Source: Securities Times, Author: Wu Shaolong.

Recently, a comment made by Huawei's Executive Director, Chairman of the Terminal BG, and Chairman of the Smart Car Solution BU, Yu Chengdong, that BYD is the "King of Sales" caused a stir. At the 2024 China Auto Chongqing Forum, BYD Chairman and President Wang Chuanfu responded to this comment by saying that competition is the embodiment of the market, and active embrace can lead to victory.

In addition to Wang Chuanfu, executives of Geely, GAC, Changan Automobile and other automakers have also expressed their views on the recent discussion of "competition" in the auto industry.

Li Shufu, CEO of Geely: A simple and crude price war results in shoddy work and fraudulent sales.

Changan Zhu Huarong: Competition is the normal process of driving out inferior products.

GAC Zeng Qinghong: The internal competition of the domestic auto market has been excessive.

...

In fact, the arguments of these executives are the epitome of the Chinese auto industry, particularly the new energy auto industry, where various players compete vigorously.

Competition within the industry.

"'Competition' is a natural law of the market. There is no need to be anxious, only active embrace and participation can truly emerge in the competition." Recently, at the "2024 China Auto Chongqing Forum - High-end Dialogue among Entrepreneurs", BYD Chairman and President Wang Chuanfu said so.

Wang Chuanfu stated that in recent years, China's new energy vehicles have undergone earth-shaking changes under the guidance of national strategic policies. Independent Chinese brands have also made great progress in various aspects such as technology, industrial chain construction, product development, and marketing. It should be noted that the development of the industry has opportunities and challenges. The core of the current "competition" is market competition. Over the past forty years of reform and opening up, China's economic take-off has grown in tandem with the development of competition and market. "Entrepreneurs need to embrace and participate in this kind of 'competition', race to the top in competition, support Chinese brands for the country, and create the world's top brands."

Wang Chuanfu believes that in the auto industry, the transformation from traditional fuel vehicles to new energy vehicles is a trend, which is driven by technological revolution, and the main driving force of technological revolution is innovation.

Just as there are a lot of Chinese auto brands, other auto company executives have different opinions on market competition.

Changan Automobile Chairman Zhu Huarong said, "Competition is a normal process of driving out inferior products, a fast return to benign competition." Competition means striving for excellence, pushing Chinese brands to new heights, maximizing user benefits, creating value for users. He also jokingly said that the industry also saw four old men doing live sales, besides himself, there are Wei Jianjun from Great Wall Motor, Li Shufu from Geely, and Yin Tongyue from Chery.

Zhu Huarong also said that the industry has witnessed "competition" leading to the emergence of four old men doing live sales for automakers, including himself, Wei Jianjun from Great Wall Motor, Li Shufu from Geely, and Yin Tongyue from Chery.

GAC Chairman Zeng Qinghong believes that the current internal competition of the domestic auto market has been excessive. "Constantly rolling prices, rolling traffic, rolling bosses, rolling chairmen, was originally normal, but if excessive it is abnormal. What does excessive mean? Rolling prices is not earning money, which is abnormal."

Zeng Qinghong said, "I have always said that there is no problem in giving benefits, but it is a problem if you cannot make a profit. If you cannot earn one million yuan, what kind of business are you doing, what kind of tax are you paying, and what kind of industry are you in? Players need to return to rational price competition."

In addition, Zeng Qinghong also mentioned that "rolling traffic" is also excess competition of the current automakers. He believes that the internal competition of the industry cannot continue to "roll". Meanwhile, he also believes that the future market should be a multi-energy structure, and adhere to a long-term plan. When the penetration rate of new energy vehicles reaches 50%, it is necessary to study and promote the "oil and electricity same rights" measures, support the upgrade and transformation of traditional enterprises, and balance the development pace of new energy and fuel vehicles.

He suggested that research be conducted on how to support the parallel development of new energy vehicles and multi-energy modes such as hybrid vehicles in areas such as government procurement, auto licensing, car purchase restrictions, and consumer subsidies.

Price war.

In a market economy, price wars are the most common means of competition. How do auto giants view the situation of the industry from an internecine competition to a price war?

Li Shufu, Chairman of Geely Holding Group, stated that the healthy development of any industry must achieve better economic benefits in terms of input-output ratio. The endless internecine competition and the simple and crude price war result in cutting corners, fabricating and selling fakes, and non-compliant disorderly competition. For the auto industry, only legal and healthy competition can achieve sustainable and high-quality development. Only in this way can China's achievements in electric vehicles be consolidated and respected.

In fact, price wars have already had a direct impact on China's auto industry. Data shows that in 2023, the profit margin of the domestic auto industry was 5.0%, a decrease of 0.7 percentage points from 2022, and lower than the average level of 5.8% for the entire industry. From January to February 2024, the profit margin of the auto industry further declined to 4.3%.

In addition, Yang Xueliang, Senior Vice President of Geely Holding Group, also stated that corporate competition should not be limited to price wars, but should also learn from moral battles.

Yang believes that the competition between auto companies should not be limited to price wars, but should cover multiple dimensions such as technology, quality, brand, and service quality. More attention should be paid to the ethical level of competition, which is the compliance governance of ESG (environment, society, and company governance).

He pointed out that the core of moral battle is to adhere to integrity and responsibility, and ensure product safety and environmental protection standards. Auto companies should adhere to the moral bottom line, not reduce costs at the expense of product quality, and not deceive consumers to gain short-term benefits.

Li Yunfei, General Manager of the Brand and Public Relations Department of BYD Group, has a different view on the issue of price wars.

He stated that due to the different sizes of each company and their own situation, they must act within their means. "Don't fool consumers, be good to consumers," Li Yunfei suggested, "Everyone has raised prices before, so when it comes to some annual major changes or the launch of new products, the price reduction should be taken into consideration."

Li Xueyong, Deputy General Manager of Chery Automobile Co., Ltd., believes that Chinese brands are developing rapidly and price wars are inevitable.

"First, it is impossible not to engage in price wars. The key lies in creating the best value for consumers in the corresponding price. Second, the serious internecine 'price war' has helped Chinese brands rise, reflecting the technological progress and cost advantages of Chinese brands. Third, from price war to value war, it reflects the company's understanding and adherence to long-termism. Fourth, the core of the shift from price war to value war lies in focusing on the global market, which tests the company's ability to lay out the global market. To look to the future, a world-class auto company must be created."

Li Xueyong believes that the shift from price wars to value wars is a reflection of a company's values, reflecting the strategic thinking of how a company can stand and serve users in market competition.

Editor/Lambor