Economy

Why China's Car Industry Is Crashing On Its Own Turf

Daredevil Xie Yujun leaps over the frozen Heilongjiang River in a stunt car in Heihe, in China
Daredevil Xie Yujun leaps over the frozen Heilongjiang River in a stunt car in Heihe, in China
Zhu Shiyun

BEIJING — It is not exaggerating to describe China's automobile market as rolling into its "Golden Age."

According to the China Association of Automobile Manufacturers' latest data, from January to April this year the passenger car market grew by 10% to 6.48 million cars. In comparison, for the first quarter of this year, the U.S. car market had a growth rate of 1.4%.

During the same period, China's imported car market grew more than 20%. Joint-venture brands also registered a strong growth. While the joint venture of Chinese auto group FAW and Germany's Volkswagen sold more than 920,000 cars, a growth of 17.5% compared with the same period last year, General Motors sold 1.2 million cars with a growth of 11%.

But in this context, we must also note that sales of China’s own brands haven't stopped bleeding. After three consecutive years of decline, Chinese brands' market share has now plunged to 38% overall. Thus while China's automobile market has finally and fully matured, China’s indigenous manufacturers are facing a grim outlook.

Causes

We believe the challenges that face China's own brands are two-fold, the intensifying external competition and the failure to make the necessary internal adjustments.

Independent Chinese-brand cars are being squeezed from both joint-venture manufactured cars and imported cars, first in the product lineup, second in cost.

In the compact car market, the most competitive of all, the joint-ventures are accelerating their pace. The multinational brands have a competitive advantage in both storage and distribution processes, by being able to sell the same model of car made by different Chinese joint-venture partnerships.

The best example are the various models launched by FAW-Volkswagen. These siblings born out of the same platform are at the top of the sales chart all year around. Toyota is following suit by separately offering both the American and European versions of its best-selling Corolla model to different Chinese joint venture vendors to sell.

In addition, both FAW-Volkswagen and Nissan have launched one after the other their "affordable car" series priced around 50,000 RMB ($8,010). The low-end car market is where Chinese own brands had originally staked out their territory. It remains to be seen whether the invasion of China by the global auto industry leaders will lead to a development of the domestic market or be a fatal blow for local brands.

Thanks to their greater scale and leading technology, joint-ventures can use their cost advantage to further squeeze out competitors. By manufacturing a series of models of the same class of cars using the same platform, these cars can share a high proportion of the same parts and components and thus further reduce their cost. At the same time, because of their wider sales numbers, often over a million vehicles annually, joint-venture companies possess the mean to grow further into the Chinese market.

Chang'an Zhixing SC6378, aka "Chana Star" — Photo: Ken Marshall

Too little, too late?

In comparison, most of China's local brands do not have a sufficient cost advantage to keep up with the price-reduction trend of the market. Take the best-performing Changan Automobile as an example. The company estimates it will sell 600,000 cars this year. If the joint-venture brands dip further in price it's difficult to predict how much margin the local brands have. As Dong Yang, secretary general of China Association of Automobile Manufacturers, pointed out, just one-fifth of Chinese-only brands have steady profitability, another one-fifth make a small profit and the rest are losing money.

In addition, local brands also face the double dilemma of upgrading and time pressure.

In recent years many local car makers have chosen to breakthrough by producing premium cars with higher profit margins. However the path is tough. For instance, Great Wall Hover's H8 model was forced to postpone its launch twice due to component integration problems; also Changan Automobile suspended altogether its high-end plan to focus on developing its parent brand and its R&D.

Is it too late for local carmakers to turn it around? Many of them have realized the problem and have started to transform themselves over the past two or three years ago. Several companies such as Chery and Geely have all changed their multi-branding strategy to "unification" instead. They are also trying to raise their technological level through acquisitions, fundraising and building their own auto research centers, as well as relying on international teams.

Then, there are also the uncertainties that will come as many of China's cities are tightening vehicle purchase and license restrictions. Coupled that with the overall updgrading of competition from international brands, China's automakers don't have much time to save themselves.


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Society

What It Means When The Jews Of Germany No Longer Feel Safe

A neo-Nazi has been buried in the former grave of a Jewish musicologist Max Friedlaender – not an oversight, but a deliberate provocation. This is just one more example of antisemitism on the rise in Germany, and society's inability to respond.

At a protest against antisemitism in Berlin

Eva Marie Kogel

-Essay-

BERLIN — If you want to check the state of your society, there's a simple test: as the U.S. High Commissioner for Germany, John Jay McCloy, said in 1949, the touchstone for a democracy is the well-being of Jews. This litmus test is still relevant today. And it seems Germany would not pass.


Incidents are piling up. Most recently, groups of neo-Nazis from across the country traveled to a church near Berlin for the funeral of a well-known far-right figure. He was buried in the former grave of Jewish musicologist Max Friedlaender, a gravesite chosen deliberately by the right-wing extremists.

The incident at the cemetery

They intentionally chose a Jewish grave as an act of provocation, trying to gain maximum publicity for this act of desecration. And the cemetery authorities at the graveyard in Stahnsdorf fell for it. The church issued an immediate apology, calling it a "terrible mistake" and saying they "must immediately see whether and what we can undo."

There are so many incidents that get little to no media attention.

It's unfathomable that this burial was allowed to take place at all, but now the cemetery authorities need to make a decision quickly about how to put things right. Otherwise, the grave may well become a pilgrimage site for Holocaust deniers and antisemites.

The incident has garnered attention in the international press and it will live long in the memory. Like the case of singer-songwriter Gil Ofarim, who recently claimed he was subjected to antisemitic abuse at a hotel in Leipzig. Details of the crime are still being investigated. But there are so many other incidents that get little to no media attention.

Photo of the grave of Jewish musicologist Max Friedlaender

The grave of Jewish musicologist Max Friedlaender

Jens Kalaene/dpa/ZUMA

Crimes against Jews are rising

Across all parts of society, antisemitism is on the rise. Until a few years ago, Jewish life was seen as an accepted part of German society. Since the attack on the synagogue in Halle in 2019, the picture has changed: it was a bitter reminder that right-wing terror against Jewish people has a long, unbroken history in Germany.

Stories have abounded about the coronavirus crisis being a Jewish conspiracy; meanwhile, Muslim antisemitism is becoming louder and more forceful. The anti-Israel boycott movement BDS rears its head in every debate on antisemitism, just as left-wing or post-colonial thinking are part of every discussion.

Jewish life needs to be allowed to step out of the shadows.

Since 2015, the number of antisemitic crimes recorded has risen by about a third, to 2,350. But victims only report around 20% of cases. Some choose not to because they've had bad experiences with the police, others because they're afraid of the perpetrators, and still others because they just want to put it behind them. Victims clearly hold out little hope of useful reaction from the state – so crimes go unreported.

And the reality of Jewish life in Germany is a dark one. Sociologists say that Jewish children are living out their "identity under siege." What impact does it have on them when they can only go to nursery under police protection? Or when they hear Holocaust jokes at school?

Germany needs to take its antisemitism seriously

This shows that the country of commemorative services and "stumbling blocks" placed in sidewalks as a memorial to victims of the Nazis has lost its moral compass. To make it point true north again, antisemitism needs to be documented from the perspective of those affected, making it visible to the non-Jewish population. And Jewish life needs to be allowed to step out of the shadows.

That is the first thing. The second is that we need to talk about specifically German forms of antisemitism. For example, the fact that in no other EU country are Jewish people so often confronted about the Israeli government's policies (according to a survey, 41% of German Jews have experienced this, while the EU average is 28%). Projecting the old antisemitism onto the state of Israel offers people a more comfortable target for their arguments.

Our society needs to have more conversations about antisemitism. The test of German democracy, as McCloy called it, starts with taking these concerns seriously and talking about them. We need to have these conversations because it affects all of us. It's about saving our democracy. Before it's too late.

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