Deloitte: Speed ​​Up, Increase Risk

In the past few years, the Chinese auto market has ended its booming “golden decade”, and the overall growth trend has slowed down, gradually entering the era of “micro-growth”. With the development of China’s auto market, the market competition environment will become more mature, followed by the increasingly perfect market legal supervision represented by the “anti-monopoly law”, which ultimately promotes the “diversification” and “diversity” of market competition formats. Diversification "will develop rapidly. At the same time, as the country's pace of rectification of the automotive market has accelerated, antitrust investigations and the revision and promulgation of industry laws and regulations have caused manufacturers and distributors to face unprecedented compliance risks, and have far-reaching impact on the competitive landscape of the auto industry.

Monopoly on firms' channels is heavily penalized

In order to promote fair competition in the auto market, the National Development and Reform Commission and other law enforcement agencies launched a large-scale investigation into the monopoly behavior of the auto industry and repeatedly issued a huge fine of one hundred million yuan. In September 2015, Guangdong Provincial Development and Reform Commission imposed an administrative penalty on the Dongfeng Nissan monopoly case, fined more than RMB 120 million, and fined 19,12 million yuan to 17 dealers in Guangzhou. At present, it seems that anti-monopoly in the automotive industry will likely become the norm, playing a major role in the future of the industry's operating norms. For manufacturers, the behavior of manufacturers such as the monopoly of monopolized automobile parts for long-term abuse, the forced use of warehouses, the tying of non-best-selling models, and restrictions on cross-regional sales may face antitrust penalties. The implementation of the "Automobile Brand Sales Management Measures" for the next ten years will soon be subject to revision. This revision may shake the foundation of the firm's long-term strong position from the regulatory level.

Dealer horizontal monopoly is prohibited

Dealers' retail level also began to receive attention from antitrust supervision requirements. We have noticed a series of punitive measures against dealers that jointly limit the minimum prices for new car sales and after-sale services, as well as the collection of PDI fees, and punish them with confiscation of proceeds and high fines. It can be foreseen that in the future, the country will continue to strengthen the supervision and management of the Chinese automobile market through the promulgation of laws and regulations. If dealers ignore the interpretation of relevant policies, they will bear higher compliance risks.

Increased competition in circulation

The anti-monopoly and the “Implementation Measures for Automobile Brand Sales Management” under revision will probably weaken the manufacturers’ control over the prices of whole vehicles, spare parts, and regional sales. In September 2014, the “Guidance Opinions on Promoting the Transformation and Upgrading of the Automobile Maintenance Industry and Enhancing the Service Quality” promulgated by ten ministries and commissions in September 2014 promoted the elimination of industry barriers in the aftermarket OEM parts and after-sales maintenance technology and promoted after-sales market competition. In the end, dealers will face fierce competition in both vehicle and after-sales services.

Respondents believe that in the short term, industrial policies have the greatest impact on the front-end sales market. The anti-monopoly investigation triggered multi-brand manufacturers to take the initiative to adjust the prices of vehicles and spare parts. The relaxation of manufacturers' cross-regional control will also intensify competition among dealers across regions, and the profit margin for new vehicles and spare parts will be further reduced. In the long run, the gradual reduction of post-market barriers will greatly promote the development of the accessory retail industry and the rapid repair industry. Therefore, the high profitability of dealers' spare parts and after-sales maintenance maintained under imperfect competition conditions will not be sustainable in the future. In addition, in terms of the influence of industrial policies on the relationship between manufacturers and dealers, most respondents believe that relying on the progress of relevant laws and regulations, dealers will have more say in the long run.

Zhang Xudong, director of services for Deloitte China Excellent Automotive Distributors, believes that the current brand licensing system in the Chinese automotive industry is a necessary industry constraint in the early stage of the development of the industry when the operational capabilities of the circulation sector are immature. With the further development of the automobile circulation field in China, the diversification and diversity of the formats is a necessary condition for maintaining full market competition. Only in a fully competitive market can the operational efficiency of the industry chain and the satisfaction of terminal needs be fully enhanced. Therefore, the reform of the brand sales management methods and the anti-monopoly supervision of the industry will effectively promote the diversity and diversity of the competition in China's auto industry. On the one hand, the distributor's own sales and after-sales services are diversified, and on the other hand they are also subject to competition from other diversity channels. Therefore, the operation of distributors will face the challenge of “danger and opportunity” coexistence. The dealer’s operation mode needs to change from the traditional “product orientation” to “service orientation”, and from “profit-oriented at the time” to “customer value orientation”. Strengthen the dealer's own efficient customer demand perception and service experience advantages, thereby enhancing its long-term profitability.

Currently facing the compliance risk of anti-monopoly, the host manufacturers need to conduct a full self-check of the existing dealer network management policies, retail incentive strategies, and regional management policies in a timely manner. At the same time, the daily sales process, after-sales procedures, and personal information privacy management of the distributors are also managed. The normative nature focuses on. In addition, OEMs need to actively consider the establishment of new channels and operating models for new vehicle sales, after-sales services and spare parts in the anti-monopoly environment. For parts and accessories manufacturers, faced with the diversification of spare parts channels, how to conduct sales channel planning and pricing strategies under multiple sales channel models will be the focus of management's attention.