In the past two years, some new energy vehicle enterprises have desperately leveraged, presenting a false prosperity in the industry and enterprises.

By the first three quarters of this year, some enterprises had a turnover of 500 billion yuan and a profit of 25 billion yuan, which seemed promising, but their accounts payable had reached 240 billion yuan. Those who understand finance should know what this means:

OEMs have occupied a large amount of cost-free funds from suppliers, making the snowball effect even greater.

If calculated based on the current benchmark loan interest rate of 4.35%, 10.4 billion yuan of its profits come from the interest on accounts payable. This is just the contribution of extending the supplier payment cycle and does not include the support for suppliers' losses caused by frequent changes of suppliers and extreme price reductions.

A common question in the industry is whether the confidence in price competition really comes from product and technological breakthroughs. Do the market and profits really come from normal product logic?

Behind the roaring ship moving forward is the blood and tears of thousands of suppliers and the lament of hundreds of thousands of auto practitioners.

A few days ago, an OEM issued a document requiring suppliers to reduce prices by another 10% in 2025, which aroused the collective indignation of suppliers. They complained in an open letter against price reductions that the OEM's exploitation forced suppliers to "either be eliminated in the competition or starve to death".

01.

Why is the current situation formed? One reason is the macroeconomic environment with insufficient effective consumer demand for domestic automobiles. Signs have emerged around 2018, indicating that the automobile market is no longer growing rapidly.

The share of new energy vehicles has been taken away from fuel vehicles. This year, the market share of new energy vehicles has exceeded 50% for three consecutive months. It will not be easy to grab more shares from fuel vehicles.

Especially for pure electric vehicles, their proportion in new energy vehicle sales has been declining for more than a year. This means that the marketization of new energy vehicles has entered a relatively stable period: those who have chosen new energy vehicles have already bought them, and those who haven't bought are not easily swayed.

Some automakers may not study the overall environment well and therefore indulge in self-hypnosis amid the great changes in the global automotive industry, aiming to fight a "decisive battle" in 2025 to eliminate competitors and dominate the market.

The core issue is whether the market can support it. Today's young people are no longer like those before 2018. Leveraging to stimulate consumption basically has no effect. Looking at the data, we can see that PPI has been declining for 36 consecutive months, and consumption continues to shrink.

For example, in the past two years, measures such as reducing existing profits, lowering down payments for the first and second homes, and lifting purchase restrictions have been taken to stimulate the real estate market. However, those who used to queue up overnight to buy houses are nowhere to be found.

Society presents a picture of "vibrant old people, disillusioned middle-aged people, and listless young people." In other words, the desire to consume among middle-aged and young people, who have the strongest desire to consume, has disappeared. People in the automotive industry can see that in recent years, automakers have not emphasized targeting younger consumers as much when doing marketing.

For decades, many enterprises have had an inertial thinking: as long as it is an industry encouraged by the state, they dare to leverage and believe that the winner takes all.

However, this logic is based on the premise that the consumer market remains unchanged. Therefore, in the past few years, there have been negative examples in some industries. Who do you think of when you think of enterprises that have leveraged crazy? Isn't it Evergrande?

The misalignment between the production and consumption ends is the essential problem.

Another puzzle is whether automakers who want to win all can definitely defeat their competitors by binding suppliers and dealers to the same huge ship.

A simple analysis shows that international giants such as Volkswagen and Toyota have much stronger financial and resource capabilities and still hold markets outside China. It is like a fairy tale to defeat them within three to five years. Even domestic automaker groups, some of which are state-owned enterprises, and some of which are listed new forces and private enterprises, and local governments are also eager for the automotive industry. They will definitely not stand idly by when others are in trouble, so it is impossible for them to be defeated in the short term.

The theory of quick victory using unconventional means is fundamentally unachievable. There will only be two outcomes: being dragged down oneself or changing strategies early and giving up the illusion of "eliminating" competitors.

02.

Another reason that has led some new energy automakers to misjudge the situation and engage in fierce competition is the subsidies and special treatment for new energy vehicles.

Due to different policies from fuel vehicles, new energy vehicles have significant advantages in cost and usage convenience. Some new energy automakers habitually believe that they can continue to ride the wave of state support in the future, just as they have done in the past decade.

However, in the second stage of the marketization of new energy vehicles, the market share has reached 50%, achieving the goal ten years ahead of the national plan. At this point, the new energy industry support policy can be said to have completed its mission.

However, the explosion of the market in the past three years has made some automakers take a gamble and start fighting, such as extending the supplier payment cycle to 300 days. Many automakers were forced to follow suit, and most of those who did not follow suit were quickly marginalized, leading the entire automotive industry into a period of disillusionment.

Now, it is considered a great honor for some automakers to offer suppliers a 90-day payment term, which they boast about everywhere. This is quite ironic for an industry claiming to be globally competitive.

Obviously, as long as new energy vehicles enjoy privileges, the fierce competition will not end. The reason is simple: an unfair market will lead to distorted competition. With policy advantages, new energy vehicles have the conditions to compete fiercely compared to fuel vehicles. Even within the same camp of new energy vehicles, those without conditions can create conditions to compete fiercely.

In fact, the product costs of fuel vehicles and electric vehicles have tended to be at the same level. Two or three years ago, new energy automakers had already promoted the concept of "same price for fuel and electric vehicles," with electric vehicles even cheaper.

Under such circumstances, subsidies and special treatment should have been completely withdrawn. However, due to policy lag, the industry has been dragged into a quagmire: fuel vehicle enterprises have lost their profits, and 95% of new energy vehicle enterprises are still not profitable.

In fact, automakers with high leverage are more dangerous than those that are not profitable: whether there will be an explosion depends ultimately on whether there is an increase in effective consumer demand for automobiles or whether a new market can be found to release the leverage.

Some say that as new energy automakers are now going overseas to explore new markets, the leverage effect can be maximized.

Although automakers have been vigorously promoting going overseas in recent years, and export sales have indeed increased significantly, indicating that China's automotive products are indeed competitive overseas.

However, if you study geopolitics and observe global trends, you will find that anti-globalization is becoming increasingly fierce, and populism is prevalent in Europe and the United States. Especially with the return of the "redneck" Trump, anti-immigration and trade protectionism may be the global trend for some time to come.

In other words, the globalization of the Chinese automotive industry is different from that of other countries in history and may occur in an era of prevalent trade protectionism. Some say that Europe is not going to cancel the additional tax on Chinese electric vehicles? It might, but Chinese car exports to Europe will surely be more difficult than expected based on inertial thinking.

It is imperative to adjust industrial policies. One of the reasons why Europe previously decided to impose an additional tax on Chinese electric vehicles was anti-subsidy. Although we oppose trade protectionism, we should face up to the fact that privileges do exist for new energy vehicles.

This is also why I support the concept of "equal rights for fuel and electric vehicles" and adjusting consumer subsidies for new energy vehicles, eliminating their special treatment of unrestricted travel in China, and letting the market make the choice.

Recently, relevant departments have reduced export tax rebates for new energy vehicles and photovoltaics, possibly realizing the problems existing in the overseas expansion of new energy vehicles. The Ministry of Industry and Information Technology has also stated that fuel vehicles should not be abandoned, emphasizing that "equal rights for fuel and electric vehicles" is the general trend. Adjusting policies to balance fuel and electric vehicles is also necessary for going overseas, as sales in many countries now mainly come from fuel vehicles, and there is still a huge market for exporting fuel vehicles in the future.

Whether considering the healthy and orderly development of new energy vehicles, the coexistence and complementarity of fuel vehicles, or the unification of domestic and foreign markets, policies should no longer support the leveraging of new energy vehicles. The concept of "equal rights for fuel and electric vehicles" is imminent.