AutoBeta(AutoBeta.net)11/30 Report--

After 28 years of continuous growth, China's car market came to an end in 2018, with cumulative sales of 28.0806 million vehicles down 2.76 per cent from a year earlier. But the decline has not stopped this year and will even continue until 2020. Today, Lang Xuehong, deputy secretary general of the China Automobile Circulation Association, predicted that the auto market will continue to bottom out in 2020 and is expected to pick up by the end of the year.

Lang Xuehong also pointed out that car sales are expected to be about 25 million in 2019 and 22.5 million in 2020, down 10 per cent from a year earlier. In 2020, the downward pressure of the automobile market may shift upstream, and the pressure of manufacturers is greater than that of dealers. It means that the market, which was originally optimistic about bottoming out and rebounding this year, has not yet reached the bottom, will continue to decline, and the market pressure will further expand.

According to the latest sales figures released by the China Automobile Association, cumulative car sales in the first 10 months of this year were 20.652 million, down 9.7% from a year earlier, and 0.6 percentage points lower than in September. But it was still the 16th consecutive month of year-on-year decline in sales. In the face of the promotion of "Golden Nine and Silver Ten", it has also failed to save the car market, which continues to decline.

The slowdown in sales brings a lot of pressure to dealers, but it puts more pressure on car companies, and even affects the entire industry chain. According to the survey report of inventory early warning index of Chinese car dealers, the inventory early warning index of automobile dealers in October was 62.4%, up 3.8% from September, and the inventory early warning index is still above the warning line. In the face of high inventory, the amount of car pick-up tasks of dealers increases, inventory pressure increases, in order to ensure the completion of sales tasks, dealers increase sales promotion efforts to reduce sales is a common means of volume.

Guanghui Automobile, the leading car dealer company, was affected by the decline in gross profit margin and the increase in financial expenses in the first three quarters of 2019. Revenue increased slightly by 1.47% compared with the same period last year, while net profit belonging to listed companies fell 28.76% year-on-year, and the performance growth rate was lower than expected. Among the other 13 listed car dealer groups, only 3 had a higher net profit level in the first half of the year than in the same period last year, while the rest decreased to varying degrees.

In the face of dealers before going to inventory, car companies will face production reduction, and production reduction will affect the entire upstream industry chain, original equipment manufacturers, parts suppliers and dealers will be affected.

Up to now, among the listed auto parts companies that have released quarterly results, only Ningde Times, Ningbo Huaxiang and Daimei shares increased their net profit in the first three quarters. Huayu Automobile, Junsheng Electronics, China Ding shares, Wanxiang Qian Chao, Topp shares, Desai Xiwei, Wanliyang, Siwei Tuxin and other enterprises' net profits have all declined significantly compared with the same period last year, and the net profits of 8 companies have decreased by double digits.

Prior to this, there are a number of independent car parts supply Guowei Technology Co., Ltd. (hereinafter referred to as "Guowei Technology") was exposed to stop production, arrears of wages, broken capital chain, unsustainable operation of the news.

KuaiBao released October production and sales data from a number of car companies, which gave a weak boost as a whole. According to the ranking of car companies based on the passenger car data of the Federation of passengers in October, 65% of car companies' sales have declined, and nearly 30% of them have dropped by more than 50%. Taking into account some car companies that have no sales or have not been counted, the situation may be even more serious.

Even SAIC, China's leading auto maker, saw a decline in net profit in the first three quarters of this year. In the first three quarters, SAIC achieved operating income of 585.345 billion yuan, down 13.25% from a year earlier, and net profit fell 24.86% to 20.793 billion yuan. Changan Automobile, known as the "profit cow", lost as much as 2.662 billion yuan in the first three quarters, down 328.83% from the same period last year.

In terms of current market performance, the overall sales volume of China's automobile market may decline year by year, and it is more difficult for independent brands and joint venture brands at the end of the market. Brands that originally occupied the market by performance-to-price ratio are unable to attack in the depressed market environment. Can only sit back and wait for the market to be eroded. Survival of the fittest and survival of the fittest is the inherent law of development under the mode dominated by market economy.

For the remaining joint venture brands and independent brands, although the whole market dimension has shrunk, there will be fewer car brands participating in competition, even vicious competition, so this will in fact leave better room for development for the remaining manufacturers. There are signs that although the car market has not yet come out of the cold winter, the knockout stages of car companies are intensifying.

Affected by the superposition of multiple factors, such as the increasing downward pressure on the macro-economy, the slowdown in the growth of residents' income, the strengthening of resources and environmental constraints brought about by the continuous growth of car ownership, and the change in the concept of automobile consumption, the stage of rapid popularization and development of cars in China has basically come to an end.

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