Summary of Key Points
After Chery Group's sales volume exceeded 20 million units, Chairman Yin Tongyue publicly stated that the company will no longer engage in cutthroat competition and instead focus on building a stronger brand, making technological breakthroughs, and improving customer satisfaction. This statement highlights a critical issue in China's automotive industry: despite large sales volumes, profits are meager, and there is intense internal competition (price wars, reduced quality and prices, frequent quality issues), leading to a weakening domestic market. The industry is shifting from focusing on price and volume to emphasizing technology, service, and value. Automotive companies need to pursue high-quality growth if they want to transform from being large to being strong in the global market.
1. How Harmful is Internal Competition in the Industry? — A Vicious Cycle of Losing Money While Trying to Gain Market Share
"Cutthroat competition" has been a hallmark of the Chinese automotive market in recent years:
- Endless Price Wars: Some companies lower prices by reducing product quality (e.g., using cheaper materials), resulting in no profits for anyone.
- Short-lived Models: Cars are launched and discontinued within two years, similar to fast-moving consumer goods, with no guarantees regarding quality or durability.
- Cutting Corners in Critical Areas: Emphasis is placed on superficial features like large seats and big TVs, while neglecting essential aspects such as safety (thinner crash bars) and environmental standards (non-compliant emissions).
The consequences of these practices are increased sales volumes but lower profits, as well as damaged brand reputations due to quality issues, which negatively affect the overall image of Chinese automobiles.
2. Data Speaks Volumes: Large Scale Does Not Equal Strong Profitability
The current industry situation is clearly illustrated by the following figures:
- Declining Sales: In the first half of this year, only over 8.7 million ordinary passenger vehicles (sedans, SUVs, etc.) were sold domestically, a 20% decrease compared to the same period last year. Export growth has not made up for the shortfall in domestic sales.
- Sharp Profit Drops: The industry's profit margin in 2025 is expected to be only 4.1%, the lowest since 2015, and it dropped to 3.8% in the first half of this year, lower than the average of 6.5% for downstream manufacturing industries—selling cars is less profitable than operating factories.
- Intense Competition: There are more than 130 automotive brands in China, with over 500 new models launched in the first half of this year, meaning new cars are released almost daily; it's no wonder competition is so fierce.
3. Changing Consumer Behaviors: Consumers No Longer Buy into Showy Features
Previously, consumers may have been attracted by low prices and attractive appearances, but now they are more discerning:
- They no longer solely focus on price but value safety, quality, service (ease of after-sales maintenance), and long-term value (resale potential).
- Cars that rely on flashy features like large TVs are becoming less popular; consumers want practical and reliable vehicles, not just visually appealing gadgets.
4. Chery's Approach to Avoiding Cutthroat Competition: Growing in a Different Way
Chery is not just talking the talk; it is taking action:
- Reducing Excess Sales: The company is actively reducing dealer inventories to avoid forcing sales through inventory accumulation (much of previous sales were merely pushed to dealers rather than actually sold).
- Seeking Growth Overseas: Chery is relying on exports to maintain its scale, as China has already become the world's largest automotive exporter.
- Investing in Technology: The company is investing in original designs, self-developed batteries, and high-performance infotainment systems to reduce dependence on others.
- Strengthening Foundations: Chery is improving management, supply chain efficiency, and project execution capabilities to ensure more stable product quality.
5. How Can Chinese Autos Become Stronger Globally?
Although China is the world's largest automotive market, competing with established giants like Mercedes-Benz and BMW requires more than just low prices:
- Long-term Strategy: Focus on long-term development rather than short-term sales growth, especially in areas such as technology (batteries, chips), quality (manufacturing, durability), and service (after-sales, user experience).
- Establishing a Strong Brand Image: Only by proving that Chinese cars are of high quality and technologically advanced can Chinese automakers gain a foothold in the global market.
Yin Tongyue's words hope to inspire other automotive companies to stop competing on price and invest in areas that will truly drive their success.