Restriction may cause big fluctuation

[Editor’s Note] December 10th, host by SOHU AUTO the 「2011 Beijing auto market forecast Salon and the First Regional Marketing Summit" held at Wenjin International Hotel.

He Yi, Deputy Editor of SOHU, general manager of Automotive Business Unit, Gu Xianghua, Deputy Secretary-General of China Association of Automobile, Luo Lei, Deputy Secretary-General of China Automobile Dealers Association, Tang Jing, Senior Analyst of Polk Automotive Information Resources, and nearly 40 CEOs gathered on the scene to discuss and exchange the trend in 2011 Beijing auto market.

 

Following is statement of Gu Xianghua, Deputy Secretary-General of China Association of Automobile Manufacturers.

 

Good morning everyone, I will take these 15 minutes to analyze the regional impacts of 2011 China auto industry policies, which are divided into two aspects: First, I want to talk about the development and the operation of China auto industry this year.

The second aspect only represents my own point of view rather than the association or others. I just want to talk about some personal opinion about the macro situation and the development of the automotive market in 2011.

In the year of 2010, China auto growth started high and then became lower slowly and has been into a smooth, good and normal state.

 

This year we have already heard the news. The news conference was just held at three p.m. yesterday.

Till November, our production has reached 16,4 million and the cumulative sales 16,390,000. Basically, we has sold out all produced. Now there is only one month left here. The data in November is the highest through this year and the history. We produced 1750,000 units and sold 1690,000 in November. According to our trend of previous years, the last month of the year is definitely a high point.

 

This year Beijing will introduce new deal to solve traffic jams, therefore, personally, I think sales in December can reach 2 million units, making the cumulative sales of this year tops 18 million units. There is no doubt that we can reach this level. The growth should be at 34% or so. We will create the highest production worldwide if 18 million units are achieved, which is even a record in American history.

 
Take a look at three wires on the left side of the screen. The green line represents the year 2009, because of the industrial promotion planning after 2009 financial crisis; the line went up relatively faster. The red line, this year the growth rate is expected to top 30% rather than the originally forecasted 20%. Although the last line is downward trend, the growth may exceed 30%. This year, instability of policies has caused such situation in the auto market. In general, we hope to drop the growth a little. Stable regional sustainable development can not afford a growth of more than 30% annually.

The trend of each month from 2005 to 2010 can be seen from this table. The thick line in the middle it the trend of this year. October and November this year are very high, and the October is higher than previous years. November is the traditionally golden season. Generally, the curve is like this, and each month as well.

This table is relatively simple, all the models we have inside are in growth. This line in the middle represents the growth of cars. SUV and MPV are increasing especially rapidly. And this is a diagram for contribution, mostly is the sedan, and then come pickup and SUV. This one represents for models with a displacement of less than 1.6 L. Right now, passenger cars with a displacement of less than 1.6 L account for 68.55%. The blue is for this year; here we can see a blowup because of the halved purchase tax and 3,000Yuan subsidy for fuel-efficient vehicles. Therefore, we can see it is an arc.

And now I want to briefly outline the situation of this year. In general, the auto market has maintained a high growth and a normal market trend, such as stock and income. Now the whole industry is in a rapid developing and healthy state.

 

2011 auto market macroeconomic environment and policy analysis

 

About 2011, I would like to analyze from three aspects, first, the current stable macro environment, is beneficial to the trend of the automotive market. For example, our economy is in stable and rapid development. Though a bit different, forecasts from the World Bank, China and other countries about China’s GDP growth for next year is around 8%.

Secondly, the trend of accelerated development of our industrialization and urbanization has not changed. Now we are at such a stage.

Our large-scale construction of infrastructure and road network such as airports, high-speed railway and highway is still continuing, In addition, the seventh session of the Fifth Plenary Session repeatedly has stressed that in this period people’s income and domestic demand need be boosted.

Many American economists say to develop economy; China can only by stimulating domestic demand. Right now, we also pay much attention to this. In addition, the per capita GDP has been further improving, and demand for cars is increasing. We now have over four-thousand-dollars per capita GDP. A per capita GDP of more than three thousand dollars even in the car society is a highly developing period, which is beneficial to the automotive market.

From the policy side, we think there are a lot of favorable factors. First, we proposed the car trade-in and car to the countryside policies in revitalization planning, through some are to be ended, we now think maybe it can be proponed. We association has been discussed with related authorities because these policies made for a very significant results, which play a good role for changing the structure of our cars and expanding rural markets. Besides, the effectiveness of the national four trillion investments is lagging behind, which can be seen clearly from the semi trailer. Next year, this benefit will continue since the four trillion investment projects are now in the continuation, which is a big stimulation to the auto market.

In addition, energy conservation and new energy vehicles can win a subsidy of three thousand Yuan. The government will soon introduce a new national energy development plan. The auto industry has been put the first among the 7 emerging industries. From central to local governments are encouraged in the formulation of policies for new energy and energy saving vehicles. In addition, industrial policy has always been mentioned to be introduced this year, though have not yet. The core idea of industrial policy is to build China a strong carmaker.

Besides, because of high housing prices and monetary tightening, most consumers want to spend money on cars rather houses, which is definitely good news to auto consumption. Now the proportion of cars consumption is more and more important. From Jan. to October this year, the cars accounted for 10.5% of total retail sales of social consumer goods. Since houses purchasing is being suppressed, if cars are get into a state of suppression, there will nothing to boost the spending. As for the stock market, in general, are getting better. We all know that car market will not go bad when the stock market is in good state.

There are also some negative aspects. Why the automobile market has been so hot these two months is mainly because some policies are about to be introduced, especially the policy to solve the Beijing’s traffic jams concerned widely by the whole solitary.

Such policy may cause consumers to purchase in advance, which may overdraw the demands of auto market for next year.

Secondly, the travel tax may be adjusted. Thirdly, the NDRC also revealed that environmental taxes are being considered. Fourthly, small-displacement purchase tax will be canceled. Fifthly, not only Beijing, but also basically the big cities, especially coastal cities, are suffering serious congestion. Beijing is now launching solution for traffic jams online, which is said to have won the agreement of State Council principally. But which terms will be changed is still not clear.

Some of the original contents may be found on the internet and known to you all. For example, one family in Beijing can only own one car. While others need to pay social security of five years and must have parking permits, etc.

Besides, some special roads have limitation on date and will charge traffic jam fee of 2 Yuan per liter of gasoline. These contents can all be found on the internet. However, they are not policy documents, now though approved by the State Council meeting principally; they will certainly ask for comments and also be modified.

So I think that this policy is detrimental to the development of the automobile market. In a comprehensive analysis, in 2011 due to policy adjustments, the purchase tax concession, coupled with rapid growth for two consecutive years, last year the growth reached more than 40% and 30% or more this year.

In this way, the demands of auto market for next year may be overdrawn and there may be some small fluctuations, especially the beginning of the year, because the purchase tax concessions will be ended and many people purchase cars in advance.

But I think in general, the fluctuations will periodic. After a period, the market will recover because the overall stable growth will last definitely no matter from the whole satiation, demands or people’s purchasing power. If so, I expect growth will reach 10%, 20 million units based on the forthcoming 18 million units of this year.

But I personally think that if Beijing is to introduce the program, the market will have large fluctuations because Beijing’s policy will be copied by the whole country generally.
If so, I can not say that next year we can usher in a growth of 10%. Why these policies will have such serious impact, in particular the purchase limitation? I think it is unreasonable to blame the traffic jam to amount of cars. Other factors such as road design, urban planning, driving habits, the people of quality, as well as management, etc., can never be ignored. There are traffic controls in Beijing all day long, which is really influential.

But many ways may be more difficult to control. But the easiest is to limit, which needs only an order. I agree to improve the fee of using in some ways rather than purchase limitation. Firstly, this policy show some inequality naturally that the rich has been enjoyed cars long before while the poor will be inhibited when they just have the idea of buying a car.

In addition, this restriction once copied by other cities will disrupt the planning of automakers and upstream and downstream corporations. During the making of 12th five-year plan, every place has taken the auto industry as a focus and has set a lot of production plans.

Three groups such as Chery and BYD are to reach five million during 12th five year plan period. It is contradict that on one hand we take auto industry as a pillar and on the other we are about to limit its development.  Such policies will definitely cause big fluctuations in next year’s car market, at least the first half, and then such large fluctuations would possibly bring further changes in national policy.

In short, I think as an industry has now reached 18 million-scale, the government should not make frequent changes in policies, which will cause a great impact to national economy. So, I insist that the policy is to maintain stability and continuity. Traffic congestion should be solved through other ways.

I will stop here for time limitation, thank you!

(Translator: Yalong/Jessie)

See original Chinese report Please click:

http://beijing.auto.sohu.com/20101210/n278227876.shtml