Global automobile industry chain can’t be “de Chinese”

The novel coronavirus pneumonia has brought more strikes to the global auto industry than the imagination. The latest quarterly data released by multinational car companies showed that the data of operating profit and sales dropped sharply, and even the sales data of India’s domestic automobile market in April were zero. With the control of the epidemic situation, the recovery trend of China’s automobile market is obvious, which gives hope to the global automobile enterprises. After the outbreak, which car manufacturers are likely to win in the future? Is it feasible to “de China” the global automobile industry chain? Ferdinand dudenhoff, a professor of economics, management and automobile at Duisburg Essen University, who is known as the “Godfather” of Germany, recently said in an exclusive interview with a reporter from the global times that the global automobile industry is facing the biggest crisis since World War II. China is the most dynamic market, and whoever “withdraws from China” will become the loser.
The epidemic will overturn the automobile pattern of China, America and Europe
Global Times: international oil prices have plummeted recently, and even entered the “era of negative oil prices”. With the impact of the epidemic, what do you think will be the impact on gasoline vehicles and new energy trams respectively?
Dudenhoff: when global oil prices fell in 2016, it gave a certain boost to the automotive industry. But today, the sharp drop in oil prices has undoubtedly poured cold water on the electric vehicles which are still in the market cultivation stage. However, the “negative oil price” is only temporary, which is related to the spread of the new crown epidemic and the decline of oil demand caused by blockade orders around the world, which will change with the past of the epidemic. On the other hand, most countries and regions such as Europe and China will not give up the “emission reduction” targets. Europe will usher in stricter emission standards this year. In other words, the new crown crisis will not change the transformation of electric vehicles. After the epidemic, Europe and other countries will give more tax incentives for electric vehicle sales. We will move faster to the era of electric vehicles.
Global Times: according to your experience, how much impact do you think the epidemic will have on the global automobile industry? Will the epidemic change the pattern of automobile in the world?
Dudenhoff: in my opinion, the auto industry is facing the biggest crisis since World War II. Unlike 2009, when the crisis was limited to a single major market, there are now chain reactions in almost all core markets: China, Europe, the United States. Global demand has fallen sharply, creating huge overcapacity almost overnight. The pattern of the automobile industry will also change greatly.
First, demand for cars in the US is now falling sharply. At the helm of the United States is a very emotional and short-sighted president. As a result, we cannot predict what will happen in the US market. You can guess anything, depending on Trump’s mood. But to be sure, the U.S. auto industry faces more problems than Tesla. The US market is expected to take three or four years to recover.
Second, it could take as long as a decade for Europe to revive last year’s sales. The European auto industry has just recovered from the financial crisis, and now it has been hit hard again. However, German automakers are relatively good because they are already focused on China.
The most dynamic market is certainly China. First of all, because the new outbreak is coming to an end in China. Second, China will have a very strong government stimulus plan. Third, China is not a saturated market. In a saturated market like Europe or the United States, 1000 residents own 500 to 700 cars. In China, the vehicle density is 100 cars per 1000 residents. As a result, China still has great growth potential.
German cars are awakening
Global Times: after the outbreak of the epidemic, some Chinese auto parts enterprises stopped production, and then there was a shortage of auto parts supply in Europe and America. Some people think that global supply chain is not a good idea for the automobile industry. Countries should try their best to ensure the supply of spare parts at home, and some enterprises even prepare for “de Chinesization”. What do you think of this?
Dudenhoff: I think global supply chain is a good idea. As a result of the epidemic situation, the supply chains of major automobile producing countries have become “local made” instead of “global manufacturing”. Like masks, many countries are now producing them locally. However, this is not a long-term plan, because the demand will drop after the epidemic, and many mask production lines in Europe will be eliminated. After all, China has a greater price advantage. Automobile production is similar to masks. China has many advantages. The lower end of the supply chain is gathered in China, such as raw materials and auto parts. There are more and more China Europe trains running between China and Europe, which can quickly send parts or vehicles to Europe. This is an opportunity for the European auto industry. The United States, if it adopts the policy of “withdrawing from China”, will become a failure.
Global Times: at present, China’s automobile industry has begun to resume production. Many people believe that China will become a global “safe haven” when the global automobile industry chain has not been restored. How do you judge?
Dudenhoff: the future of global automobile lies in China. In the long run, this is also where President Trump’s trade war has done great damage to American companies. Tesla is a U.S. company that is still retrograde in the Sino US trade war, although in the outbreak, Tesla’s large-scale plans, including new factories and new models, are still advancing. German auto makers are also relatively stable because of their high share in China. China is gradually recovering. German car makers also returned to normal faster than other European car makers.