The Chinese auto market will officially enter the knockout round.
Editor’s note: This article is from the WeChat public account “Economic Observer Network” (ID: Eeojjgcw), author Zhou Ju, authorized to reprint.
From an industry perspective, high market concentration is not a bad thing, because the higher the concentration of the industry, the stronger the strength of the leading enterprises, and the efficiency of the industry’s resource allocation. In the past ten years, the promotion of industrial concentration has been the direction advocated by the Ministry of Industry and Information and other national ministries. But for some small and medium-sized enterprises, it is a disaster.
Different from the previous situation where most brands “have a meal to eat”, the division of the “big cake” in the Chinese auto market has changed significantly in the past three years. And this change can be seen from the continued rise in the industry concentration indicator.
Recently, the latest data provided by McKinsey shows that the concentration of head brands (9) in the Chinese passenger car market was 48% three years ago (2016), and then increased by 2% per year to 2019. It reached 54% from January to May. The concentration change of China’s own brands is more obvious. The market concentration of head brands (8) of self-owned brands is 64% in 2016, and by May 2019, this data has changed to 79%, just three. It increased by 15 percentage points during the year.
According to the division of industry concentration by economics, when the market share of the top 8 largest participants in the market is higher than 40%, it is an oligopolistic industry, and when the market share of the top eight participants in the market accounts for When the ratio is higher than 70%, it is high oligopoly. From this perspective, the Chinese passenger car market has undoubtedly been the “oligopolistic market”, while the self-owned brand has crossed the high and low-occupancy segmentation line in 2018, and the head concentration is getting stronger and stronger.
From an industrial perspective, high market concentration is not a bad thing, because the higher the concentration of the industry, the stronger the strength of the leading enterprises, and the efficiency of resource allocation in the industry. In the past ten years, the promotion of industrial concentration has been the direction advocated by the Ministry of Industry and Information and other national ministries. But for some small and medium-sized enterprises, it is a disaster. In the oligopolistic industry, small and medium-sized enterprises have few new opportunities for entry, and the “tail” enterprise survival space is continuously squeezed, which will result in a higher elimination rate. According to the latest data, 34 domestic companies have accumulated less than 1,000 vehicles in the first three quarters of this year.
“The Chinese auto market has begun to show the trend of ‘stronger and stronger, weaker’, and will officially enter the knockout.” For the continued industry concentration, McKinsey’s global associate director Guan Mingyu is on the economy. Observer reporter said. ActuallySince 2018, the auto industry’s knockouts have shown obvious signs, and many companies have stopped production and layoffs due to sales decline or funding problems. At the same time, however, some new car companies are still advancing against the trend, and they look forward to a unique business model, a share of the transformation of the automotive industry. But for these new entrants, there are not many opportunities.
Close to 90% concentration goal
The Economic Observer reported the market concentration (CR5) of the top five passenger cars from 2010 to September 2019. Overall, the concentration of the automotive industry has gone through a rather tortuous route in the past decade.
Car industry concentration over the past decade
From 2010 to 2014, the concentration of the passenger car industry was on the overall high, with CR5 rising from 31.25% to 37.06% in 2014, indicating that the industry’s head enterprises are growing rapidly. It is worth noting that during this period, there was an abnormally high point in 2012, when the top five industry concentration reached 40.11%, the highest level in the past 10 years. For the formation of this high point, the industry believes that in addition to the rapid growth of the head enterprises, Japanese automakers suffered a sharp decline in sales due to the “Diaoyu Island” incident, and Japanese sales were transferred to several other head enterprises.
The data shows that in 2012, the sales of the three major Japanese automakers in China showed a collective negative growth for the first time, while the German and American automakers saw a sharp increase in sales, resulting in a further increase in the sales share of the head enterprises. In the top five sales in 2012, Dongfeng Nissan quietly disappeared. However, in the three years from 2012 to 2014, the passenger car market is still the world of joint venture brands. Eight of the top ten car companies in the sales volume are joint venture car companies. Among the independent car companies, only Chery Automobile and BYD List.
But in 2014-2016, the concentration of the passenger car industry began to decline continuously, and the CR5 fell from 37.06% in 2014 to 35.83% in 2016. The overall decline was not too large, but it reflected that the market was being dispersed. The new situation in the automobile market at that time was that as the SUV market began to heat up, many small and medium-sized brands, especially their own brands, quickly launched SUV models with rich selection and high cost performance, which diverted the sales of head car companies. The implementation of the purchase tax halving policy has made self-owned brands the biggest beneficiaries of the policy and has stimulated the sales of multiple brands.
At this stage, the SUV market has created a number of “new stars”, such as