The high-endization of independent brands: a rebalancing of the competitive landscape

In front of a new wave of automobile globalization, what will China have to do with real market chips? How can Chinese companies re-arrange in a global perspective? Where is the next step in the joint venture? In what direction does the independent brand break? With this series of propositions, the April 18th Japan Daily held the "21st Century Automobile Industry Summit Forum" in Shanghai.

Ten years of rigid demand, under the catalysis of the country's stimulus spending policy, pushed the Chinese auto market to the top position in the world last year. The Chinese auto market has completed the first cycle of automobile popularization. On the same day, we invited nearly 200 people from the manufacturers and academics to predict the next five or even ten-year cycle.

In accordance with the consumption cycle of developed countries' automobiles and previous home appliances and other products, after the first round of consumer penetration, the dual consumption structure will naturally take shape with the start of the second round of consumption cycles. In the process of adjusting the economic structure of China, cities in the third and lower tiers will be incremental markets in the Chinese automobile market; consumption in second-tier cities is also undergoing qualitative changes, and brand concentration in first and second-tier cities is becoming higher and higher.

The butterfly effect brought about by these changes is that the competition of joint venture brands is sinking to the three-fourth and five-tier markets, fully compressing the survival space of independent brands, and letting the former Blue Ocean become the Red Sea. There are also electric vehicles under the background of new energy strategies, and commercialization is approaching us. Through this issue, we will try to find the answers one by one.

At the Shanghai International Auto Show opened on April 19th, the joint-venture independent brands headed by the concept of Guangben have become the focus of attention of many local companies. The original joint venture took the middle-to-high end line and local brands took a clear competitive pattern in the low-end market, which was broken due to the joint venture's own brands entering the low-end market. Can the independent brand be reversed and advanced, can it become a breakthrough path? What are the impacts of abrupt policy trends and market conditions on the road to autonomous transformation? Will the development of new energy vehicles become another way of strategic transformation of autonomous vehicle enterprises?

Lin Xin, President of Xinhuaxin, Lian Ping, Chief Economist of Bank of Communications, Dong Haiyang, Vice President of Beijing Automotive Co., Ltd., Liu Jinliang, Vice President of Geely Group, Huang Luming, Deputy Director of the Economic Information Center of the National Information Center, and Green Travel Fund of China National Association for Tourism Promotion Zhang Jianyu made a dialogue on April 18.

Short-term tight, long-term good to the LEI: independent brands have gone for a decade, so far the market share of self-owned brand models accounted for more than one-third of the market, but the product range of self-owned brands is still at a low price, and different companies start from Different angles for high-end transformation. However, the current inflationary pressure has caused the deposit reserve ratio to rise continuously. The pressure on bank financial institutions has soared. What impact will this bring on the transformation of autonomous auto companies?

Lian Ping: From the beginning of last year, the macro-policy has been moderately loosely adjusted to be stable, which will cause automakers of their own brands to face greater pressure on financing and costs. A major feature of China’s economy in 2011 was the tight relationship between financing needs. The increase in economic growth and price increase led to a significant increase in the demand for funds in circulation, but there was no significant increase in social financing. In the first quarter, the central bank announced that the total amount of social financing is about 4.2 trillion yuan, which is less than 300 billion yuan in the first quarter of 2010. The lesser part is mainly credit.

The reduction in credit and direct financing did not make up, making the commercial bank loan interest rates have risen significantly since the first quarter of this year, loan interest rates have risen by a high margin, and the downside has clearly decreased. It has basically disappeared in some places, virtually increasing the financing costs of auto companies.

From the point of view of consumer demand, rising interest rates have increased the cost of car purchases for consumers, coupled with financing pressure, which has made it possible for some banks to stop car consumer credit business, which will put pressure on the development of autonomous car companies.

However, in the medium to long term, the rigid demand for auto consumption is still in demand, and this demand mostly comes from low-end and mid-range automotive products. In addition, income distribution reforms have enabled the growth rate of low- and middle-income people to increase faster than that of high-end people. To a degree conducive to the development of independent models.

Dong Haiyang: The self-owned brands are mostly in the price range below RMB 70,000. Encouraging the withdrawal of consumer policies will have an impact in the short term, but it may not be a bad thing in the long run. The policy is as predictive as marketing, and the overall consumption structure will not change. After the policy is withdrawn, to some extent it will force companies to strengthen their self-hematopoietic capacity. There are better ways to solve these problems in terms of technological innovation and marketing innovation.

Independent high-end approach is the quality of lei: the high-end of independent brands is the direction we are looking for. Now, what are the options?

Dong Haiyang: I understand that high-endization has two dimensions. The first is from the A-class car to the B-class car's high-end; the second is the A-class car gentrification. The paths to solve these two dimensions are the same and all require quality assurance. Quality includes design, manufacturing, R&D, vehicle development, back-office marketing, and so on. It is a full-value chain quality assurance.

Now BAIC has acquired high-end technology on the one hand; on the other hand, it has been trying to learn the successful methods of modern South Korea and Beijing’s modern quality and is walking on both legs with technology and quality.

Liu Jinliang: Geely Automobile has not yet reached a stage where it can put its own brand to the top. However, since 2007, Geely has undergone a strategic transformation and has also found a way to continuously increase the value of its own brand. Geely's parent brand has created three sub-brands. Up to now, the price of imperial jewellery has reached about 90,000 yuan, and it can still meet demand, indicating that Geely's transformation strategy has achieved initial results. These three brands, we define all are popular brands, just for different consumers. As for whether Geely will develop high-end brands in the future, it depends on the situation after 3-5 years.

Lei: There is a kind of voice in the market that independent brands have accumulated low-end market competitive advantage in the past decade. Independent brands should consolidate this advantage and should not make breakthroughs, because not every enterprise can succeed, but it will lead to growth. The independent brand did not succeed upwards and lost its original market. Therefore, there is no need for independent brands to start full-scale high-end, and there are still arguments. How should this be viewed?

The self-owned brand is high-end: it is the competition structure that once rebalances Huang Luming: The self-owned brand has gone through two stages after so many years of development. The first phase of the competition was at the low end, which provided a long time for its development and achieved some achievements. This achievement is reflected in three aspects: The first is the rapid progress of products, the improvement of quality by leaps and bounds; second, the appearance changes, has its own personalized products; Third, the visibility has been greatly improved.

However, in the next stage, I feel that the overall market situation has undergone major changes, mainly due to the sinking of joint ventures. Like GM and Beijing Hyundai, there are 50,000-70,000 products that directly push their own brands into the market. This is an unprecedented challenge for independent brands.

In this situation, the auto makers have to shrink their original progress, and the price/performance ratio has weakened. In addition, there is still a big gap between the products, although the appearance is very close, but its content and performance still need to be improved, which also takes some time to catch up.

We learned from the survey that the third-line market has a higher awareness of self-owned brands and may also be affected by their own income. However, the decline in the cost of self-owned brands is no longer feasible. Although high-end is not a thing of the past, brands must go to the high-end in the future. The high-end must do the brand, do the quality, and have the quality to build the brand. We still have the opportunity.

Lei: there is still a saying that the development of new energy vehicles is the opportunity for independent car companies to overtake the curve, then this is not another way to transform the autonomous car companies?

Zhang Jianyu: I think the development of new energy vehicles is an opportunity for independent brands to take off. We can analyze from several aspects. First of all, China is a country with more coal and less oil. In the future, energy constraints will greatly restrict the development of the country. In this case, we must look for new ways of energy production and consumption. Therefore, the use of coal or other new energy sources should be converted into electricity, turning electricity into the main driving force and energy source of our lives. This is a kind of Inescapable facts.

As a decentralized energy consumption and pollution emission vehicle, it is difficult to constrain the emission of the automobile itself by means of the restriction of factory emissions, and the overall pollution level of the environment must be reduced through overall technology upgrading and large-scale mandatory technology transformation. .

National policy has also seen this point, so from the perspective of the country's strategic emerging industries, the development of new energy vehicles has presented a great leap forward platform and approach. This provides a good opportunity for the brand creation of independent car companies. I have seen that the country has achieved leapfrog development in terms of wind energy, solar energy, and electricity.

The change of people's behavior is a combination of three aspects. Whether the infrastructure construction can really realize the new energy vehicle technology, the government's control policy, or the individual's wishes, I think the unified combination of the three will help realize the transformation of the industry.

So I think there is a possibility of a big leap forward for new energy vehicles.