The Chinese auto industry has never been as turbulent as it is today.
Following the completion of the merger between SAIC and NAC at the end of last year, Dongfeng Motor and Hafei, one of the “Big Three†of China's auto companies, are also pulling people’s nerves.
At the same time, as a leading company in the automotive industry in Beijing, the news that Beijing Automotive intends to “marry†with the Fujian Automobile Industry Group (“FuChangâ€) has also begun to spread wildly in the industry.
This is a strong game.
In the face of the turbulence between the strong players, the pressure for survival of private auto companies began to intensify. Without the adequate support of the government and the limitations of its own power, will they disappear in the natural laws of "weak food?"
State-owned enterprises become protagonists
The news that there are frequent mergers and reorganizations in the automotive industry has spread. SAIC and Nanjing Automobile were the first to cooperate. Dongfeng bought Hafei afterwards. It was reported that Beiqi would merge with Fuqi Automobile. The industry even believes that the battle for the “new three majors†by Chinese auto companies has already taken place. As a result, the Chinese automobile industry shuffled signals.
The so-called "battle" can be traced back to the "Eleventh Five-Year Plan" development plan for China's auto industry. The government’s planning goal for the auto industry is to form 1-2 large-scale automobile manufacturing enterprises (groups) with an annual output of over 2 million vehicles (of which own-brand products account for more than 50%) and exports accounting for more than 10% of production; More than 1 million automobiles (of which own-brand products account for more than 50%), and exporters account for more than 10% of the production of key car manufacturers.
The country has defined the meaning of "large" and "backbone" in terms of output and self-owned brand. Under the background of joint ventures and foreign brands occupying absolute market share, the existing three major automobile groups (Shangqi, FAW, Dongfeng) rely on joint venture products to survive without exception. If they want to become national significance in 2010, "Enterprises, mergers and reorganizations are perhaps the easiest way to expand.
For GAC and Beiqi in the second line, the integration within the industry also means an opportunity to stand up.
The improvement of product lines has become the primary consideration for industry restructuring and mergers and acquisitions.
Judging from the current product structure of the three major auto companies, the product lineup has more or less "short board." In this case, mergers and acquisitions of SMEs with product advantages, for my use, become a good choice.
But strangely, all current speculations about integration are confined to state-owned enterprises. Private enterprises seem to have nothing to do with this.
In the absence of product advantages, market advantages, and government resource advantages, can private auto companies stand alone in the reorganization tide?
There is also a supporting role
"It's hard to say that the big companies may go down now, and small companies may also be stronger," Jia Xinguang, an auto analyst, told the Financial Times. In his view, the internal system of state-owned enterprises is very chaotic, and it is not easy to sort out the various relationships and then integrate them. This brings uncertainties to the integrated large companies; secondly, the 11th Five-Year Plan of the State is only The scale has been stipulated rather than market competitiveness. "This kind of (large-scale, uncompetitive) large company is meaningless."
It is not only Jia Xinguang that holds the same view. "Can not be 'one size fits all', only looking at production, depends on the company's growth and profitability stamina." Great Wall Motor (2333.HK) Department of Information Minister Shang Yugui told the "Financial Times".
The current annual output of Great Wall Motors is 400,000, and it is planned to reach 500,000 vehicles in 2010, which is 500,000 units worse than the 1 million national backbone enterprises at the end of the “Eleventh Five-Year Plan†period. For the Great Wall, it takes at least five years to reach a capacity of 1 million vehicles.
However, as the main force of independent brands, private auto companies are not pessimistic about the prospects. Especially in the Beijing Auto Show just past, the high-profile debut of private car companies fully demonstrated their ambitions.
"Now the strength of private enterprises has come up, and the state has also more support for private enterprises, unlike the previous two years," Shang Yugui said.
Growing up in the "gap" of the large-scale auto companies of foreign auto brands, auto private enterprises also have their own "small calculations."
"We not only want to become a backbone enterprise in China, but also to become a global company, but first of all, we must adhere to the national self-owned brand." Shang Yugui disclosed the great ideals of Great Wall Motors.
Also insisting on confidence is BYD Auto. "Always adhere to the development model of independent research and development, independent brands, and independent development, and aspire to rejuvenate the national automobile industry." BYD Auto spokesman Wang Jianxi told the "Financial Times".
Behind the confidence is the support of the strength of private auto companies. With the gradual development of enterprises, these localized independent brands have gone out of the plagiarism and imitation of the initial stage of their ventures, and have formed the capability of independent research and development and innovative technologies. At the Beijing Auto Show that has just ended, the performance of private car companies has caused the domestic and foreign counterparts to take notice.
Great Wall Motor's diesel power Haval (parameter configuration library) CUA is optimistic about the domestic and foreign markets; BYD is committed to the development and production of dual-mode electric vehicles and pure electric vehicles; Geely Automobile is also actively promoting the brand and creating independent high-end cars.
In a sense, the increasingly fierce industry restructuring trend is, to a large extent, just a struggle within the large enterprise groups. If private enterprises want to get the chips for development, they must rely on their own strength.
Positive response
If the integration of several large auto companies is the development trend of the industry, what private auto companies can do is to follow the trend and gain a firm foothold in the future industry landscape.
In terms of capital, technology, market, products, etc., the large auto group obviously has the advantage of being unparalleled by private car companies. In such an environment, it is time to identify the market's access time, intensively cultivate in the subdivided market, or it can make private car companies take an opportunity. This requires private enterprises to have more sensitive market insights and individual product development capabilities.
"The market still has a lot of blank spots. As long as the products have characteristics and quality, they can still live well." Shang Yugui is optimistic about the living space of private enterprises.
“The property rights of private enterprises are clear and flexible,†Wang Jianhao said. In his view, private enterprises can formulate clear, flexible and diverse strategies to surpass the odds.
"Private enterprises do not rely on the government, rely entirely on the market to survive, and the market has a strong ability to adapt." Jia Xinguang also affirmed the viability of private car companies.
Obviously, as the Chinese auto market is booming, both state-owned large-scale auto makers and private auto makers want to gain something in this attractive market.
From the previous market performance of private car companies, their future fate is not too pessimistic. However, the premise is that private enterprises can break through the bottleneck of the brand and persist in the "encirclement and suppression" of joint venture brands.
“What we lack is the rapid increase of the brand. If cooperation or joint venture can solve this problem, we will consider it.†Shang Yugui said.
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