Whether China’s auto industry can change lanes and overtake, BYD gives a preliminary answer

Translated from the Headlines (Toutiao 头条新闻)

Author: Walker (行者啊)

If you are lagging behind, you must find a way to catch up. This is the case for a person, and the same is true for a country. There are many ways, and there are different ways to deal with different problems. Whether it can succeed depends on the time, the right place, and the harmony of people.

Judging from the current development situation, China’s lane-changing strategy designed in the automotive industry has achieved initial results. Whether it can achieve overtaking, it is necessary to ride a donkey to read the songbook and wait and see.

Anyone who really knows how to drive knows that overtaking on a curve is not only inconsistent with traffic laws, but also very dangerous. In fact, the chance of overtaking on a curve is slim, and the vehicle ahead that has taken the lead will not be given a chance to follow. Those that seem to be opportunities may be dangerous.

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The world’s first car was born in 1886, and China’s first Jiefang truck rolled off the assembly line in 1956, 70 years later. In 1985, the domestic automobile market was opened up and technology was introduced in an attempt to exchange technology with the market. However, it was not until 2009 that domestic automobile factories began to generally design forward.

With the development of the automobile industry, Western countries have formed a complete and mature industry system. China’s auto industry is at an intermediate level in the world’s auto industry and is moving forward with first-class enterprises.

However, the development of these technologies is not only a huge investment but also takes a long time. There is little hope of catching up with or even surpassing the first camp in the short term.

However, due to not mastering the core technology, our auto companies have extremely weak profitability. Li Gang, the former chairman of the China Automotive Industry Corporation, said, “In the 2011 Academy of Social Sciences Competitiveness Survey Report, it was stated that the foreign side accounted for 95% of the profits of the joint venture car companies, while the Chinese side only 5%. Pay the production license fee or be divided into part of the profit.”. Ten years have passed, and things are better now, but the Chinese side’s profits are still less than half of the foreign side’s.

The ability to transform core technology into profit is much higher than that of peripheral manufacturing. Therefore, in order to strive for greater profits, we must master core technologies such as internal combustion engines and gearboxes.

However, the development of these technologies is not only a huge investment but also takes a long time. There is little hope of catching up with or even surpassing the first camp in the short term.

The increase in production and sales does not mean that we have occupied the high-end. So far we have not a brand that can keep pace with the world’s top brands, because our core technologies such as engines and gearboxes have never caught up with the world’s leading level. The traditional car track with the internal combustion engine as the core is still firmly controlled by Japan and Europe.

At the same time, China’s energy structure is unreasonable. In 2018, China’s oil consumption reached 648 million tons, and China’s dependence on foreign oil is approaching 70%. From the perspective of strategic safety considerations, we cannot continue to run on the car’s internal combustion engine track.

Since the internal combustion engine technology started late and did not seize the development space gained during the industrial protection period to develop its own original technology, then continue to follow the automobile internal combustion engine track, and the hope of surpassing is very slim.

You still need to be practical in doing things, not just a sentence or two of determination can achieve your goals. Scientific research has its own laws, and the market has its own laws. At this point, why not change the track, at least we have no disadvantages in the late game.

With China’s current capital reserves, it has the economic strength to open up new tracks. At the same time, China is also the country with the most complete industrial categories in the world, and it is fully equipped with the industrial environment for opening up new tracks.

The principle of choosing a new track.

The new track must maximize its strengths and avoid its weaknesses, must conform to the world’s development direction, and must be more advanced than the existing track. The new track is an electric vehicle.

First of all, electric vehicles use simple-structured motors and electronic controls to replace the engines and gearboxes of traditional fuel vehicles, which conform to the law of reduced failure rate with simple structures. At the same time, simple motors can output greater torque than internal combustion engines of the same level. And the electronic control system, the energy output is more linear, which greatly improves the driving experience, especially in small-displacement vehicles, this change is more obvious.

Replacing engines and gearboxes with motors and electronic controls is replacing complexity with simplicity, and replacing backwardness with advanced.

Secondly, electric vehicles can achieve zero emissions from a single vehicle, conform to the environmental protection direction of energy-saving and emission reduction, conform to the trend of global green development, and keep in line with the global development trend in terms of technology. In the later period, under the trend of increasing the proportion of green power generation, the overall environmental protection efficiency of the use of electric vehicles will be simultaneously improved.

Determining the new track category, how to build the track is a problem. The general approach is nothing more than to guide and force. Use funds and policies to guide, use policies to force.

Subsidies are the most practical guidance. According to statistics from the Ministry of Industry and Information Technology, from the start of new energy vehicle subsidies in 2010 to 2020, the Ministry of Industry and Information Technology has approved 3.411 million new energy vehicles and the Ministry of Finance has issued 120.64 billion yuan to support industrial development.

At the same time, with the double points policy, companies are both pressured and motivated to develop new energy vehicles.

The guidance and cooperation are forced, and the new track is built. It cost hundreds of billions of RMB and took more than 10 years.

Several stages of the industrialization of electric vehicles.

In 2012, the state promulgated the first plan for the development of the energy-saving and new energy automobile industry (the “Energy-saving and New Energy Automobile Industry Development Plan (2012-2020)”), and by 2020, the goal of reaching 5 million new energy vehicles has been achieved. In 2021, China promulgated the second plan for the development of the new energy automobile industry (“New Energy Automobile Industry Development Plan (2021-2035)”), clarifying that the proportion of new energy automobile and new vehicle sales in 2025 will reach about 20% by 2035 Become the mainstream development goal of the market.

At present, the hybrid models launched by domestic new energy car companies represented by BYD not only have the experience of electric vehicles but also solve the shortcomings of electric vehicles’ cruising range anxiety and become popular models. New energy vehicles have entered the dual drive phase of policy and experience.

The effect of the new track is beginning to show.

As of the end of June 2021, the number of new energy vehicles nationwide reached 6.03 million, accounting for 2.1% of the total number of vehicles. Among them, there are 4.93 million pure electric vehicles, accounting for 81.7% of the total number of new energy vehicles.

In September of this year, China’s new energy passenger vehicle retail sales reached 334,000, a year-on-year increase of 202.1%. In the first three quarters, the retail sales of new energy vehicles were 1.818 million, a year-on-year increase of 203.1%. The substitution effect on the fuel vehicle market is continuing to show.

Among them, the penetration rate of new energy vehicles for independent brands in September was as high as 36.1%, the penetration rate of luxury new energy vehicles was 29.2%, and the penetration rate of new energy vehicles for mainstream joint venture brands was only 3.5%.

The key to building a new track.

Looking back on the construction process of the new electric car track, we found several key points.

The most effective thing in the market is driven by profit. The subsidy of real money is used as the initial start-up capital, which plays a role in attracting bees and butterflies. The influx of capital is pouring into the field of new energy vehicles. Among them, there are many companies that cheat compensation, but these companies also play a role in setting off the market objectively. Therefore, there is no too strict management of the fraud phenomenon in the early stage. The market is ruthless. Even if companies that cheat and compensate are not punished, they will lag behind in the subsequent development. This is the most severe self-punishment.

The role of subsidies is self-evident. It is the start-up capital for the new track and plays a key role.

The double points policy has played a role in forcing companies to develop new energy vehicles from another perspective. Pull one by one and push the new track just like that.

However, the role of policies is limited, and the decline of subsidies in the later period is to accelerate the marketization of electric vehicles and change policy promotion to market promotion.

The core of the market is competition. Tesla has become a potent drug. Tesla built a factory in Shanghai to go deep into the hinterland to compete with domestic companies. Introducing Tesla is like investing a wolf in a flock of sheep, the purpose is to force the domestic industry to accelerate the elimination and accelerate the formation of a market-oriented industry. It now appears that the goal has been achieved. BYD has become the top student on this track and can compete with Tesla.

The hidden dangers of the new track.

Tesla is obvious, and there are also major Japanese and European companies. Once they use their power, they may become huge rivals based on their accumulation in the automotive industry. On this point, domestic companies have to make preparations, especially BYD to stay awake at all times.

The most effective preparation for domestic independent brands is to concentrate on technology development, rather than blindly digging into the market.

At present, hybrid vehicles are selling well. As a transitional model of electric vehicles, their life cycle depends on the breakthrough time of battery technology. Perhaps BYD and other independent brands can maintain their first-mover advantage for about three years, and once the joint venture develops strength, the pattern may change.

When the old track was hopeless for overtaking, a new track was set up, and initial results were achieved. Among them, there is the support of the environmental protection environment, this is the time, our country has a complete range of industries, this is the geographical advantage, under the guidance of the policy, consumers gradually accept new energy vehicles, this is the harmony of people.

It can be seen that in a country, what kind of environment is needed to build an industry track, how much money it will cost, how long it takes, and how to choose, are basically clear in the demonstration of building an electric car track.