Caixin
Jan 07, 2020 02:15 PM
BUSINESS & TECH

China’s Fourth-Largest Carmaker Says Competition Is ‘Brutal’

A BAIC Senova D70 sits on display at Auto Shanghai 2017 in Shanghai on April 20, 2017. Photo: Bloomberg
A BAIC Senova D70 sits on display at Auto Shanghai 2017 in Shanghai on April 20, 2017. Photo: Bloomberg

(Bloomberg) — Beijing Automotive Group Co. hopes to sell at least the same amount of vehicles this year as in 2019 as it battles “brutal” competition and a prolonged slowdown in China’s car market.

China’s fourth-largest carmaker is targeting up to 2.35 million vehicle sales in 2020, General Manager Zhang Xiyong said at a news conference in the northeastern province of Jilin, compared with 2.26 million units last year. He said group revenue rose 4.3% in 2019 to 501 billion yuan ($72 billion) and that the company, whose partners include Daimler AG and Hyundai Motor Co., hopes to increase the figure to 520 billion yuan this year.

“The Chinese auto market has been sliding and competition is getting more and more brutal,” Zhang said. Speaking later at the same briefing, BAIC Chairman Xu Heyi said the industry was undergoing a “fundamental adjustment that will lead to injuries in the sinews and bones.”

“It is a knockout match that some auto industry insiders have not yet understood to the full extent,” Xu said.

Official forecasts suggest more pain ahead in the world’s largest auto market. The China Association of Automobile Manufacturers last month said sales may drop 2% to 25.3 million vehicles in 2020, which would be a third straight year of declines. The industry is suffering worldwide as trade tensions and slowing economic growth hurt demand, while competition from ride-hailing services reduces the need for individual car ownership.

Still, sales at BAIC’s joint venture with Daimler rose by double digits to 550,000 units in 2019, Zhang said. The company also announced the launch of its Beijing-brand cars, with a target of selling 1 million units by 2030, according to Xu.

Rival SAIC Motor Corp., China’s biggest vehicle maker, expects sales to rebound following their first decline in 14 years, a person familiar with the company’s outlook said last week. SAIC’s partners include Volkswagen AG and General Motors Co.

BAIC is a leader in electric vehicles thanks to the popularity of the EU5 SUV, produced by its unit Beijing Electric Vehicle Co. Like the wider auto market, the electric vehicle segment is slowing in China as the government trims back subsidies. That’s not stopping ambitious expansion plans by domestic players and international behemoths, including Tesla Inc., which is churning out sedans from a plant on the outskirts of Shanghai and will deliver its first locally-made vehicles from Tuesday.

“The industry is closely monitoring Tesla’s manufacturing costs and procurement costs as well as its technology route,” Xu said. “Tesla is a very good benchmark for the auto industry and will help it march ahead.”

Contact editor Yang Ge (geyang@caixin.com)

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