Zhao Hang: Focusing on Curbing Overcapacity

　　Editor's Notes: On September 3, the International Summit of the Development of China' Auto Industry was held in Binhai New Area in the city of Tianjin. Government officials, executives from companies attended the meeting and had discussions, focusing on the annual topic-"the transformation and upgrading of China’s automobile industry". Over 600 distinguished guests attended the forum, including government officials, industry leaders and business heads and scholars. At the scene of the meeting, Sohu Auto had an exclusive interview with Zhao Hang, the director of China Automotive Technology & Research Center.

　　Sohu Auto: Topic involves the forum this year is transformation and upgrading of China's auto industry whose importance has received wide recognition from the guests. As a leader of organizers, could you help us to sort out core focuses of the topic so far?

　　Zhao Hang: Everyone is concerned about why we put forward topic of transformation and upgrading at this moment. As a matter of fact, Chinese auto enterprises are faced with problems of investment methods, expanding capacity, resources, materials and cheap labor costs.

　　Currently, China's auto industry is keep expanding capacity, nevertheless, China's own brands account for minority share of Chinese car market. Considering that China has good industry and market, China's own brands must guard our market and make the most of our market resources. Vehicles manufactured by Chinese auto enterprises should be consistent with market demands. Moreover, they are supposed to be enterprises having international competitiveness.

　　Transformation and upgrading of China's auto industry don't necessarily mean transformation from new energy to electric vehicles. Transformation and upgrading discussed now still focus on traditional vehicles and traditional auto industry rather than simple transformation of power system. Both new energy and pure electric vehicles are trends for China's auto industry in the future. We emphasize on topics supported by Chinese government and as a good way to stimulate domestic consumption, we must rely on traditional vehicles in order to achieve economic growth.

　　Frankly speaking, we can understand the emphasis through sales gap between traditional vehicles and new energy vehicles. I think traditional vehicles still will be the main battlefield in the next 5 to 10 years. Actually people want to compete in traditional cars despite competition in new energy vehicles. There is less competition in new energy vehicles and therefore now in order to meet the challenge, it is necessary for China to start transformation and upgrading of traditional vehicles.

　　Sohu Auto: In terms of new energy vehicles, Wan Gang, vice chairman of the CPPCC National Committee and Minister of Science and Technology today talked about seven main points of the 12th Five-Year Plan of new energy vehicles. At the same time he confirmed technology line direction in the next 10 years, so in your opinion, 10 years later is it possible that production and sales of China’s new energy vehicles reach 5 million units?

　　Zhao Hang: I have not done projections, and we need to conduct a series of research to conclude. Speaking of the scale of 5 million units of production and sales, we should be clear of total market capacity as well as percentage of electric vehicles, we may have to do some work before draw a conclusion.

　　Sohu Auto: The 12th Five-Year Plan is one of core themes of the forum, thus according to your opinion, which will be the core theme during the 12th Five Year Plan session in order to achieve transformation and upgrading?

　　Zhao Hang: China shouldn’t rely on further expansion of production capacity. Second, it is important for China to find a wise direction route.

　　Sohu Auto: You just talked about capacity issues. Chen Bin, the Director of Department of Industry of the National Development and Reform Commission sent a signal directly to enterprises, that is, NDRC plans to curb overcapacity of China’s auto industry. How do you view the data released today, in accordance with 31.24 million production capacity by the end of the 12th Five-Year Plan, do you think whether there will be a serious overcapacity or not?

　　Zhao Hang: People tend to estimate and judge the situation through current situation. Now Chinese government supports development of domestic auto industry, however we should take potential crisis and exit of government support into account. As a matter of fact, an industry can not always depend on favorable policy without good earnings. Talking about earnings, I think the capacity being planned or under construction is too optimistic.

　　Indeed, Chinese car market has been in rapid growth in recent years, it should calm down and be clear of current situation. Development of auto industry is tortuous, so we will be confused when the crisis emerges someday. We will doubt whether it is healthy considering that a product always keeps growing by 40%.

　　Could relevant industries keep up with the pace? Though industries such as glass, plastic and steel supply are reasonable, we can not make sure whether roads situation can meet the demands or not, especially considering that traffic jams are common in Beijing. A lot of traffic jams mean it is better to walk instead of cars. Additionally, some cities of China are lack of parking space and there is no suitable public transportation you can take. Auto industry is closely related with social infrastructure, and subjects to various conditions.

　　Without the improvement of road safety, it is difficult to sell more cars. There are a lot of problems for us to cope with, including traffic jams and urban infrastructure construction as well as energy issues. Increasing sales lead to increasing oil consumption day by day. We need to do research on the auto industry itself and related industries so that achieve healthy and sustainable development.

　　Sohu Auto: In this afternoon's round table meeting, Dong Yang, Secretary-General of China Association of Automotive Manufacturers talked about their research data. China Association of Automotive Manufacturers predicts car sales of Chinese car market may reach 25 million units in 2015, but Dong Yang thinks this prediction is too conservative, and he predicted the figure could be 30 million cars. Dong’s prediction is close to data compiled by NDRC, that is, car sales of Chinese car market could be 31.24 million cars in 2015. In your opinion, what measures should China take in order to achieve a reasonable balance between the two sides during the 12th Five-Year Plan session?

　　Zhao Hang: One is to control capacity while the other is to explore the market. Market exploration not just means to increase people's income, but to provide the appropriate environment and facilities. Road construction and parking space should keep up with increase of car sales.

　　Sohu Auto: So far, the forum talked less about China’s own brands. The 12th Five Year Plan is a critical period for China’s own brands with the fierce competition in domestic brands. Additionally, major joint ventures also have released their own brands, and own brand of Dongfeng Nissan will be released next week, which means there will be rather fierce competition between own brands his own brand or living space squeeze. According to your opinion, what kind of development environment should China provide, support or a fully competition?

　　Zhao Hang: China should continue to support own brands, because we made some mistakes before such as market for technology strategy. Therefore, it is necessary for China to cultivate own brands. Considering that Chinese auto enterprises subject to funds and energy, Chinese government need to support them.

　　Sohu Auto: Many experts we interviewed during the forum doubt the prospect of expressed their concern about 16 central enterprises in “EV Industry Alliance”. They pointed out such alliance cant’ have substantial influence on China’s auto industry and doesn’t deserve praise. The lessons of history tell us it will not play any substantive role in China’s auto industry. How do you view the alliance, and what kind of way can best promote industrialization of new energy vehicles?

　　Zhao Hang: 16 central enterprises in “EV Industry Alliance” have no correlation in assets and interests, and may also be a multi-channel to contact. Development of electric vehicles needs support from various sides such as power, charging stations and batteries. Therefore, State-owned Assets Supervision and Administration Commission organized superior resources related to electric vehicles. It is somewhat a good thing and can have some positive influence. However, the alliance doesn’t mean other enterprises couldn’t develop electric vehicles. The alliance can not rely on monopoly and can not rely on subsidies.

　　Sohu Auto: At yesterday’s round table meeting, Mr. Chen Qingtai talked about the development of new energy vehicles in the two paths. One is to develop electric vehicles after foreign technology is mature, then we follow foreign countries, which has no financial burden. The other is to increase investment now, trying to gain advantage over foreign countries. It now appears we have chosen the latter, how do you look into the risks and likelihood of success?

　　Zhao Hang: I agree we should increase investment rather than always follow foreign technology.

　　Sohu Auto: Thank you. (Translator: Qinghua Wade)　See original Chinese report Please click:

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