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Original first release | Jinjiao Finance (ID: F-Jinjiao) Author | Jiaoye

After more than a year, the "fuel tank gate" incident has once again returned to the public eye.

This revelation in Xinhua Finance's report on August 7 seems ordinary, but it is actually earth-shattering:

"The car brand had proposed various conditions to try to influence Great Wall Motors' position on the report on the normal pressure fuel tank, and said it would switch to high pressure fuel tank production as soon as possible. At the same time, it proposed to exchange shares and increase the price of its hard-core off-road vehicles in exchange for Great Wall Motors withdrawing the report and not pursuing the matter any further."

On the same day, Wei Jianjun, chairman of Great Wall Motors, once again criticized the issue of normal pressure fuel tanks in an interview with central media, saying that it not only concerns the company's technical strength and product quality, but also directly affects the image and reputation of China's automobile industry in the international market. He bluntly said that "some bosses in some industries are now calling for improper, unfair and fraudulent fees."

In order to solve the problem of "unfair and opaque competition", Wei Jianjun made a very bold suggestion: "I am willing to pay for a comprehensive audit of the entire industry, starting with Great Wall, to see who has problems in the end. We hope that in this way, every company can face up to its own problems and jointly promote the healthy development of the industry."

This attack was tit-for-tat and soon stirred up a storm, becoming the focus of public attention and confrontation.

Perhaps in the current car industry, Wei Jianjun is an outlier and his remarks are not popular. In particular, the proposal of "comprehensive audit of the industry" will easily be resisted by the industry, but in the long run, someone will always have to act as a "cannon".

Because no matter what, the "fuel tank gate" incident does require a truth, those who are accused need to be cleared of all charges, and those who speak out need justice.

The battle behind the fuel tank

"This fuel tank has an impact no worse than Volkswagen's 'emissions scandal'."

More than a year has passed, and Wei Jianjun not only did not let go of the "normal pressure oil tank" incident, but also raised its seriousness to a new level.

In May 2023, Great Wall Motors issued a statement saying that it had submitted reporting materials to the Ministry of Ecology and Environment, the State Administration for Market Regulation, and the Ministry of Industry and Information Technology, reporting that BYD Qin PLUS DM-i and Song PLUS DM-i used normal pressure fuel tanks and were suspected of not meeting the standards for evaporative pollutant emissions from the entire vehicle.

｜More than a year has passed since Great Wall’s report, but there is still no official conclusion

In response, BYD Auto officially issued a statement saying, "We firmly oppose any form of unfair competition! And we reserve the right to legal action!" At the same time, BYD believes that the process of Great Wall Motors submitting vehicles for inspection is not in compliance with regulations, and also emphasizes that the products and related tests comply with national standards and have been certified by national authoritative agencies.

The incident sparked a huge debate in the industry at the time, with some even saying, "No one wants a 'dieselgate' to happen in China, but no one can deny that this is the Chinese version of 'dieselgate'." Unfortunately, more than a year later, the relevant authorities have not responded to Great Wall Motors' report, nor have they given any conclusions of the investigation. In Wei Jianjun's view, this matter is no small matter, no less serious than the Volkswagen "emissions gate" incident.

In 2015, the U.S. Environmental Protection Agency (EPA) found that Volkswagen installed a software in some of its diesel vehicles that could recognize when the vehicle was undergoing emissions testing and automatically adjust engine performance to reduce emissions. After the test, the software would return the engine to normal mode, when the actual emissions were much higher than the test values, up to 40 times the U.S. legal standard.

After the incident was exposed, Volkswagen Group admitted that the "emissions scandal" involved about 11 million diesel vehicles worldwide, and was subsequently sued in many countries, for which Volkswagen paid a heavy price. According to relevant statistics, by the end of 2022, Volkswagen had spent more than 32 billion euros on the "emissions scandal", including fines, compensation and settlements; in June 2023, Rupert Stadler, former CEO of Audi under the German Volkswagen Group, was sentenced to 21 months' probation, becoming the first former board member of Volkswagen to be sentenced.

In other words, 10 years after the incident, Volkswagen is still suffering from the consequences of the "emissions scandal", but this has also served as a strong warning to other automakers and promoted the standardized development of the automotive industry.

"In the international competition we participate in, there are many international giants such as European companies, American companies, and Japanese companies. How do they view us? If this issue is not handled properly, it will seriously damage the image of our country, and its impact will be no less than the Volkswagen emissions scandal of the year."

Wei Jianjun believes that the high-pressure fuel tank issue not only concerns the company's technical strength and product quality, but also directly affects the image and reputation of China's auto industry in the international market. In response to this matter, People's Daily Online reported that Great Wall Motors has the courage to expose unfair competition and contribute to maintaining the reputation of China's auto industry.

Great Wall Motors is not the only one to speak out. On July 13, Yang Xueliang, senior vice president of Geely Holding Group, mentioned the "fuel tank gate" incident again at the 2024 China Automotive Forum. He said that for the well-known incidents of normal pressure fuel tanks and serious non-compliance with emission standards in the industry, he believed that there would be a fair, just and open legal conclusion, and the truth would be revealed to the world.

"To this day, we are still lucky enough to play cards at the table. We hope that fellow players will strictly abide by the rules. If some players are found to be stealing cards, changing cards, or playing fake cards, they should consciously and proactively accept the punishment, and should not be angry and demand that the players who abide by the rules be kicked out."

Yang Xueliang further added that China's laws must support good money driving out bad money, not the other way around. If the current phenomenon continues for a long time, the tragedy of bad money driving out good money will occur.

The problem of "bad money driving out good money" is the key to the fierce battle among many car companies in the "fuel tank gate" incident.

Is this considered cheating?

Behind the "fuel tank gate" incident is actually a microcosm of the price war among auto companies.

According to Jiemian News, a high-pressure fuel tank is about 1,000 yuan more expensive than a normal-pressure fuel tank; an insider revealed to Titanium Media App that, depending on the different supply scopes, the high-pressure fuel system is about 600 yuan more valuable per vehicle than the traditional fuel system.

In other words, the cost of using a normal pressure fuel tank can be saved by at least 500 yuan. In the past, in order to cope with the ever-tightening emission regulations, most car companies would not save this part of the cost. But now that car companies are caught in the quagmire of price wars, will they take the risk and choose normal pressure fuel tanks?

In the final analysis, whether replacing high-pressure fuel tanks with normal-pressure fuel tanks is "technological cost reduction" or "cutting corners" is a bottom-line issue involving the development of the automotive industry.

BYD's explanation is "technological cost reduction". On May 29, 2023, BYD responded on the interactive trading platform that there are two technical routes for PHEV plug-in hybrid in the industry. One is that the engine and wheels cannot be decoupled (disconnected), and a high-pressure fuel tank must be equipped. The other is BYD's fuel vapor emission control technology, which can use a normal pressure fuel tank.

However, it is interesting to note that a blogger revealed that BYD's exported vehicles all use high-pressure fuel tanks. After this incident fermented, Titanium Media learned from relevant channels that BYD's Xi'an factory has gradually switched to high-pressure fuel tanks for its models since May 2023 to meet the requirements of the National VIb emission limit plan implemented nationwide in July.

｜Revelation on the Internet platform: BYD has switched to a high-pressure fuel tank

In other words, this technology is unlikely to meet the National VIb emission standards, and BYD's plug-in hybrid models will most likely return to the mainstream high-pressure fuel tank solution in the future.

Since BYD has returned to high-pressure fuel tanks, how can we explain the models with normal-pressure fuel tanks that were sold before? Since the technology of normal-pressure fuel tanks is still inferior to that of high-pressure fuel tanks, is the only reason to insist on using normal-pressure fuel tanks due to cost considerations?

This is what Wei Jianjun said, "Now some bosses in some industries are calling for improper, unfair, and fraudulent fees" and "some car companies are engaged in fraud and cheating."

As a veteran in the automotive industry, Wei Jianjun does not believe in abnormally low costs. "Our Great Wall's industrial chain is broad, deep and vertical. Our costs are not higher than anyone else's. If Great Wall really can't make money, others can't make money either."

This statement may not be completely convincing, Wei Jianjun continued to add:

"If the government needs it, they can audit the entire auto industry, starting with Great Wall, and then audit every company to see which ones have problems. Great Wall will cover the audit fees."

Since Great Wall Motors is willing to get involved, it might as well take this opportunity to launch an audit storm. I believe this is also what the majority of car users want to see. Ordinary consumers should not become the targets of deprivation by unfair competition practices of some car companies.

Because, if it is true as Wei Jianjun said, this is unfair.

Danger signal

If the "fuel tank gate" incident was really a "cheating" way of reducing costs, then where will the price war ultimately lead the Chinese auto industry?

From the macro data, a dangerous signal is flashing. Recently, the National Bureau of Statistics released the revenue and profit data of industrial enterprises above designated size in the country from January to June. The data showed that the profit margin of the automobile manufacturing industry in the first half of this year remained the same as in 2023, at 5.0%.

What does a 5% profit margin mean?

From a vertical perspective, this is the lowest profit margin in the automotive industry in the past 10 years since 2014, and it is very likely not the lowest point, as the profit margin in some months was only around 3%.

｜China's auto industry profit margin hits a 10-year low

From a horizontal perspective, this is 0.8 percentage points lower than the average profit margin of 5.8% for industrial enterprises as a whole in 2023, and 1.4 percentage points lower than the average level of 6.4% for industrial enterprises in the first half of this year. The further widening of the profit margin gap largely represents that the profit pressure faced by automobile companies is far higher than that of other industrial sectors.

In other words, automobile companies face greater operational risks than other companies.

This is a huge contrast. You should know that in 2023, China's automobile production and sales easily exceeded 30 million units, and exports surpassed Japan to become the world's number one, but unexpectedly, it became increasingly difficult to make a profit and the risks became increasingly greater.

It is worth noting that on July 30, the top leaders released the "anti-involution" signal for the first time: to strengthen industry self-discipline and prevent "involution" vicious competition. The reason behind this may be that they saw the problem of the automobile industry being "big but not strong".

Wei Jianjun said that both his personal growth and the development of Great Wall Motors benefited from the reform and opening up and this great era. Because of this, as the head of the company, he should have great ideals and a big picture, take on greater responsibilities, develop the industry, and maintain the industry.

This may seem like empty talk at first glance, but this industry cannot just be about petty intrigues, it should also have the original intention of "returning to the essence and operating for the long term."