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Starting from January 1, next year, China will implement a "new policy" for auto exports, through the implementation of qualification management for auto export enterprises, and regulate the export market. This policy, together with the “Provisions on the Investigation and Punishment of Unfair Low-Price Export Acts (Interim)\†(Revised Drafts), will create an attack on low-cost exports and vicious competition in China’s auto export market.
Low price competition in export market
In recent years, with the intensification of competition in the domestic automobile market, many auto companies have made the development of foreign markets an important task. China's auto products are also favored by consumers in some countries because of their low prices. However, since last year, as many auto companies have flocked to the export market and their export destinations have also been concentrated in developing countries and regions in Asia, Africa, the Middle East, and South America, this highly overlapping target market and customer base has eventually led to domestic auto makers. Overcompetition, low-price competition, market chaos and other complications have gradually emerged.
According to customs statistics, in the first quarter of this year, the growth rate of China’s exports of cars and SUVs is much higher than the amount of increase. In the first quarter, China’s exports of cars reached 16,813, and the export value reached US$116.76 million, a year-on-year increase of 458%, but the amount of increase was only 302%. Off-road vehicles exported 565 vehicles, amounting to 5.71 million U.S. dollars, an increase of 334% in volume, and an increase of only 120%. The industry believes that this reflects that the average unit price of exports of cars and off-road vehicles in China has decreased significantly compared with the same period of last year.
"A lot of companies just bought and sold one hammer." Yesterday, Great Wall Motor's propaganda department minister Shang Yugui stated that due to the fierce competition in the domestic market, many companies often have to lower prices and even give up their own brands. Ways to sell, it is not uncommon for you to rob orders by driving down prices.
And such products are sold abroad, there is basically no after-sales service at all, low-cost vicious competition on the one hand while harming the interests of other companies and the entire industry, on the other hand also affect the international market for Chinese products reputation.
In addition, the data shows that there are currently 8 anti-dumping cases involving the Chinese auto industry in foreign countries. Such as Canada and the United States launched anti-dumping investigations on Chinese automotive windshields.
Will establish access thresholds
The turmoil in the price competition of export products has caused the attention of major export companies such as Great Wall Motor Co., JAC, FAW Group, Dongfeng Motor and Chery Automobile. At the National People's Congress held in March this year, Zuo Yanan, the chairman of Jianghuai Automobile Group Co., Ltd., once suggested that the Ministry of Commerce can provide enterprises with some advice in terms of trade environment and access conditions to avoid excessive competition among domestic enterprises.
In May, the Ministry of Commerce promulgated the Provisions for the Investigation and Punishment of Unfair Low-cost Export Behaviors (Interim) (Draft Revision). The impact of the “Draft†on the export competition order of the products under investigation and the price drop of similar products to a certain market are declining. The investigation of factors such as the situation, the decline in the export profits of other domestic companies, or the impacted conditions will determine whether the reviewed company has an unfair low-cost export behavior. Once established, the company will face severe penalties.
At the end of June, Zhang Tong, deputy director of the Department of Mechanical and Electrical Industry of the Ministry of Commerce, disclosed on public occasions that on January 1st next year, China will also introduce a management measure to increase the access threshold for auto companies and standardize export orders.
According to the reporter’s understanding, the Ministry of Commerce will work together with the National Development and Reform Commission, the General Administration of Customs, the General Administration of Quality Supervision, Inspection and Quarantine and other ministries and commissions to work out this approach. The rectification measures are mainly through the establishment of a threshold for automobile production and operating companies and implementation of "catalogue" management. The supervisory department will implement export qualification management for auto manufacturing enterprises and authorize management of production enterprises for export management enterprises. Automobile manufacturers that meet export qualifications and their authorized export operators will be included in the "catalogue." Enterprises that do not enter the catalog will not be able to export.
However, as for the specific qualification requirements for entering the "Catalogue," the reporter did not obtain precise information from the relevant departments. Previously, in response to the disorderly competition in motorcycle exports, China had set up qualification requirements for motorbike companies that were "not less than 500,000 US dollars in exports in the previous year or not less than 30,000 in the domestic market."
Zhang Hao said that the current Chinese auto export prices only consider part of the costs, and other costs such as environmental protection, land, and social responsibilities are not counted, and these costs should be considered in the future in the price of cars.
One-fourth companies are facing out
Yesterday, in an interview, many auto export companies welcomed this policy. Shang Yugui, head of the Great Wall Auto Propaganda Department, said yesterday that the policy will play a supporting role in the export of large companies through the governance of the market order, but it will be a blow to small businesses.
Data show that in 2005, China's auto export enterprises increased to 1,009, an increase of 43.1%. Among them, 144 companies with export value over US$1 million accounted for only 14.3% of the total number of vehicle export enterprises, while their export value and quantity accounted for 91.2% and 92.1% respectively.
A large number of small-scale exports flooded the auto market. According to Shang Yugui, after the implementation of this policy, about 20%-30% of auto makers in the industry will not be able to obtain the export authorizations authorized by the state.
For automobile operators, they must obtain the authorization from qualified automobile manufacturers to export the products produced by authorized companies. Industry analysts believe that the number of export companies that an auto manufacturer can authorize should not be large, but the current auto export market is filled with a large number of export management companies of various sizes. "Approximately one-quarter of these enterprises are estimated to have been out of business," said Pan Manager of Shanghai Automotive Import & Export Co., Ltd., which is engaged in export operations such as Wuling and Saibao.
However, Shang Yugui stated that in addition to policy assistance, export automobile companies should avoid disorderly competition through other means. He said that because most of China’s auto companies’ exports are currently in the Middle East, Africa, and other places, powerful companies should make dislocation competition by opening up new international markets or creating more targeted products for different markets.