Beatrix Keim: 'There will be no profitability in a price war.'

Auto Shanghai seemed more relaxed this year. There are fewer extravagant stands. What could be the reason for this?

Overall, it seems as if the trade fair has become calmer and more mature. But that is only one side of the story. There has been a lot of talk recently in China about companies having to cut back financially. The budgets are no longer there, scrappage scheme or not. Although the first quarter was very good again, the overall mood is gloomier. The market is also very fragmented. There is still cut-throat competition.

There is always talk of more than 100 Chinese manufacturers, but the figures are vague. How many are there really?

My research has shown that there are significantly more than 100 manufacturers and around 280 brands. Many of the manufacturers pursue a multi-brand strategy. Some are intended for export, some for the local market, some only for a very specific market, such as Russia. There are always ups and downs with brands. Some disappear or are renamed because they don't work. For many manufacturers, there is therefore no real stability in the brand strategy. However, this is often based on testing what is successful.

Is fierce competition, which has recently been sharply criticized in China, still an issue?

A few weeks ago, the EV100 industry conference took place, at which it was said that things cannot go on like this. The government sees that this competition is not at all profitable and that many in the industry are dependent on support from the state, i.e. subsidies. But even the state will have to step on the brakes at some point because the national debt is slowly but surely getting too high. Manufacturers are subsidized by the provinces, the banks, or the central government, for example through the scrappage scheme.

And that's why Beijing wants to see figures?

If you look at the 2020 Auto Policy again, there is also a passage in it that states that the target figures for the next year must be submitted to the Central State Development and Reform Commission (NDRC), so not just the regional NDRC – including the planned and actual figures from the previous year. A decision will then be made: Can this manufacturer continue to produce? There have already been some, such as Neta, that have suddenly disappeared because their license was revoked. Or companies that are not profitable enough. The government now also sees this: There will be no profitability in a price war.

What is your general impression of the current state of the Chinese car industry?

I think it will shake out massively in the next two or three years because the price war is too strong. There is too much choice, and it is simply too uncertain which brands will survive. Customer confidence will dwindle and I believe there will be even more consolidations here than just the state-owned companies Changan and Dongfeng, whose merger was announced a long time ago. This will be forced on the state-owned companies. But there will also be some of the smaller vehicle manufacturers that simply won't survive.