Faced with industrial integration, traditional automobile enterprises actively innovate


Faced with industrial integration, traditional automobile enterprises actively innovate: After rapid growth for 15 years, China’s annual auto production is more than 29 million, accounting for one third of global auto annual output. But recently, the revenue of auto enterprises began to plateau, and the auto market will likely mature soon. Nonetheless, the auto industry still should make preparations for the arrival of new era-electrified, automatic drive, smart/connected cars, and prepared for the new travel concepts.

So what are the prospects of recent production and sell, revenue and profits in the auto industry?  When China and global auto enterprises are embracing the new era, how should they face the opportunities and challenges in the course of fulfilling the middle and short objectives?

On the June 5th in 2018, on the plenary meeting of opening ceremony of the 9th Global Auto Forum, the CEO of Chongqing Changan Automobile Zhu Huarong, Vice President of BAIC Group Cai Suping, and Executive Vice President of Toyota (China) Investment Limited corporation Dong Changzheng, had a heated discussion based on the above issues.

Zhu Huarong

Auto Industry will be the Waterloo for speculators, traditional auto enterprises and new powers should work together for fusion development

“Following real estate and the Internet, auto industry is becoming a new cusp, but it’s also experiencing once-in-a-century chances.” Zhu Huarong, the President of Changan Automobile said.

He argues, “Capital has a very acute sense of smell. After venture fund, the Internet and new powers involved in producing cars, recently a new wave of merger, acquisition and reorganization have appeared, and now it has affected 6 companies with more than 80 billion Yuan of assets. So the importance attached to the capital market will surely bring about a new round of great development in auto industry.” But at the same time, he believes that this wave will also change the competitive landscape of the whole industry and pose challenges to its long-term development. After all, excessive investment and competition wastes local resources.

Zhu also introduced the foundation of the auto industry in China: at present, there are 180 automobile enterprises in China, among which 32 percent (57) have no sales volume at all; of the 96 passenger car companies, 20 percent have zero sales; of the 118 Chinese passenger car brands, 16 percent have no sales. On the other hand, in the passenger car market, the top ten companies have taken up 87% of the market share; while among the accumulated 503 companies registered in the Ministry of Industry and Information Technology, 16 have entered the approved list published by the National Development and Reform Commission, and 6 have passed the audit of the Ministry of Industry and Information Technology. It can be seen that a large number of car companies are in a disadvantaged state, and the market concentration is increasing significantly.

Based on the data above, Zhu forecasts that in 3 to 5 years, the bankruptcy, merger, acquisition and reorganization of car companies will no longer be news. Most of the brands will be mercilessly eliminated, while 90 percent of the new forces of car-building will become martyrs, which in Zhu’s view is an ideal ending.

“Auto industry is a technology-intensive and capital-intensive industry, which requires the integration of various disciplines and management systems. It’s an awesome endeavour, because money alone can’t build cars. The entry of capital will not destroy the law of industrial competition and development. For those speculators and spoilers, auto industry will be their Waterloo,” he said frankly.

Here, Zhu summed up the four major challenges facing the industry, including the uncertainty of policy change, the evil nature of industrial competition, the complexity of technological iteration and the diversity of consumer transformation. Specifically, changes in the international community and the global political environment have affected China’s policies and the overseas distribution of its industries. Domestic policy details are not yet determined, and policy iteration will have a long-term impact. The entrance of investors disturbs the status quo business logic. Their excessive promises for the future and irresponsible behavior to the users influence the judgment and decision of the local government to the auto industry. This auto industry shall rely on sufficient fair competition to select the superior and eliminate the inferior. At the same time, because there are many development paths for new energy vehicles, enterprises should not miss any opportunity and respond positively to the change of demand, consumption patterns and business models.

Facing the current industrial situation, Zhu believes that both challenges and opportunities exist for both new and traditional car companies. Traditional car companies and new forces should not be opposed to each other. It is only through the integration of the two that a win-win solution can be achieved.

Cai Suping

BAIC Group developed four strategic measures to meet the new era of industrial revolution.

Vice president of BAIC group Cai Suping pointed out that at present, the auto industry is in an unprecedented revolution era, where the Internet, the Internet of things, artificial intelligence, cloud computing, cloud services and the big data and other new information communications quickly fuse, and new technology and new form of industry constantly emerge and thrive. In the future, cars will use new energy and share, connect, and quickly upgrade. “From the perspective of harmonious and unified development of people, cars and resources, it proposes a transformation proposition for every global automobile enterprise.”

In order to meet the needs of the times, in 2014, BAIC group proposed the transformation and development strategy from manufacturing enterprises to service and innovative enterprises. In 2017, BAIC group proposed “carrying out the strategy of collectivization 2.0,” which focused on key areas of the “new energy, internationalization, intelligent, network, service, sharing” to keep advanced advantages of new energy vehicles, create differentiated brand characteristics, to achieve high quality development, to improve its global competitiveness.

“New strategy triggers new revolution.” Beijing Automotive Group, as the pioneer and main force of new energy automobiles, has started the “leading 2025 strategy” of comprehensive new energy transformation as early as last year Introduced by Cai Suping said. It includes the comprehensive new energy orientation of service ecology, industrial layout and product technology, the parallel of three lines of technical routes and the develop-body of a comprehensive new energy development. The product extensions are happening from Beijing Automotive Group to the entire group.

“New environment meets new challenges.” Cai Suping thinks that under the background of a sharp reduction in the import tariff on automobiles and the phasing out of restrictions on the proportion of foreign shares, the enterprises should seize the important opportunities of the global system and actively participate in more challenging global competitions. It will both enhance our capacity for independent innovation and opening up and cooperation. For example, Beijing Automotive Group was the first one to lead the construction of the first international center for new energy innovation, and worked with international partners. He believes that Beijing Automotive Group had the faiths and abilities to take the exam.

“New age calls for new talents.” Talent is the foundation of the industry, and in the new form, Cai Suping believes, auto talent also has been redefined. New talents need a broader and forward-looking global vision. Therefore, Beijing Automotive Group has a broad view of the global talent market and introduces interdisciplinary talents with Internet thinking.

Dong Changzheng

Toyota is facing unprecedented crisis, the future is not so “suits and ties”

“Toyota used to be in ‘suits and ties’, very serious. But the future of Toyota, like what I’m wearing today, may have some less serious aspects. “Dong Changzheng, executive vice president of Toyota Motor (China) Investment Co., Ltd., said.

He admitted that Toyota, which has been considered by the industry as “steady and conservative,” is undergoing an unprecedented transformation, and the sense of urgency and crisis within Toyota has never been felt. Facing with the investment of new technologies in the future, we find it is difficult to win, unless tighten the belt. Although Toyota relies on unique strategies such as lean management to lead the world, it needs to learn from partners and rivals in other fields at this stage. “In the past, we all know that Toyota had its own rhythm and was in a leading position in the world. Now many aspects still need to learn from independent brands and other peers. It is a very critical question whether the leading sectors of the past can still lead in the future. The issue discussed within Toyota every day may not be how much profit this year, how much profit will be next year, but how to exist in this industry in the future. Comparing with leading, standing still is the first step,” Dong Changzheng said.

In the face of the future, Toyota is also making changes. Those changes are reflected in learning from competitors and strengthening cooperation in more fields. This is what Dong Changzheng said “not so serious.”

“Toyota is also studying from other car brands in some areas such as new technology, new energy, new fuel cell, ICV, automatic driving. To be honest, just like what those bosses mentioned before, although there are uncertainties, the most important thing is to strengthen cooperation in these fields.”

Why do we have to cooperate? Dong Changzheng explained: “The previous products can be brought to China after the products of Europe, America and Japan are mature, but ICV must be developed in China in certain places, and we must build brands with partners in those places,” explained Dong Changzheng.

“People who are born in different years have different consumption concepts, especially that the whole world has reached a consensus that China has been leading the world in the consumer trend.” Dong Changzheng said. Those enterprises like Honda will be more careful, because this is a direction. Once the direction in China is wrong, it means that the direction in the whole world is wrong. So we can’t take a risk.

On top of that, Dong Changzheng didn’t agree on the version of the so-called traditional automobile enterprises, he stated: “new cars haven’t appeared, how we can be the traditional one? Traditional cars are the widely recognized cars,” he added, “there are many unfinished things that need us to do in the traditional area, and normally aspirated motor needs to improve and many enterprises are sticking to it.”

-Published on pages#43 to 46 June-2018 edition of MOBILE WORLD Magazine