Amid A Wave Of Price Cuts, The Reshuffle Of China's Motor Cities Accelerates

These days, regardless of whether to pay attention to the car market, a lot of people should have heard the Dongfeng department "big price reduction" news.

According to reports, at least 30 car brands have participated in the price war so far, with discounts of up to 100,000 yuan. Hubei Province, which is said to be the first shooting of the "price cut wave", has become the focus of attention.

According to the related publicity posters circulated before, from March 1 to March 31, 2023, as long as the purchase of a specific brand designated models in Hubei, Hubei license plate, you can enjoy the car subsidies jointly provided by the car companies and the government.

Among them, the comprehensive subsidy of a B-class car is as high as 90,000 yuan -- 45,000 yuan from the manufacturer and 45,000 yuan from the government. Subsidy intensity, a time to let public opinion uproar, but also led to more car brands and local follow up.

It remains to be seen where the vigorous price cuts will go and how long they will last. What is certain, however, is that behind the massive subsidies promoted by auto companies and local governments, it is not only the competition of brands, but also the secret tussle of the local auto industry.

The vane significance of automobile promotion policy

In fact, in order to promote automobile consumption, different levels of automobile promotion policies have been introduced throughout the country in recent years, from directly issuing car subsidies to tax incentives, which are very common. But the actual subsidies as big as Hubei, or very rare. This also explains why Hubei is the only province where car promotion policies are flourishing.

As an important pole in the domestic automobile industry, Hubei automobile industry is undoubtedly the first pillar industry. Wuhan, the capital of Hubei Province, is one of the six major passenger vehicle bases in China, bringing together four major car lines from China, France, the United States and Japan. In addition, Shiyan, Xiangfan, Yichang, Huanggang and other places in Hubei Province also have the layout of related vehicle and supporting enterprises.

Obviously, it makes sense that the whole of Hubei Province pays more attention to the production and sale of cars than other places. From the reality point of view, the pressure of Hubei automobile industry in recent years is indeed an objective existence.

According to the National Bureau of Statistics, Hubei's auto production fell 9.68 percent year on year to below the 2 million mark in 2022, and Chongqing surpassed it in the national ranking, dropping it to fifth place. Among the top 10 provinces and cities in terms of automobile production, only three experienced negative growth in 2022, and the deceleration rate of Hubei was only lower than that of Jilin.

Moreover, it is worth noting that, as the dominant car enterprise in Hubei province, Dongfeng Group's total sales volume of passenger cars in 2022 was 2.15 million, down 4.4% year-on-year. In fact, since 2018, Dongfeng Group's passenger car sales have been in a continuous decline.

In this context, this time Dongfeng's related car series in the forefront of the price reduction, it is not surprising. And given the auto industry's deep involvement in local economies, local governments have a natural incentive to participate in subsidizing the promotion.

There is no exception. After Hubei announced the price cut, in Jilin, also an auto industry hub, FAW also announced it would offer 150 million yuan in subsidies for temporary car purchases in Jilin province, ranging from a minimum of 5,000 yuan to a maximum of 37,000 yuan per vehicle.

Although the subsidy intensity of Jilin compared with Hubei is not large, but another major auto industry province to start the full price action, obviously has important bellwether significance.

The change of the pattern of Chinese automobile industry

The automobile industry has long been regarded as the crown jewel of modern manufacturing. The length and breadth of the industrial chain involved behind it are not comparable to other general industries. At the same time, its unit price is high, and there is no problem with the bulk consumption.

Therefore, automobile production and sales, small to a local, large to a country, often have a pivotal position.

So we see, all over the world, the creation of a number of "motor cities" that really live on cars. For example, in foreign countries, there are Detroit in the United States (headquarters of General Motors and Ford), Stuttgart in Germany (headquarters of Mercedes-Benz), and Toyota City in Japan (headquarters of Toyota Motor).

In China, Changchun, Shanghai, Guangzhou, Wuhan, Chongqing, etc., can be called the "automobile capital".

According to the National Bureau of Statistics, the top 10 provinces and municipalities in terms of auto production in 2022 are Guangdong, Shanghai, Jilin, Chongqing, Hubei, Guangxi, Anhui, Shaanxi, Zhejiang and Shandong. They all made more than a million cars. Among them, Guangdong, Shanghai, Jilin, Chongqing, all more than 2 million.

This is highly consistent with the distribution of the major "car capitals". These cities are home to major automobile companies. For example, Changchun has FAW, Shanghai has SAIC, Guangzhou has GaC, Wuhan has Dongfeng, Chongqing has Changan, they are the city's leading enterprises, can also be said to jointly carry the banner of China's automobile industry.

It should be said that in the past many years, the pattern of the automobile industry in the country has maintained a basic stability. However, in recent years, with the sudden emergence of the new energy automobile industry, the existing pattern of the automobile industry is facing new challenges, and the reshuffle of the "automobile capital" has accelerated significantly.

Among them, there are reasons for foreign enterprises to enter. The Tesla factory in Shanghai, for example, has basically established Shanghai's leading position in the domestic new energy automobile industry at one stroke, and continued to consolidate the overall advantages of Shanghai's automobile industry.

There is also the catfish effect of new forces in car building. For example, NexteV and ideo have brought great imagination to the new-energy vehicle industry in Hefei and Changzhou, respectively.

And the accelerated rise of domestic new energy vehicle brands. For example, as BYD ranks first in global new-energy passenger car sales, its corresponding production capacity has jumped, making Xi 'an, Shenzhen, Changsha and other major cities in domestic new-energy vehicle production that cannot be ignored.

In particular, Xi 'an, which did not have a strong presence in China's automobile industry in the past, will produce more than one million new energy vehicles in 2022, becoming the largest city in China in terms of new energy vehicle output.

In recent years, under the new energy automobile industry, Xi 'an, Hefei, Shenzhen, Changsha and other cities have put forward to build "new energy automobile city" or similar goals. From the change of positioning, it is not difficult to find the drastic reshuffle of the automobile industry pattern.

How to transform traditional automobile centers

Therefore, the big price reduction of traditional fuel vehicles is far from only the promotion in the sense of "stable mass consumption". It can be seen as a "self-rescue" move forced by the urgency of transformation of the traditional automobile industry in the era of new energy vehicles.

With the increasing saturation of China's automobile consumption market, the passenger car market is actually moving from the past incremental era to the inventory era. On the one hand, the peak of automobile sales, on the other hand, the penetration rate of new energy vehicles is rising rapidly, so the traditional fuel automobile industry naturally faces greater pressure.

Accordingly, if the transformation of the automobile industry cannot keep up with the pace of the new energy era, those traditional "automobile towns" are likely to become a burden -- not only for the automobile enterprises, but also for local development. In this respect, some old foreign auto cities have experienced the transformation dilemma, the actual experience has been a lesson.

However, the promotion of subsidies jointly launched by auto enterprises and local governments may relieve the temporary sales pressure, but it is difficult to fundamentally solve the transformation problem of traditional auto enterprises and the auto industry.

Therefore, at present, the topic in front of many important towns in the traditional automobile industry is, after the promotion, how to really let the traditional automobile industry chain to "update", really seize the tuyere of new energy vehicles?

In fact, many places already have plans. For example, Hubei released the Three-year Action Plan for the Breakthrough Development of New Energy and Intelligent Connected Automobile Industry (2022-2024) and the Key Task List for the Breakthrough Development of New energy and intelligent Connected Automobile Industry in Hubei Province at the beginning of this year, proposing to adhere to the development direction of electrified, intelligent and connected automobile and seize the development heights of new energy and intelligent connected automobile. Accelerating the transformation and upgrading of the automobile industry, putting forth effort to build an important innovation center and production base of new energy and intelligent connected automobile.

Last year, Chongqing proposed to build a trillion-level intelligent Internet-connected new-energy automobile industry cluster, making great efforts to increase the increment, improve the stock and improve the ecology. At present, Chongqing has gathered a number of new energy vehicle enterprises, and promotes the integration and innovation of automobile, software, electronics and other industries.

Jilin issued Opinions on the Implementation of the "Upgrading" Project of Automobile Industry Cluster, and proposed that by 2025, a new energy automobile enterprise and brand should be introduced, a number of key component enterprises should be introduced, a number of innovation platforms should be created, a number of production and education integration projects should be promoted, a number of key technologies should be broken through, and a number of application scenarios should be built, so as to basically form a new ecology of new energy automobile industry. The industrial chain and supply chain of new energy vehicles serve the whole country and have certain international radiation capacity.

At the same time, the upstream and downstream industries supporting the new energy automobile industry are also giving birth to a number of new industrial centers. For example, Ningde in Fujian Province, Yibin in Sichuan Province, Yichun in Jiangxi Province and so on have proposed to build "lithium battery city" or "power battery city". These are expected to become a new bright spot in China's automobile industry, but also bring new development opportunities to different cities.

On the whole, on the one hand, a large number of new forces are still planning to enter the market, on the other hand, traditional automobile industry centers are trying to transform themselves. The ecology of Chinese automobile cities in the new energy era is far from being finalized. This is a challenge, but also an opportunity to reshape the regional economic map.