Summary of Key Points
In the first half of this year, the regional landscape of China's automotive industry underwent a profound reshuffle: not only did traditional fuel vehicle hubs (such as Chongqing and Jilin) see a collective decline in production, but provinces that had previously risen rapidly due to new energy vehicles (such as Shaanxi and Hunan) also experienced significant drops. The underlying factors are not simply the "battle between oil and electricity," but rather a combination of multiple variables including export capabilities, corporate diversity, dependence on key players in the supply chain, and product structure adjustments. Provinces with export diversification (such as Zhejiang and Shanghai) managed to grow against the trend, while those that rely on a single leading enterprise (such as Shaanxi and Hunan) are more vulnerable to fluctuations. Traditional bases without support from new energy vehicles and exports may face permanent loss of market share.
Detailed Analysis
1. Why are traditional fuel vehicle hubs experiencing a decline?
Traditional fuel vehicle-producing provinces have had a tough time this year: Chongqing's production decreased by 9%, Jilin by 26%, and Hubei and Beijing also saw declines. The main reasons are:
- The shrinking fuel vehicle market: Domestic sales of fuel vehicles fell by 27.8% in the first half of the year, with a sharp drop of 39% in June, affecting traditional production bases significantly. For example, Sichuan, which mainly produces fuel vehicles, saw its output drop by 18.2% due to technological upgrades and the closure of old production lines without mass production of new models.
- Lack of diversification: Although Chongqing's new energy vehicle sales increased by 4%, fuel vehicle sales decreased by 17.7%, and the growth in new energy vehicles was not enough to compensate for the loss in fuel vehicles. Jilin, which relies heavily on joint-venture fuel vehicles (such as FAW-Volkswagen and Audi), suffered heavy losses this year due to poor performance of these vehicles, resulting in a permanent loss of market share without new energy or export revenue.
2. Why have new energy star provinces suddenly struggled?
Provinces that had thrived on new energy vehicles, such as Shaanxi and Hunan, now experience the largest declines (47.7% and 15.5%, respectively). The problem lies in their over-reliance on a single company,比亚迪:
- Shaanxi: Shaanxi's growth was driven by its Xi'an base, but this year, the base is transitioning to new models (such as the Qin PLUS and Song PLUS), leading to temporary production declines. However, with比亚迪's nationwide restructuring, it is becoming more focused on export-friendly bases like Zhengzhou in Henan, making it difficult for Shaanxi to return to its peak levels.
- Hunan: The low-cost vehicle market has been hit: Changsha-based BYD mainly produces new energy vehicles priced below 80,000 yuan. The halving of the purchase tax this year led to a 47.8% drop in sales of these vehicles, as consumers prefer more subsidized mid-to-high-end models.
3. Export becomes a lifeline for some provinces:
Despite the overall decline in the domestic market (21% in sales), exports have surged (65.3% year-on-year). Provinces that have managed to grow include:
- Zhejiang: Chery exported 930,000 vehicles in half a year, accounting for 22% of China's total exports; Geely and Leapmotor saw significant increases in exports.
- Henan: The Zhengzhou base of BYD uses specialized roll-on ships for overseas deliveries, prioritizing this market for new vehicle shipments.
- Guangdong (a traditional base): It has both new energy vehicle exports from BYD and AEON, as well as fuel vehicle production from Guangqi and GAC, which helped offset declining domestic sales.
4. The risks of over-reliance on a single company:
Provinces that rely too heavily on one leading enterprise are at significant risk. For example, if the leading company experiences issues, the entire province's production can be severely impacted. This is evident in Shaanxi and Hunan.
- Diversification is key: Provinces with a variety of companies (such as Anhui, with 7 vehicle manufacturers and over 3,000 parts suppliers) are more stable, as one company's fluctuations can be balanced by others.
- Guangdong: With multiple strong players (BYD, GAC, Xpeng), as well as Japanese joint ventures in new energy and exports, the province still managed to grow by 5% in the first half of the year.
5. The future landscape:
The reshuffle will lead to changes in the automotive industry's regional structure:
- Production capacity will concentrate in export-friendly areas: New production capacity will be directed towards coastal ports and roll-on ship terminals (e.g., Zhejiang, Shanghai). Interior bases need to improve logistics through dedicated trains and ships.
- Accelerated industry consolidation: With over 130 brands and more than 500 new models, competition is fierce, leading to more mergers and reorganizations, and significant changes in production rankings among provinces.
- Traditional bases need to transform: Regions like the Northeast and some central and western areas must adapt by integrating into the national supply chain or shifting to niche markets (commercial vehicles, special-purpose vehicles, export manufacturing).
- Changing policy priorities: The traditional model of attracting a single leading company is no longer effective; what matters now is a comprehensive ecosystem that includes diverse vehicle production, independent parts supply, export channels, and a robust after-sales network.
Conclusion
The major reshuffle in the automotive industry reflects a competition of capabilities. Only those with strong export capabilities, a diversified corporate structure, and resilient industrial ecosystems will survive. For consumers, this means more choices in terms of vehicle quality. For local governments, the approach to attracting investment must shift from focusing on individual giants to building comprehensive ecosystems.