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Expansion of investment will inevitably bring about a decline in profits, the elimination of the game has begun, the active involvement of the policy will accelerate the elimination of the game.
It seems that no car investors really care about the impact of the new "Automobile Industry Development Policy" and the "Eleventh Five-Year Plan" on the adjustment of industrial structure will have an impact on car investors. Although the discussion over vehicle overcapacity in the past two years and the fact that car prices and profits have been declining have continued to impact this not yet strong industry, this has not slowed the pace of progress for all investors. Multinational car giants continued to oversize their original plans for expanding production of passenger cars. The attempted entrants are still eyeing their eyes.
Investors involved in expanding production may now be faced with paying for the policy costs they pay. On December 1, the two-and-a-half-day central economic work conference ended in Beijing. "Adjusting the industrial structure" has once again become the key word for economic work next year. Solving the issue of overcapacity in some industries has become one of the major tasks of macroeconomic control next year. Although at the beginning of the fifth round of macro-control, cars were not included in the main control of steel and real estate, but the current overcapacity problem in the automotive industry has caused the attention of the National Development and Reform Commission and analysts.
Policy must be real
The current production capacity is 8 million units, which exceeds 25% of the demand, and 2.2 million units are under construction. The new capacity planned and planned is 10 million. If the investment is not controlled, the production capacity will exceed the demand in 2010 by more than twice... According to Ma Kai, director of the National Development and Reform Commission, the auto industry has become a prominent industry with overcapacity. Ma Xiaohe, director of the National Development and Reform Commission’s Institute of Industrial Development, said in an interview with this reporter that the auto industry is too hot and there is an investment bubble in the supply market.
Although from the perspective of market economy, overcapacity is not a bad thing. Overcapacity - price war - profit decline - investment contraction, all follow the laws of market economy. However, if the seemingly simple "market law process" is not regulated by the government, it will cause problems in the entire economy and society.
If the problem of overcapacity is not solved, the contradiction between resources and environmental constraints will be significantly aggravated, the contradiction of structural incoordination will become more prominent, the collapse of enterprises and the unemployment of workers will increase significantly, the bad debts of banks will further expand, and China’s economic and social development will be difficult to embark on. With the scientific development track, it is difficult to maintain a stable and healthy development over a long period of time. It is difficult to form a strong international competitiveness, Ma Kai pointed out. This is also why the National Development and Reform Commission has taken the issue of overcapacity as a breakthrough in industrial restructuring and has been listed as the key reason for economic work next year.
In fact, the overcapacity of vehicles is not a new problem. It is said that there were similar concerns in the industry before and after the release of the "Automotive Industry Policy" in 1994. As the government encourages the development of the private auto market and invests hundreds of billions of yuan in large-scale state-owned auto groups to expand production scales, and since the Chinese auto market entered a period of “blowouts†in 2002, almost all multinational car giants entering the Chinese market are rushing to compete. Announcing its own new investment or expansion plan, this wind was the largest in the second half of 2003.
The sudden cold winter of the auto market in 2004 frozen the enthusiasm of investors. This year, the new "Automobile Industry Policy" was introduced, and it was clearly proposed to optimize the industrial structure and say it. However, it seems that no one really cares what this means. With the gradual digestion of inventories in 2005 and the steady increase in sales volume, automakers once again have good expectations for the market, once again embarked on the road to expansion, and there seems to be no particular concern about the risk of overcapacity.
However, the action of the Development and Reform Commission shows that the policy needs to be real. Although the NDRC has not yet come up with concrete measures on how to solve the problem of overcapacity in the current auto industry, it has undoubtedly released a clear signal: It is imperative to solve the problem of excess production capacity. Automobile companies that have already spent a lot of manpower, material resources, and financial resources to continue expanding production are required to pay for policy costs.
The elimination has already begun
There is no doubt that market demand is just one reason for large-scale expansion. What is even more critical is the profit level. But a very strange phenomenon is: On the one hand, prices and profits on the Chinese auto market have continued to fall. On the one hand, major auto companies, especially multinational auto giants, have been unable to resist the expansion of production.
A recent Morgan Stanley report pointed out that in the first 10 months of this year, the net profit of the auto industry will decline by more than 50% year-on-year. It is predicted that the future automobile price will continue to fall by 6%, the product profit rate will drop by 4%, and the price war will intensify in the next two years. Even unprofitable. According to the report of the newspaper on the production targets of auto companies, the next two years will be an “explosion period†of expansion. The combined production capacity of Europe, the United States, Japan, and Korea will exceed one million in China.
An industry insider told this reporter that the transnational giants have been blinded by the seemingly huge market cake. It is not easy to say that the demand for the auto market in 2010 will reach 10 million vehicles. The policy's current development has provided a wake-up call for multinational companies. The government will not sit idly by regarding the ever-increasing vehicle production capacity.
But in any case, knockout is inevitable. The continued decline in profits will result in the elimination of enterprises with weak competitiveness, and the active involvement of policies will accelerate the elimination process. Some auto brands that are not competitive will withdraw.
SUV companies may bear the brunt. In fact, the current production of SUVs has begun to decrease. At the peak of a few years ago, there were 70 or 80 SUV manufacturers, and there are now more than 40 of them. The basic ones that have been eliminated are all low-end economic SUVs. . But even this pattern is difficult to maintain. Industry insiders estimate that it will wash away 1/3 again next year.
In this case, it's even harder for players who are squeezing their heads to get into the car field.
The giants of multinational corporations did not seem to take this seriously. Toyota and GM executives all expressed their confidence in the future development of the Chinese auto industry when they were interviewed by this reporter. They are confident that their own companies will win in the competition. This attitude is generally pervasive among multinational companies that continue to expand production in China.
An analyst who did not wish to be named told reporters that the increase in investment by multinational corporations will inevitably bring about a decline in profits. The bitter consequences of the continuous collapse of the investment bubble brought about by this continuous expansion of production will eventually have to be swallowed by them. "Expansion workers' dreams should be awake, and the profit margins in the future will become smaller and smaller. If the survival of the fittest can survive for several years, market share will not be particularly good," the person predicted.
Editor: Zheng Xueqin