Motorists March passenger car sales, find a way out under pressure

Only if the community achieves a unanimous ****ing understanding of the economy's positive outlook will investment and consumption rise, and the auto market really get back on the growth track.

Wen / "car people" Meng Hua

April 10 and 11, the passenger association, China Association of Automobile Manufacturers, respectively, released in March and the first quarter of 2023 data.

The data were unsurprisingly not very good. The CAC said, "The overall economic operation of the auto industry is under greater pressure."

Social zero

The two reasons cited by the China Association of Automobile Manufacturers (CAAM) are: one is the withdrawal of the policy; and the other is the price war (which the CAAM distinguishes between the new energy models, called "price cuts", and the traditional models, called "promotions"). The traditional models are called "promotion"), leading to fluctuations in the end market.

The Automobile Man also has its own views on this.

The real world is complex, and there are many mutually reinforcing situations. Single causes cause single and well-defined results, i.e., linear logic, rather less so.

Price wars, price instability, will lead to the consumer market wait-and-see mood, this is no problem. But what about the mechanism for generating price wars? Certainly not the relevant enterprises are fed up, or simply want to suppress their opponents, the probability is that the feeling of end consumption is not invigorated, has been and capacity mismatch. If you do not take the initiative marketing initiatives, sales chain is not vibrant counter-surge wave, will erode all the way to the production side.

Everyone does the same thing, the effect is certainly not good. But if everyone does it and you don't, it's mostly miserable. It's easy to recognize from the data what companies claim not to participate in price wars and then have their sales hammered. It's the classic prisoner's dilemma.

In March this year, domestic passenger car production and sales were 2.149 million units and 2.017 million units, up 25% and 22% from a year earlier, and up 14.3% and 8.2% year-on-year, respectively; from January to March, domestic passenger car production and sales were 5.262 million units and 5.138 million units, down 4.3% and 7.3% year-on-year, respectively.

Remember when the 2022 first-quarter numbers came out, and the reasons given were epidemics, lack of cores and poor supply chains? Now that all three of those factors have nearly disappeared, here's the result. Obviously, the total root cause is "social zero consumption" problem.

In March this year, CPI rose 0.7% year-on-year, PPI fell 2.5%. And last year's CPI has been at a low level, has been hovering at 2%. In the fourth quarter of last year, CPI fell from 2.8% in September all the way to 0.7% in March this year, without a break. Even if the removal of seasonal factors, this data is too low. PPI than the CPI "first drop for the respect", reflecting the industrial countries PPI as the CPI pioneer consistent style.

Then the conclusion is clear: since late last year at the latest, the country has been in a deflationary situation, unlike the path of inflation in developed countries.

From the country's loose monetary policy (except for real estate), can conclude that the country is also so see. Social consumption in the first half of this year will not be too good, in fact, standing in early January, can be clearly foreseen.

Previous experience has proved that, even if vigorously irrigate, will only be financial attributes of the things speculated high, pan-consumer because the main body of consumption from the "discharge pipe mouth" a little far away, it is difficult to borrow on the force. Here, once again interpreted the word "near the water tower". Pan-consumption does not work, automobile consumption priority is more to be back, because wood, rice, oil and salt is more important.

We see, the China Association of Automobile Manufacturers has repeatedly called for a package of help to the automobile industry, from focusing on the supply side, to balance the two ends, a part of the policy to the demand side, but also to see this point. In other words, there is both foresight and **** knowledge of the situation.

So at the root of it, that's how price wars are fought.

Chinese enterprises market share continues to go up

According to the data of the passenger association, in the first quarter of this year, the narrow sense of passenger cars (that is, after deducting the microbus) retail sales of 4,261,000 units, a year-on-year decline of 13.4%; new energy vehicle retail sales of 1,313,000 units, a year-on-year increase of 22.4%, and the growth rate also fell off. Among them, 1.587 million narrow passenger cars were retailed in March, up 14.3 percent from a year earlier and 0.3 percent from a year earlier.

So much so, it wasn't just the March market that stagnated, but the entire first quarter was a bit of a letdown. In the words of the Federation of Automobile Manufacturers (FAM), March's year-over-year growth rate was the weakest "since the turn of the century". The reasons given by the Federation: weak consumption and market price confusion, which is close to the perception of the "car people".

Passenger Federation also pointed out that, from the weekly trend, the first two weeks of March sales are seriously low, into the second half of the market only gradually warmed up. If this trend is followed, further market pickup in April is possible. That puts a bit of a bright spot on March's numbers.

Nothing like a big market contraction to stiffen competition. In such a market, data from the China Association of Automobile Manufacturers (CAAM) showed that Chinese brands sold 1.052 million units in March, further boosting their market share to 52.1 percent, compared with 52.2 percent in the first quarter, a relatively steady trend. And while the data from the Association of Automobile Manufacturers (AAM) suggests that wholesale sales are indeed the same, on the retail side the Chinese brands' retail share was 48.8 percent in March, compared with just under 50 percent in the first-quarter tally.

While there's nothing wrong with the conclusion that Chinese brands are gradually gaining the upper hand at a cursory glance, in March, Chinese brands and joint ventures diverged in terms of production pace.

Inventories reflect differences in production pace

Supply chain pressure eased in March, with prices of battery raw materials, mainly lithium carbonate, falling continuously, and the chip supply shortfall gradually being smoothed out.

From December last year to the beginning of March this year, has been more sales than production, so that the inventory to go more fierce. This is not a supply chain problem, but reflects the host factory smelled the risk, early to take low-speed production to reduce inventory pressure.

Looking at the March pace, overall wholesale volume was 90,000 units higher than retail, which means inventories are the same number higher. And Chinese brands wholesaled 110,000 units above retail.

These inventories are in dealers' hands, reflecting the fact that dealers are starting to restock more aggressively, implying bullishness for April and May sales. It's also related to financial support from OEMs for dealers, and the lower cost of capital tied up in dealerships now. In short, everyone made up for the loss in December last year. From the difference between the wholesale and retail data, it is impossible to conclude that "continue to vigorously go to inventory". There is no question that inventories are rising.

Passenger Federation statistics, traditional car companies are generally one month inventory (including dealer inventory), while the new forces inventory for 60 days, which means what is self-evident.

The direct sales model is in the hands of the OEMs because there is no dealer inventory, so the products produced are in the hands of the OEMs. Tesla does the same, but its inventory is 34 days (and has been reduced in the last week), so that highlights the operational pressure on the new forces.

At this point, it's pointless to talk tough and say you won't participate in a price war, inventory doesn't lie. It is expected to quietly behind the "make up for the drop", of course, will take some words to cover up, or in advance with some marketing means, to appease the emotions of old users, to prevent the latter have the feeling of leeks. In this regard, Tesla has a basket of lessons.

In fact, for companies with export business, the current inventory cordon (1.5) is not so terrible. That's because the higher exports give them an additional sales volume balancing tool.

But products for export are theoretically not interchangeable with those for domestic sales, unless they fit the European, U.S. and Chinese standards (which multinational luxury brands often do, with minor changes to logos and the like). For a product priced at more than 100,000 yuan, this extra cost can't be ignored unless it can be sold at a higher price than its domestic counterpart.

Currently exports are still only January-February data, vehicle exports 682,000 units, up 1.4 times. Among them, 256,000 units of new energy vehicles, up 4 times year-on-year (China Association of Automobile Manufacturers data).

China's auto exports of 4 million units this year is almost a nail in the coffin, and the growth rate of exports of new energy vehicles, far exceeding the growth rate of the domestic market, which means that exports in the future, the first to become a new energy product capacity and inventory balancer. From this point of view, the Chinese enterprises more and more multinational car kind of global configuration capacity flavor.

Joint venture needs to accelerate the pace of transformation

In contrast, the mainstream joint venture brand retail 540,000 units in March, down 9% year-on-year. Among them, the German share of 21.9%, once again stand to more than 20%; Japanese share of 16%, the U.S. share of 10%, a slight rebound.

Mainstream joint ventures want to break the spiral of declining share, there is no other way, must be in the field of new energy to continue to make efforts, more y involved in the competition. At present, the joint venture corresponding new energy products, the price has been involved in the competition, but the volume did not come up. This should be attributed to the deployment of the product matrix, the application of new energy technologies (three electric, car networking, two wise) is not yet in place.

This is not something that can be rushed. The Automobile Man has repeatedly analyzed that most mainstream joint venture brands, except Volkswagen, may need until 2025 for large-scale new energy products to come up. The good news is that they have always earned more than Chinese brands in the fuel-vehicle market. It's not a big problem to lose money on the new energy business.

But everyone is facing a **** the same problem, is the new energy business net profit to turn positive. The current price competition, undoubtedly slowed down this claim, but also let the joint venture to new energy pace, there are more doubts.

And on the other hand, the fuel car business down, seems to have accelerated signs (and the broader market shrinkage year-on-year has a relationship), at this time the rhythm of the control is more important.

This is also evidenced by data from the China Association of Automobile Manufacturers (CAAM). The CAC said that from January to March, the domestic sales of the top 10 automobile enterprise groups combined sales of 4.315 million units (wholesale caliber), down 16.3%, market concentration of 84.9%, down 2.1 percentage points year-on-year. Compared with the previous year, only BYD, BAIC and BMW Brilliance are positive growth. The decline in market concentration is a positively correlated event with the continued rise (albeit at a slower pace) of new energy.

If you look at the new-energy business alone, the top 10 automakers have a market concentration of 85 percent, up 9.2 percentage points from a year ago. It may seem about the same as passenger cars as a whole, but the concentration of new energy is an upward trend, contrary to the passenger cars as a whole going downhill.

The intensification of the Matthew effect shows that the new energy competition, is moving towards the "second half", new energy entry threshold is higher, the advantage of the enterprise sales continue to expand, while the list outside the enterprise, need to pay more efforts to come back.

While the March market is not satisfactory, but as mentioned earlier, the signs of warming in April are also obvious. Considering the special circumstances of April and May last year, a year-on-year surge in the next two months is also highly probable.

But the automobile consumer market, always can not be detached from the economic environment and social consumer confidence. Only the social face of the economy's prospects for good to achieve consistent **** knowledge, investment and consumption will be up, the auto market will really return to the growth track.

Automobile exports, although out of the independent market (relative to other industrial exports), but its volume is not domestic consumption of 1/6, temporarily can not take on a big responsibility. With the passage of time, for the active expansion of the car companies, but is more a way out.

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