"This model must be reduced by another 10 points next year."
Zhang Bing (pseudonym), who was in charge of business negotiations not long ago, was shocked by the annual framework conditions proposed by the other party.
Even as one of the top 10 automotive suppliers in the world, there is nothing it can do when faced with the almost crazy price-cutting behavior from the OEMs. After all, no one wants to lose customers.
The price war in China's auto market has been going on for more than two years. According to incomplete statistics, about 150 models have been reduced in price in the first five months of this year.
The result of the downward movement of the price system is negative. The entire industrial chain has become increasingly unhealthy: in order to make up for losses, the OEMs have transferred the pressure to suppliers, and the suppliers are not living Buddhas and can only squeeze the purchasing costs of upstream companies.
"When all starting points are centered around survival, and when all actions are becoming short-term and profit-oriented, people no longer have much energy to pay attention to quality and safety."
"This is very dangerous," Zhang Bing said.
Suppliers can't bear it anymore
At the end of last year, a curved screen company located in Nanjing, Jiangsu won an order from a car company, but the cost was that the R&D cycle had to be shortened by half.
"No matter what method you use, you must ensure that our new car is successfully launched in the first quarter of next year."
In fact, this new car was originally planned to be unveiled in the third quarter, but due to competitive pressure, the schedule had to be advanced by a full six months.
The supplier's internal staff calculated that if this execution time was followed, there would not be enough time to do verification testing, and the reliability of the product would also be questionable.
But in the end they chose to make an exception: on the one hand they added more staff to the project, and on the other hand they readjusted the R&D cycle. In order to save time, some experimental links were forcibly merged, and some were even forced to be cut.
After completing the project without any major problems, a person in charge could not hide his dissatisfaction, "In order to reduce costs and increase efficiency, the OEM and supplier should discuss how to optimize together, instead of directly pushing the supplier into the fire pit now."
In fact, in recent years, there have been even more operations that have caused suppliers to collapse.
For example, some car companies will use the excuse of bidding or trial production to secretly transfer the core information received to suppliers within their system for imitation. This not only greatly shortens the R&D time, but also saves considerable R&D costs, which can be said to be "killing two birds with one stone."
The following is a case learned by Automotive Industry News.
Supplier A made a solution for a rear hidden small table for a certain OEM. After the solution was accepted, the supplier received a small-scale trial production order. Then the OEM started to make a show of it: on the one hand, it gave the solution to supplier B and asked it to copy it at a price 40% lower, and on the other hand, it informed supplier A that the total purchase volume would be greatly reduced due to the adjustment of the expected sales volume of new cars, which meant that A was forced to withdraw.
An insider of a multinational supplier group told us that many companies have suffered losses due to intellectual property rights in recent years, so this year they also set up a special legal team to handle similar cases, and it is directly led by the top management of the China region.
"This kind of weird thing only happens in China," he said with a wry smile.
This is closely related to the fierce competitive environment in China's current auto market. According to media statistics, the scale of price cuts in the auto market in the first five months of this year alone is close to that of the whole of last year.
Therefore, many people in the industry lamented: in the past, being eager for quick success and instant benefits was a derogatory term, while slow work and careful work was a compliment. Now it is all the opposite: if you are slow, you will be eliminated, and only if you are fast, you will not be swept away. All they shout is long-termism, and all they think about is short-term gains.
As a result, a very magical scene appeared in the automotive industry this year. The names of big-name suppliers were frequently mentioned at press conferences, but once an accident occurred, the suppliers refuted the rumors faster and more actively than the car companies.
The subtext is obvious: I won't take the blame for some things, it's not you who force me to do it.
When some danger signs begin to appear
At this year's Beijing Auto Show, Kia China COO Yang Honghai once again made "shocking" remarks.
Regarding the topic of price wars, he bluntly stated that simply pursuing prices will definitely disrupt the market, and consumers will be the ultimate victims.
"Once the manufacturer lowers the price, they will definitely adjust some of the costs. They will give you the best of the visible things, but as for the invisible things... (hesitant to speak)"
In short, you get what you pay for. Yang Honghai, who is always outspoken, only mentioned this.
According to a detailed list of parts optimization of a certain car company obtained by Auto Industry and Economics, domestic substitution, material replacement, or even direct cancellation have almost become normalized operations for cost reduction in the industry.
In the launch of many new products, in order to keep up with the market rhythm, some car companies do not hesitate to hastily push models with incomplete functions to consumers.
"If there is no time, then use OTA and leave the unfinished functions for later implementation through upgrades." An employee told us that this is a sentence he often hears in the conference room.
If you pay attention to the PPT or product brochures at car companies' press conferences, the more powerful a feature is, the more likely you will see a line of words like this nearby: This feature will be implemented through subsequent OTA upgrades.
“It’s really sad that a semi-finished product is packaged with fancy marketing words like “it gets better the more you use it” and “you drive a new car every day”,” the employee sneered.
If the intelligent driving function is not a rigid need for everyone and there is not much difference between using it early or late, then when it comes to the full life cycle testing of the vehicle which is related to safety, there are not many in the industry that can insist on not reducing it.
In a live broadcast at the beginning of the year, Lei Jun's remarks caused huge controversy.
He said that the test fleet of Xiaomi's first model SU7 will continue to be tested on the road and complete the "full life cycle". At first glance, it seems nothing, but if you think about it carefully, if you dare to sell it before the full life cycle test is completed, then the first batch of car owners will be guinea pigs, right?
Industry insiders pointed out that it is very rare in the past to conduct large-scale road tests after the release of a new car model.
Some of the new forces' tricky behaviors have more or less led foreign brands astray. A Japanese car company's R&D staff told us that in order to catch up with the speed of Chinese brands, the testing cycle of new models has been shortened from one and a half years to less than one year, but no test items have been reduced.
“How is that accomplished?”
"Some (projects) can only be fooled."
Weird scenes continue to appear. Recently, a new car of a certain brand had four door interior panels with inconsistent colors, which was almost impossible to happen before.
Finally, the older generation of Autobots couldn't sit still anymore.
Recently, Fu Yuwu, Honorary Chairman of the China Society of Automotive Engineers, published an article criticizing the current chaos in the industry:
"A market economy requires competition, and competition produces champions. But today, corruption has become a terrible phenomenon. If we don't face it and correct it, it will distort the values of the entire industry and destroy the legal environment of the entire industry."
Final Thoughts
The volume is rolling, but has it touched the bottom line? The answer given to me by employees of several car companies is no.
"Crossing the line in front of the national standard is illegal, so no one dares to cross this red line in terms of the various processes, materials, tests, etc. that you see."
But they all revealed a big truth, that is, the lag of national standards in some areas and the not-so-high standards may be one of the reasons why the automotive industry now looks down on each other.
Just a week ago, the Ministry of Industry and Information Technology issued the Key Points for Automobile Standardization Work in 2024, with the aim of further improving relevant regulations and safety standards in the automotive industry.
What should we do before the new regulations are implemented?
"You can only rely on your conscience, but conscience is something that not everyone has, and not everyone has it all the time."