Should Hubei muster the same courage and determination that propelled the establishment of the Second Automobile Works, I am confident that it will maintain its pivotal role in the automotive sector.

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Hubei, once a renowned automotive province, thrived on the strength of the Second Automobile Works (Dongfeng).

As recently as last year, describing Hubei as a major automotive hub would have met with little dissent. In 2023, Hubei's automotive production hit 1.9 million vehicles, ranking sixth nationally.

The industry's total output value surpassed 800 billion yuan, accounting for nearly 30% of Hubei's total industrial output.

However, this narrative has shifted dramatically in 2024.

From January to February, Hubei produced fewer than 160,000 vehicles, marking a 30% decrease from the previous year. This drop has relegated Hubei from the top ten to thirteenth place.

Alarmingly, some observant netizens have noted that Hubei's automotive production has been outpaced by all neighboring provinces (Anhui, Chongqing, Hunan, Henan), with the exception of Jiangxi.

Hubei's precipitous decline can be deemed inevitable.

Let's delve into the intricacies of Hubei's automotive industry.

I. Hubei's Dilemma: The Waning Era of Fuel Vehicles

Hubei's sharp drop in automotive production mirrors the broader decline of the fuel vehicle industry.

In 2024, domestic sales of traditional fuel passenger vehicles in China stood at approximately 11.55 million, a year-on-year decrease of 17.4%.

Conversely, new energy vehicle sales surged to 12.18 million, up 36% year-on-year, with both sales and growth significantly outpacing those of fuel vehicles. In 2024, the annual retail penetration rate of new energy vehicles reached 49.4%.

This transition has inevitably impacted Hubei's automotive industry, which is heavily reliant on fuel vehicles, particularly Dongfeng Group.

Dongfeng Group, the backbone of Hubei's automotive industry, sold fewer than 1.9 million vehicles in 2024, marking the seventh consecutive year of decline and the first time in a decade that sales have dipped below 2 million vehicles. This downturn is closely tied to the sharp fall in sales of traditional fuel brands such as Dongfeng Nissan and Dongfeng Honda.

The decline of fuel vehicles can be attributed to a development inertia.

In regions where traditional fuel vehicles have thrived, automakers are hesitant to develop new energy vehicles for fear of cannibalizing existing fuel vehicle market share, thereby slowing down the advancement of new energy technologies.

Gradually, the past advantages become a "burden" during the transition to new energy.

II. The Grim Reality Behind the Data: Missed Transition Opportunities

One of the reasons for Hubei's drastic drop in automotive production rankings from January to February is its failure to seize multiple transition opportunities.

This is structural in nature.

First, let's consider the choice of technical routes.

When new energy was in its nascent stages, various regions adopted different technological approaches. For instance, Hefei, Anhui, bet on the NIO + JAC OEM model, investing over 20 billion yuan to establish the Hefei New Energy Industrial Park.

Conversely, Hubei's automotive leader, Dongfeng Group, adhered to a "fuel and electricity balance" strategy, failing to prioritize new energy.

The group's new energy R&D investment accounted for only about 2% of revenue, compared to BYD's 7% investment during the same period.

Now, let's turn to the industrial chain layout.

Across the river from Changsha, BYD's vehicle manufacturing base was introduced in 2019, aiming to bolster the local new energy industrial chain.

In contrast, Hubei only introduced BYD's battery project in 2023 and has yet to implement any vehicle manufacturing projects.

This series of lagging actions caused Hubei to miss the window period for BYD and CATL's national expansion.

As a result, Changsha's local supporting rate for new energy stands at around 65%, while Hubei's is only around 40%, naturally increasing the cost of complete vehicles.

For example, the logistics cost for power battery capacity supplied from other provinces rises by 800-1200 yuan.

Lastly, the inability to compete with emerging players.

Using Anhui as an example again, the Hefei government established a 40 billion yuan industry investment fund to support new players and provide robust backing for "building factories on behalf + order guarantees." In contrast, Wuhan Economic and Technological Development Zone insists on full-price payment of land transfer fees, making it challenging for new players to establish a foothold in Hubei, a major automotive province.

To date, Hubei has not secured any headquarters or R&D centers of new automakers, and it seems unlikely that new "new forces" will emerge anytime soon.

This series of problematic actions ultimately hindered Hubei's new energy development.

Hubei is in a rush.

III. Dongfeng Automobile: Hubei's Lone Pillar

Amidst this dilemma, Hubei has taken action.

In March this year, it issued the "Several Measures to Support the Development of the Provincial Automotive Industry," outlining an ambitious "double million" goal.

What does this entail?

It aims to support Dongfeng Automobile in achieving 1 million new energy vehicle sales and production by 2025, while pushing the annual production of "Made in Hubei" new energy vehicles to 1 million units.

Based on 2024 data, Dongfeng's new energy sales would need to increase by 150% to meet this target.

We are skeptical as this appears to be an insurmountable task for Dongfeng.

Dongfeng lacks strong competitiveness in the new energy field.

Currently, Dongfeng boasts seven new energy brands (Lantu, Mengshi, Yipai, Nano, Fengshen, Fengxing, Qichen), but apart from Lantu, which sold about 90,000 vehicles in 2024, the market performance of other brands is unremarkable.

Perhaps recognizing the impracticality of this goal, rumors suggest that Wuhan may introduce Xiaomi Automobile.

However, Xiaomi Automobile's planned production capacity at its Beijing plant already reaches 300,000 vehicles. Even if it sets up operations in Wuhan, it might focus on parts and components rather than vehicle manufacturing.

In the short term, this will scarcely alter the fundamentals of Hubei's new energy automotive industry.

However, from the perspective of "Electric Momentum," Hubei possesses a historical foundation for change.

Should Hubei muster the same courage and determination that propelled the establishment of the Second Automobile Works, I am confident that it will continue to be a major hub for the automotive industry.

Best wishes.