relatively easy way to deal with price wars is that companies should come up with a reasonable valuation system for used cars. For example, when a new car is sold, after two or three years, with some reasonable attributes, its used car residual value should not be lower than a certain amount. If it is lower than a certain amount, then the company should recycle it according to this base price.

This simple industry regulation is timely.

On the one hand, the major new players have already exited the market, and the industry should restore some entry barriers. This will not cause new companies that have initially established themselves to go out of business, and it can also put an end to many industry chaos. After these years, the accounts should be settled clearly. For the automotive industry, maintaining healthy development, even if the total volume decreases, is still the most powerful support for the entire industry and economy.

On the other hand, this is a simultaneous protection of the scale of the new and used car industries. If the current industry trend continues to develop in an unorderly manner, the huge used car industry will face the risk of collapse, which is difficult to accept from both the consumer and industry perspectives.

Furthermore, with this provision, car companies will no longer be able to arbitrarily lower or raise prices as they do now, and will not be able to use game-style pricing. The phenomenon of new car prices backstabbing old car owners will be greatly alleviated.

More importantly, facing the wave of new energy vehicles, this will prompt many companies to innovate their industries more responsibly, more prudently, and with greater consideration for user interests. It is also very conducive to the natural elimination of "outdated" production capacity. Companies that do not have system capabilities, economies of scale, and core innovation capabilities will not be able to pass this test.

Another example is exports. China's automobile export data now looks relatively promising. However, large-scale exports without compliance guarantees are very worrying.

Huawei encountered many problems caused by exports in the past, so the company learned from its mistakes and invested heavily in compliance. Many industries in China have also encountered similar situations. For example, motorcycle exports grew rapidly at the beginning, but then fell off a cliff, and the international market share was almost wiped out, all returned to Japanese companies in less than ten years.

The first wave of Chinese automobile exports in the 2000s also ended in an inglorious way. Quality, service, and management issues at some companies led to the collapse of the entire image of Chinese automobiles in the international market.

And now, we are clearly seeing such risks accumulating rapidly again.

Some brands that have no presence in China can survive by relying on exports, and some large companies have adopted some worrying practices in order to quickly increase overseas sales. Once these bombs explode, it will damage the overall international image of Chinese automobiles. When the nest is overturned, it will be difficult for all the eggs to remain intact. Some excellent companies that rely on technology, comply with regulations, and are at a critical stage of going global will also be dragged down.

So what role should industry associations play in this?

In fact, problems at the management and technical levels are easy to solve. Industry associations need to play a role. The two biggest problems we need to solve here are: first, industry associations must have the ability to speak, and second, industry associations must have the ability to make companies obey.

If we rely on everyone knowing the situation and self-discipline in the industry like in the good market, it will obviously not work. In the face of the stock market, zero-sum games are everywhere. What the industry association should do is not to smooth things over, but to keep the bottom line of stock competition within the scope of industry health.

From this perspective, the development level of a large regional automobile market corresponds to the development level of the industry association's capabilities. We very much hope that in this industry self-discipline construction, the industry association of our core industry such as automobiles can catch up with the level required for the healthy development of the industry.

The second difficult thing to do is, of course, to open up channels for the withdrawal of obsolete production capacity.

Automobile companies are always popular no matter how big they are, and local governments' enthusiasm for the automobile industry chain has never diminished, even after experiencing various industry scams in the past few years.

Even a new enterprise with a greater reputation of being a fraud will suffer heavy losses when it exits, let alone some automobile enterprises that were once local glories, GDP contributors, employment guarantees, and sources of high-quality resources for the matchmaking market. It is conceivable how difficult it would be for them to be withdrawn as obsolete production capacity.

But there is really no way to deal with this, and this is also one of the fundamental reasons why the price war in the automobile industry has reached this point. The biggest predicament of most joint ventures today is actually rooted in the huge and imprudent capacity construction around 2015.

This group encountered a large number of slightly imprudent production capacities built up due to the accelerated development of new energy in the later period. There will always be a group of them that enter the exit channel of "backward production capacity".

However, if this is just a guiding opinion, it may be difficult to clarify which is the backward production capacity and which one should be eliminated first.

For example, the market demand for some production capacity is obviously not good, but closing it will cause negative social effects; the ownership of some production capacity may make it more complicated to close it. In practice, these are all difficult problems to think about.

We had relevant experience when state-owned enterprises were restructured in the 1990s.

For enterprises, this is also a change that needs to be adapted. After all, some enterprises have already rolled themselves up to the top of the bar, and it may not be easy to pull back at the moment; and more enterprises have just made up their minds to enter the involution mode, and the mobilization meeting has just been held. For such a sudden special project, it is hard to say whether the chassis can handle it and whether the rear wheels will leave the ground.

But in any case, excessive involution or low-level involution in the market competition mode can never be a good thing for the industry. The automobile industry has its own particularity in the global manufacturing industry. It is impossible for you to gain a huge global market share by low prices and simple innovation.

In the automotive industry, even Volkswagen, which has pricing power,Toyota、BenzThese companies can never achieve sustainable development by endlessly expanding their scale and market share. This is different from other industries.

Even for many countries that do not have the ability to produce complete vehicles, automobile assembly, parts localization, and distribution are all industrial chains that these countries will not ignore.

Therefore, it is time to stop involution, re-examine the development of Chinese automobile companies from the perspective of global development, and form an atmosphere of industry self-discipline with international compliance capabilities.

No matter how difficult it is, you should give a thumbs up.