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on july 30 this year, the political bureau of the cpc central committee clearly pointed out in its meeting on economic work in the second half of the year that it was necessary to strengthen industry self-discipline and prevent "involutionary" vicious competition. since then, xinhua news agency and other central media have also emphasized in news reports and editorials that the main industry to prevent involution is the automobile industry. so, why should the automobile industry prevent involution?

the negative transmission signal brought by involution is strengthening

according to a survey by the china automobile dealers association, the auto dealer industry is currently facing a critical moment of life and death. the dealer confidence index has fallen to a record low. in recent months, guanghui group, once a leading auto dealer in china, has been suspended from trading and entered the bankruptcy liquidation stage. many dealer groups in henan and jiangsu have suddenly closed down, and their bosses have fled. except for a few profitable oems such as byd, geely, and seres, which have quickly connected to the grid, most brands are unable to take care of themselves, causing losses to consumers.

in the upstream, some first-tier component suppliers reported that they were forced to pay low prices to profitable leading enterprises, and they were expected to make no profit for the whole year. according to feedback from industry insiders, the entire automotive supply chain is not profitable at present, and even since 2023, vehicle manufacturers have used acceptance bills to pay tier 1 suppliers. xinfu think tank, a third-party corporate strategy consulting company, also cited the survey results in a report, saying that the current phenomenon of using acceptance bills to pay supporting suppliers is likely to trigger a structural crisis of financial leverage and transmit it to the entire industry chain.

in august, it is expected that the sales penetration rate of new energy vehicles in china will approach or even exceed 53%. it is very likely that the ministry of industry and information technology will achieve the new energy vehicle market development goal of miit six years ahead of schedule, that is, to make new energy vehicles reach 50% market share in 2030. of course, this statistical ratio may include the wholesale volume of exports, which is still questionable. however, the costs accumulated by china's automobile industry on fuel vehicles for 40 years are indeed being cleared too quickly, which will lead to further structural overcapacity and put pressure on overall employment. at the same time, the sharp decline in market share is accelerating the process of production cuts and layoffs by foreign joint ventures. foreign investment in the automobile industry will account for 23% of all fdi in 2023, and the rapid reduction of foreign investment will also have an impact on the overall health of china's economy. although toyota, volkswagen, mercedes-benz, bmw and other leading foreign companies are stepping up their transformation efforts and investing in the construction of new factories for electric vehicles and hydrogen engines, other foreign companies such as nissan, honda, gm, ford, star group, hyundai, mazda, etc. are retreating to varying degrees, and a large number of upstream and downstream companies have also been affected. in a short period of time, it is impossible to rely on a few domestic brands and new forces to make up for it.

the decline of joint ventures is also eroding state-owned assets. in the automotive industry policy, the red line of 50:50 joint ventures was only lifted in the past two years. tesla is currently the only foreign-owned vehicle manufacturer in china. among the joint ventures, only bmw, volkswagen, audi and others have partially changed their shareholding ratios and become major shareholders. foreign investors in joint ventures such as denza and polestar have even become minority shareholders. if foreign capital withdraws, the additional investment made by china at a 50% shareholding ratio will become non-performing assets and be stripped away. recently, although the rumors that saic-gm is negotiating to sell buick and abandon chevrolet have been denied, they are not groundless. saic-gm's sales have dropped by 80%, and gm's global president's statement that the company needs to restructure in the chinese market are all facts, and large-scale layoffs have been ongoing. some economists also pointed out that if china and western countries penetrate each other in important industries, and you have me and i have you, then the "decoupling and chain-breaking" talk of a few politicians will never be realized. but if most of the foreign capital in the automotive industry leaves, china's efforts to enter europe, the united states, japan and south korea will inevitably lead to more unscrupulous obstruction.

at the same time, the power battery industry is also slowing down to cope with the overcapacity caused by internal circulation. yang hongxin, chairman of honeycomb, a subsidiary of great wall motor holdings, warned at the china automotive blue book forum that by the end of this year, fewer than 40 battery manufacturers will be able to survive the wave of integration. "in the past, we said that second-tier and third-tier battery factories were rolling up prices in order to gain more market share. now it is the big guys who are starting to roll up prices," he said. "due to the decline in battery prices of leading companies, from battery manufacturers and lithium miners to cathode and anode producers, they have all suffered a decline in profits. this is caused by excessive expansion due to the surge in demand from 2021 to 2022." according to industry statistics, in the first quarter of this year, the total revenue and net profit of 107 mainland-listed companies in the lithium battery supply chain were 293 billion yuan and 17 billion yuan, respectively, down 18% and 50% year-on-year, respectively.

the trade war friction caused by going overseas cannot be underestimated

as the internal competition becomes increasingly serious and the whole industry is under great pressure, the overseas market is undoubtedly the pressure relief valve of this "pressure cooker". however, china's automobile exports overseas are facing increasingly complex and difficult environmental changes. the tariff measures determined by the european union on august 20 were only slightly adjusted on the draft in early july, which can be said to be a change of soup but not medicine. except for the temporary suspension of the recovery of chinese imported electric vehicles stored in bremen and piraeus before july, other measures have remained basically unchanged.

with direct exports blocked, chinese automakers have to open up the european market again, and local production or joint venture production is an inevitable step. currently, chery has projects in spain, byd in hungary, and dongfeng in italy are either on the ground or under negotiation. however, eu chief trade representative dombrovskis recently warned: "the move to set up factories will only work if it meets the requirements of the rules of origin. the eu has clearly stipulated the minimum value added that foreign-funded automobile factories in the region must reach." eu trade officials also told foreign media that if necessary, they can use anti-circumvention rules to crack down on companies that try to evade paying tariffs by conducting basic assembly operations in the eu or other countries. when explaining the details of the rules to foreign media, dombrovskis said: "it is necessary to consider how much added value will be created in the eu region and how much technology will be placed in the eu? will this factory only assemble or actually manufacture cars using parts produced in europe? the difference here is quite big."

in the past two months, in order to race against time, chinese electric vehicles have begun to be quickly distributed to europe. on the one hand, looking at the latest data from the general administration of customs, eu tariff measures have begun to lead to a decline in china's automobile exports: in june this year, china exported 27,180 electric vehicles to the eu, a decrease of 25% month-on-month and 31% year-on-year. but wholesalers are showing different signs of hoarding. according to data from a european market research company, chinese brands registered more than 23,000 new electric vehicles in the european market in june, a month-on-month increase of 72%, with a market share of 11%, setting a record for new car registrations in a single month. but among these newly registered new cars, many are std, that is, channel inventory pressure, such as saic mg4's commercial vehicles 40% are registered by dealers, not car buyers. analysts here believe that this kind of growth is not sustainable. sure enough, by july, the same "made in china" new registrations of electric vehicles decreased by 45% month-on-month. looking at the country markets, the proportion of new registrations by chinese brands in germany fell from 13% in june to 8%, and the french market fell from 7% to 5%. only in the non-eu uk did chinese-made electric vehicles remain basically stable.

at the end of august, canada also suddenly announced that it would follow the united states and impose a 100% tariff on electric vehicles imported from china, with the combined tax rate reaching 106.5%. although chinese cars do not have a strong presence in canada, byd has previously announced plans to build a factory in canada, so this move is highly malicious and targeted, with collusion.

the brand recognition demonstration effect and high value-added profit margin in the european and american markets are the key points for us to go overseas. although we can grow bigger and stronger in the markets of central and south america, southeast asia and the middle east, we will have to move to europe and the united states one day to dominate the world. what's more, the market capacity of central and south america and southeast asia is limited, and they are suffering from inflation and have poor stability. with the federal reserve's interest rate hike approaching in september, the currencies of emerging market countries are expected to appreciate, which is conducive to their purchase of cars imported from china. but on the other hand, the renminbi will also appreciate to a certain extent due to the narrowing interest rate gap, thereby reducing the price advantage of china's exported cars. the impact of this double-edged sword on automobile exports is difficult to judge now.

to sum up, with the overseas markets volatile and difficult to predict, the vicious internal circulation in the domestic market will only increase the burden on export companies, causing fires in the backyards of car companies and leaving them stretched to the limit.

with only one long board, the bucket will still leak

everyone always talks about making up for the shortcomings, but from the bucket theory, the imbalance of development is not only reflected in the shortcomings. if most of the wooden boards on the bucket are sawed short and all spliced ​​onto a new board to make it the longest, then the bucket will leak faster. as we all know, the negative impact of the conversion of new and old kinetic energy, including the reshuffle and clearance of the industry, is inevitable. however, we should learn from history. industrial development cannot only focus on one end, and we must not fall into a vicious cycle of chaos when it is alive, control when it is chaotic, death when it is controlled, and release when it dies! due to the low profits of the entire industry upstream and downstream, the automobile production capacity has no self-repair ability after repeated construction. therefore, in the process of kinetic energy conversion, top-level design and source control should be strengthened, and the development of the new energy vehicle industry should be steadily promoted according to the instructions of the central government and the overall strategic deployment. avoid the deformation of industrial policies, which will lead to the stalling of industry development and the overtaking of the curve and the loss of the track. once the automobile industry collapses, the battery industry will be burned, and there is even a risk of affecting macroeconomic growth. this is also the original intention and foresight of the central government to prevent involutionary vicious competition.

the china passenger car association pointed out at the end of its weekly analysis report in mid-august: "currently, fuel vehicles pay 1%-40% consumption tax and 10% purchase tax, and use refined oil with nearly 50% of the comprehensive tax, making a huge contribution to the country's economic construction. therefore, in the face of the unexpected downturn in the development of fuel vehicles, it is necessary to give fuel vehicle users more equal use rights, achieve better coordinated development of fuel vehicles and new energy vehicles, and prevent the rapid decline of the fuel vehicle market from bringing unexpected chain pressure to the economy."

theoretically, the 51% penetration rate of new energy vehicles means that under the current policy environment, the receivables of purchase tax, vehicle and vessel tax, and fuel tax have all declined to varying degrees, and these motor vehicle-related taxes are all direct taxes that are indispensable to the national tax source. not long ago, hainan province began to resume the collection of new energy vehicle road maintenance fees (equivalent to fuel tax), which also shows from one side that the rapid development of new energy vehicles has caused certain pressure on the local economy.

the decline in tax revenue also reflects the decline in profits of automobile companies and the lack of consumption potential. according to data from the national bureau of statistics website: from january to july, general public budget revenue fell by 2.6% year-on-year, of which tax revenue fell by 5.4% year-on-year. among the major taxes, value-added tax and corporate income tax fell by 5.2% and 5.4% year-on-year respectively, indicating that corporate profits were under pressure due to low prices; personal income tax fell by 5.5% year-on-year, indicating that residents' income, especially the income of the middle-class group anchored by the current personal income tax threshold, was not good and consumption performance was weak. as a durable consumer product, automobiles have been severely overdrawn in consumption potential under the impact of multiple rounds of price wars and internal circulation. we can also see clues from the information that passenger car sales have continued to decline year-on-year in recent months, and the national total retail sales of consumer goods have only declined in the automobile category year-on-year. and this happened under the premise of doubling the scrapping subsidy. according to our reporter's investigation, recently in some independent brand 4s stores, as long as you provide a photo of an old car, you can directly apply for scrapping subsidies, and you can enjoy a discount of 20,000 yuan no matter what model you buy, which is enough to prove the severity of the market situation.

involution must end!

the good news is that the industry has begun to correct its internal circulation, and price wars and inventory pressure have begun to converge. the china passenger car association stated in another forecast report: with the country's call for strengthening industry self-discipline and preventing "involutionary" vicious competition, the terminal car prices that have continued to fall for half a year have gradually stabilized. the terminal survey results show that the overall car market discount rate in the second week of august was about 24.0%, slightly narrower than 24.2% at the end of the previous month. consumers' holding money to wait for purchases has been further alleviated, and it is expected that the overall car market heat in august can continue moderately.

for the healthier development of the industry, and also to avoid the negative pressure of structural overcapacity on the macro-economy. the author has several suggestions: first, starting from the source of energy supply, under the favorable conditions of reduced gasoline and diesel consumption (it is expected that gasoline consumption will drop by about 4% this year) and the situation of net oil imports beginning to reverse, gradually accelerate the transformation and improvement of gas stations and energy replenishment facilities, increase the construction of electric energy storage equipment and production capacity in large quantities, avoid the shortage of electricity caused by the rapid growth of new energy vehicle penetration, and lay the foundation for the new energy industry to replace real estate (the automobile industry alone cannot replace the gdp growth loss caused by the decline of real estate) and realize the transfer of growth points; second, on the basis of industrial balance, extend the time for the conversion of new and old kinetic energy, implement the same rights of oil and electricity in steps, let automobile companies reduce internal consumption, prevent internal competition, and focus more on improving quality and reliability. the introduction of the annual inspection standard for new energy vehicles is a manifestation of this trend; third, call on leading companies to focus on the benefits of the entire industry and society, practice corporate social responsibility, and decisively stop price wars. we will improve pre-sales and after-sales services, enhance customer satisfaction, and establish a globally trusted niu brand. we will proceed step by step and make steady progress to jointly embrace the supreme glory of "made in china, global cars".