The automotive industry’s 2020 target: the overall market size will reach 28.77 million vehicles.

This year, the automotive market unexpectedly shifted to a phase of slow growth, prompting automakers who had been optimistic about this year’s market last year to lower their sales targets for 2016. Under the new market conditions, automakers have reached a broad consensus: that moderate-to-low-speed growth is not temporary—it will persist in the medium and long term, becoming the “new normal.” This shift will also compel automakers to adopt a more rational approach when planning their strategies for the 13th Five-Year Plan. According to sales projections released by experts at the China Automotive Industry Association’s Data Resource Center, the overall market size by 2020 is expected to reach 28.77 million vehicles—slightly below the previously forecast figure of 30 million vehicles. This revised target has gained considerable industry acceptance. At the same time, however, new-energy vehicles are experiencing rapid growth, and policy support measures are likely to continue throughout the 13th Five-Year Plan period. As a result, the target of 5 million new-energy vehicles may well be within reach.

The market size in 2020 may be slightly below 30 million vehicles.

“Affected by multiple factors—including economic slowdown, stock market volatility, and the exhaustion of purchase restrictions—China’s auto market growth rate in 2015 hit a new low in recent years. In 2016 and throughout the entire 13th Five-Year Plan period, China’s auto market will maintain low-level growth on a high base, with an average annual growth rate of around 4%,” said experts from the China Automotive Technology & Research Center’s Data Resource Center at the 2015 Information Exchange and Business Development Seminar held in Karamay, Xinjiang, on October 15. According to data provided by the China Association of Automobile Manufacturers, in 2014, China’s total automobile production and sales reached 23.72 million and 23.49 million units, respectively. If we calculate based on a 4% annual growth rate, by 2020, China’s auto production and sales will reach 30.01 million and 29.72 million units, roughly in line with the earlier overall forecast of 30 million units made by automakers. However, the forecast by experts from the China Automotive Technology & Research Center’s Data Resource Center is slightly lower: they predict that the overall market size by 2020 will be 28.77 million units. Since China joined the World Trade Organization in 2001, its auto market experienced a decade-long period of rapid growth, often referred to as the “Golden Decade.” During those 10 years, China’s auto production and sales surged from just over two million units to more than 18 million units, making China the world’s largest auto producer and the largest auto market. This decade coincided with China’s “10th Five-Year Plan” and “11th Five-Year Plan” periods (from 2001 to 2010). With China entering the “12th Five-Year Plan” period in 2011, the Chinese auto market also entered a new normal of medium- and low-speed development, with growth significantly slowing down—a trend that became especially evident in 2015. The main reasons behind this slowdown are the weakening of endogenous growth drivers and a decline in consumer demand. The stock market’s sharp fluctuations have delayed car-buying decisions. From a market perspective, newly built production capacity from automakers has begun to come online, intensifying market competition. Price cuts and reduced production volumes by automakers have become the new normal. Dealers face high inventory levels, declining profitability, and even widespread losses. From the consumer perspective, the economic downturn has led to insufficient consumer information and heightened wait-and-see attitudes. Additionally, the growing popularity of ride-sharing services such as Didi and Kuaidi has prompted some consumers to give up on buying cars altogether and instead opt for shared mobility options. These factors are likely to persist in the medium and long term, making it unlikely that the auto market will soon emerge from its current “new normal.”

5 million new-energy vehicles is not a dream.

How can we find new growth drivers amid mounting pressures and achieve the goals set forth in the 13th Five-Year Plan? Liao Zhengbo, head of the Strategic Planning Department at Dongfeng Motor (9.52, -0.15, -1.55%), believes that new-energy vehicles represent a significant breakthrough. Earlier, during a State Council executive meeting, the “Development Plan for Energy-Saving and New-Energy Vehicle Industry (2012-2020)” was adopted, setting a target of exceeding 5 million new-energy vehicles by 2020. Although this 5-million-unit figure has faced considerable skepticism—Korn Ferry, for instance, publicly stated that it would be extremely challenging for China to reach the ambitious goal of accumulating 5 million new-energy vehicle sales by 2020—nonetheless, driven by a series of supportive policies, the new-energy vehicle market is now experiencing robust growth. According to data from the China Association of Automobile Manufacturers, from January to September, new-energy vehicle production reached 144,284 units, with sales totaling 136,733 units, representing year-on-year increases of 2.0 times and 2.3 times, respectively. Among these, pure electric vehicles saw production and sales of 93,032 units and 87,531 units, respectively, up 2.0 times and 2.7 times year-on-year; plug-in hybrid vehicles recorded production and sales of 51,252 units and 49,202 units, respectively, increasing by 1.9 times and 1.8 times year-on-year. Moreover, the policy continues: the Ministry of Finance and three other departments jointly issued the “Notice on Fiscal Support Policies for the Promotion and Application of New-Energy Vehicles from 2016 to 2020.” Over the next five years, China will continue to implement subsidy policies for new-energy vehicles. This means that during the 13th Five-Year Plan period, China will maintain an active policy of promoting new-energy vehicles and adopt a universal approach, carrying out demonstration and promotion nationwide. Naturally, vigorously developing new-energy vehicles has become a key focus of automakers’ 13th Five-Year Plans. Furthermore, on January 5 this year, the Ministry of Industry and Information Technology released the newly revised “Limits on Fuel Consumption of Passenger Cars” and “Methods and Indicators for Evaluating Fuel Consumption of Passenger Cars.” These two mandatory national standards will take effect starting January 1, 2016, with annual fuel consumption targets set progressively until the average fuel consumption of passenger cars falls to 5.0 liters per 100 kilometers by 2020. Under such circumstances, achieving these targets solely through traditional powertrain technologies would prove exceedingly difficult; thus, developing new-energy vehicles has become an imperative challenge for enterprises. Liao Zhengbo explained that during the 13th Five-Year Plan period, Dongfeng Group will master several key new-energy vehicle technologies and secure core resources. Against the backdrop of the overall market entering a growth phase, Dongfeng’s new-energy vehicles aim to lead the entire industry in terms of sales volume. GAC Group (20.01, -0.06, -0.30%) seeks to build sustainable competitiveness through new-energy vehicles. Changan Automobile (15.33, -0.41, -2.60%) has formulated an even more comprehensive and clear new-energy vehicle strategy for the 13th Five-Year Plan period. Yuan Mingxue stated that Changan will use intelligent technology as a breakthrough point to develop classic new-energy vehicle models and achieve its “518” performance targets for new-energy products. Meanwhile, SAIC Motor (17.77, 0.00, 0.00%) is also actively laying out the industrial chain for new-energy vehicles in preparation for the 13th Five-Year Plan.

The “13th Five-Year Plan” sees the automotive industry facing a “new technology battle.”

“SAIC Group’s ‘13th Five-Year Plan’ strategic priorities reflect its commitment to building an innovative enterprise and enhancing its differentiated competitive edge in a complex and ever-changing environment,” said Cheng Jinglei. Feng Xingya, Executive Deputy General Manager of GAC Group, also believes that “the automotive industry’s production and manufacturing methods as well as business models will undergo significant transformations in the future. First, at the product level, vehicles will shift toward personalization, electrification, and intelligence; second, at the manufacturing level, digitalization and modular production will drive the automotive industry toward large-scale customization. These trends will profoundly impact automakers’ development over the next five years.” Beyond changes in products themselves, the future of automobiles will also see shifts in operational models. In the evolution toward vehicle intelligence, autonomous driving has already reached a broad consensus. As autonomous driving becomes a reality, the operational models for cars may also change—for instance, with the rise of car-sharing services, car-sharing will gradually take off. During the ‘13th Five-Year Plan,’ Dongfeng will step up efforts to build network infrastructure platforms, including cloud computing and industrial intelligent systems. “We may not fully achieve this during the ‘13th Five-Year Plan,’ but we’ll establish the basic architectural framework and begin implementation in selected areas,” said Liao Zhengbo. Meanwhile, Chang’an Automobile plans to develop industries derived from internet and cloud-computing-based models, as well as traditional car rental businesses, during the ‘13th Five-Year Plan,’ according to Yuan Mingxue. Cheng Jinglei added that the future of the automotive industry calls for the involvement of innovative financial sectors; automakers must build new financial strengths and launch innovative business initiatives in the aftermarket, creating customer service centered on user experience. For automotive companies, overseas markets still offer considerable room for expansion. In Chang’an’s ‘13th Five-Year Plan,’ responding to the nation’s “Belt and Road” initiative, achieving a balanced domestic and international market strategy has become Chang’an’s new overseas approach. GAC’s internationalization strategy goes beyond simply building global brands—it encompasses three key aspects: perfecting product offerings, strengthening investment and financing systems, and leveraging scientific planning and coordinated resource allocation to strive for scaled overseas sales, globally integrated resources, and internationally oriented capital operations. Feng Xingya told reporters, “During the ‘13th Five-Year Plan,’ our annual overseas sales will reach 300,000 vehicles, placing us among the top three in the industry for overseas exports.” Meanwhile, domestic brands—including SAIC, Chery, and Geely—have not only formulated overseas market strategies for the ‘13th Five-Year Plan,’ but have also begun actively targeting mainstream developed markets such as North America and Western Europe, aiming to break into these lucrative markets during the plan period.