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geely's taizhou declaration is not only for itself

2024-09-25

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a small-scale taizhou auto show created another famous scene for geely automobile.

li shufu, chairman of geely holding group and founder of geely, unexpectedly released the "taizhou declaration" at the taizhou auto show. this is another important strategic declaration at the group level after the 2007 "ningbo declaration" to transform the strategy to not engage in price wars, but in technology wars, brand wars, service wars, and moral wars.

it was the ningbo declaration in 2007 that helped geely survive the 2008 financial crisis. today, when the auto market is turbulent, the road ahead is foggy, and opportunities and risks coexist, geely actively seeks stability and strives to protect itself in the turbulent auto market.

why did geely issue the "taizhou declaration"?

although there is only a quarter left in 2024, we can already see that the auto market will be extremely extraordinary throughout the year. the price war continues, the auto market is involuted, products are flooding in, the market competition is becoming more and more fierce, and it has also led to many industry chaos.

for example, in a crazy price war, the most easily lost thing is product quality. although the production and sales base of various car companies is growing, which can reduce the cost of parts supply to a certain extent, the decline in car prices is obviously not proportional to the cost reduction, resulting in many mainstream car companies losing more money although their sales data looks encouraging.

in addition, many industry leaders have pointed out that the reason why some car companies have the confidence to engage in price wars is that in addition to squeezing suppliers, "cutting corners" has also become an unconventional trick. in other words, this year's automotive industry has truly shown people that "you get what you pay for."

against this background, it is particularly important for geely to release the taizhou declaration at the right time.

the taizhou declaration mainly mentions five points, namely strategic focus, strategic integration, strategic synergy, strategic stability and strategic talents. after analyzing these five points, it is not difficult to find that geely has been unswervingly implementing strategic focus, integration and synergy. the author believes that the focus of this declaration is strategic stability and strategic talents.

regarding strategic stability, geely stated that it would adhere to prudent operations, not expand blindly, persist in intensive cultivation, and fight a good positional battle; strengthen corporate governance and improve management efficiency; work with partners to make full use of large-scale specialized production and large-scale social cooperation to create new advantages in the industrial chain, continuously improve capacity utilization, and effectively reduce costs; further improve employee welfare and remuneration, increase workers' rights and interests, and take the path of common prosperity; adhere to compliance with the law, adhere to user-centricity, adhere to moral bottom lines, and ensure the long-term sustainable development of the company.

a careful analysis reveals that all of them reveal concerns about the current state of the automobile industry, just like li shufu’s "ningbo declaration" 17 years ago, "price wars are getting cheaper, quality is getting worse, and service experience is getting worse. if we continue on this path, the company will be doomed." such words also revealed the potential risks of the chinese auto market at that time.

steady operation and good positional warfare are still geely's concerns about the industry's internal circulation. it is not that geely cannot roll or win, but that rolling further will not benefit the company's long-term development. geely also mentioned the issue of not blindly expanding. currently, geely holding group already includes geely auto, lynk & co. and other mid- and low-end brands, high-end luxury brands such as zeekr and volvo, and super luxury brands such as lotus, and even individual brands such as smart. it can be said that the family is large and the categories are complete. and according to the product matrix of geely's various brands, it is currently in a stage where it can fully meet market demand, which means that geely does not need to expand on a large scale.

in fact, many other automobile groups are in a similar situation to geely, but their routes are different. some choose to do the same as geely, after completing the layout of various brands, to start a steady and cautious strategy, and not blindly participate in internal competition, while others expand madly, fearing that the trend of internal competition will stop, and even expand to a debt ratio higher than most real estate companies. it is easy to imagine what this means.

geely also mentioned the issue of employee remuneration. the previous transfer of mitsubishi's changsha factory was a negative event that broke the glamorous side of the automobile industry. it is reported that the employees of the original mitsubishi factory can choose to leave with compensation or sign a new contract, but the basic salary has dropped by 50% compared with the original, and various welfare benefits have been almost cut. in addition, a large number of auto companies have started the largest-scale layoffs in history. it is regrettable that the automobile has become a pillar industry in china, but the treatment of employees is still not well guaranteed.

the salary issue is linked to the talent issue mentioned by geely. the automotive industry is currently in a period of rapid transformation and needs a large number of talents in related emerging industries. this is not only about talents in automotive machinery, but also talents in software engineering, the internet, ai big data, intelligence, etc. are all must-win places for auto companies. geely adheres to the concept of "everyone is a talent and everyone can become a talent" and practices the career development direction of "employing talents according to their abilities and making the best use of their talents", so that every employee can shine and feel the power they contribute to geely. this is also the most effective way to retain talents and make them feel a sense of belonging.

how significant is the release of the taizhou declaration?

if you ask what the significance of geely's "taizhou declaration" is, according to li shufu, it is as significant as the "ningbo declaration". but in addition to its significance to geely itself, i believe that friendly companies that have a deep understanding of the "taizhou declaration" should consider whether to follow up and issue a "xx declaration".

it can be said that the "taizhou declaration" is not only addressed to geely itself, but also to the entire industry.

as mentioned above, the taizhou declaration is not only geely's future strategy, but also seems to be an expression of concern about the current state of the industry. it does not mention business goals, sales volume, or products. what is mentioned the most is, in general terms, how car companies should stay on the right long-term development path.

after china's auto market entered the "explosive" mode in 2016, it continued until 2020. force majeure factors slowed down the growth of the auto market, but it brought opportunities to the new energy industry. until now, the rapid expansion of the new energy vehicle market has been accompanied by the acceleration of the survival of the fittest, and the reason for this situation is the continuous internal circulation.

this year, important actions taken by several mainstream car companies have actually given the industry a warning. the first is tesla's behavior of lowering and then raising prices at the beginning of the year. the reason is that its 2023 financial report was inferior to its own, and according to tesla's own judgment, it will be more difficult to make substantial profits in the future auto market. therefore, it has taken certain measures to cope with the deteriorating profit margins.

the second is bmw's "repetition" on the issue of price wars. if it engages in price wars, it will lose profits and the interests of dealers will be seriously damaged. if it does not engage in price wars, the sales volume in august really taught this luxury brand a lesson, making it deeply realize the particularity of the chinese auto market.

there is another very illustrative case. byd's profit per vehicle was about 8,600 yuan in 2023, but in the first half of this year, this figure dropped to 8,450 yuan. byd is already the most profitable brand among chinese auto companies, and its profit per vehicle is declining. it is conceivable how difficult the current situation of other companies is.

the current state of the industry may be irreversible in the short term, but geely has taken the lead and is the first company in the industry to put its intention of “getting the automotive industry back on track” into written form to warn the entire industry.

judging from the current situation, the industry's internal competition has also shown a weakening trend, so much so that some people say that even byd doesn't want to compete anymore, and the newly launched song dm-i is actually more expensive than the old model. but it's approaching the end of the year again, whether it's geely itself, or chery, byd, great wall and other car companies, they are all making adequate preparations for the end-of-year rush. the internal competition and price war have lasted for 9 months, and the last 3 months of this year may not be bad. therefore, if the automotive industry wants to truly return to normal without panicking throughout the industry, it may have to wait until 2025.