“The consolidation process will be very very heavy in this industry" - Changan president Zhu Huarong

“The consolidation process will be very very heavy in this industry" - Changan president Zhu Huarong

A majority of Chinese brands in the country will be "eliminated" says one automaker as the country looks to consolidate the bewildering number of offers currently available.

Despite a slight leveling off in sales, China is nonetheless seeing around 30m vehicles drive off showroom forecourts every year to satiate the 1.3bn leviathan population's increasing desire for personal mobility.

This has engendered its own chronic problems however as mega traffic jams choke cities mainly on the Eastern Seaboard, but which could equally spread to any one of China's huge metropolises scattered across the country.

"There are 180 automotive Chinese brands [and] 57% of those brands had zero sales," said Changan president, Zhu Huarong at the recent Global Automotive Forum in the Mid-Western Chinese city of Chongqing. "There has been increasing consolidation in this industry: 10% of the businesses occup [y] around 90% of market share.

"The new energy vehicle industry is taking everyone by surprise – the number of new energy vehicle makes is 103 [and] 51 are new entrants. We can see capital flowing into this market, however competition in this market is cut-throat. I believe the majority of Chinese brands will be eliminated.

"The consolidation process will be very, very heavy in this industry. Of course it brings a lot of opportunities, on the other hand it brings a lot of challenges. A lot of people will make a lot of money, but a lot of people will lose a lot of money.

"Now there are some new market features which really baffled us. Policy changes are becoming more and more uncertain at the macro level. Industry competition is really cut-throat [while] the Chinese automotive market is entering the international market and is impacting the whole world. Who knows what will change? Nobody has a crystal ball and no algorithm works in this situation. President Xi emphasises the impact of the reform package. In the long run the impact will be very far-reaching and of course let's focus on [the] industrial policy framework."

A visit to the Motor Show next door to the Global Automotive Forum echoed the Changan president's estimation of just how many marques are currently in China.

The bewildering array of brands currently flooding the Chinese market is evidenced by a huge variety of models populating the vast stands in the massive halls, some of which look remarkably similar to certain products in the West. Such a broad range of brands is probably not sustainable in the long term, a view echoed by BAIC recently with the automaker envisaging perhaps a third of local vehicle manufacturers will be forced out of business.

That there is major interest – at least at the Chongqing show – is not in doubt. The immense halls were packed to the rafters and that was just the trade days – far more people will have poured through the doors as they opened to the public.

That interest has to be backed by the markets though and Huarong was confident the new energy sectors would attract finance. "The capital market is watching very closely what is happening in this industry," added the Changan chief.

"However, it will also change the competition pattern. Whenever there is over-competition there will be wasted resources. So we can see there is quite a lot of inflow of capital into this market.

"We used to follow what other people are doing. Now people in China are taking a different path. New technologies are really dazzling us – we have to deal with so many complex issues. Ride sharing and car pooling really drives the changes in the business models. Car sharing is really friend and foe for this industry.

"I have been in this field for 32 years and the situation we are facing is requiring much more courage than any period in the past. We must transform from an operator to a service provider."

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