China's auto market outlook in 2022

The coronavirus pandemic remains the biggest uncertainty for the growth of the automotive market. The continuation of the epidemic and the dynamic zero prevention policy will continue to inhibit the full recovery of the macro economy and household consumption, and the bottleneck of the supply chain is also expected to continue. However, the policy expectations of loose monetary policy and the tax cut subsidy program for small and medium-sized enterprises are expected to hedge the potential negative impact of the epidemic on the economy and consumer confidence. In addition, the supply constraints of core components such as raw materials and chips will also be effectively alleviated with the release of new capacity in the second half of the year.

Looking forward to 2022, both sides of supply and demand will form a joint force to drive car sales steadily upward, and it is expected that car sales will achieve 3% growth throughout the year. Aside from short-term fluctuations in production and sales, China's auto consumption is full of resilience in the medium and long term, and will open a new growth curve.

First, from the supply side, the market has significantly increased the number of new models such as smart electric vehicles to choose from, catering to the different needs of different market segments and target groups. Secondly, the Oems have established system-level capabilities and ecosystems in emerging fields such as three-power technology, intelligent cockpit, and high-level assisted driving, and have accelerated the production and scale of core technologies (including high-specific energy power batteries, 800V high-pressure platforms, large computing power vehicle regulation chips, lidar, etc.) to promote the upgrading of automotive technology paradigms. Comprehensively enhance the attractiveness of smart electric vehicle products to consumers.

From the demand side, the increase and purchase will lead the structural growth of China's automobile consumption. In 2021, the demand for replacement purchases exceeded the first purchase to become the main source of growth in China's auto sales, and there is a strong correlation with the growth of both the low-end market (A00 class cars) and the middle and high-end market (above B class). In addition, after the market cultivation in recent years, consumers' acceptance and recognition of emerging vehicle technologies and the use value they bring has been significantly improved, which is not only reflected in the outbreak of new energy vehicle sales, but also reflected in the continued rise of high-level auxiliary driving software installation rate. According to Deloitte's 2022 Global Automotive Consumer Survey, 40% of Chinese consumers who are interested in buying a car are considering buying energy-saving and new energy vehicles, and more than 70% of the surveyed car owners are willing to pay a higher premium for electric vehicles than fuel vehicles of the same class. Nearly 70% of consumers are willing to pay more than 2,500 yuan for owning advanced autonomous vehicles and safety features, of which nearly 20% are willing to pay more than 10,000 yuan for autonomous driving features.

New energy vehicles: crossing the critical point, open 1-100 high growth

After crossing the penetration rate of 10%, the new energy automobile industry will officially move from 0-1 to 1-100, entering a stage of high growth driven by the market. It took nearly ten years for the penetration rate of new energy vehicles in China to increase from 0 to 5%, but it took only one year to complete the breakthrough from 5% to 10% and then to 13%. Looking forward to 2022, despite the further decline of subsidies and their official withdrawal at the end of the year, China's new energy vehicle market is fully transforming into a demand-driven high growth stage, and forming a strong support for sales on four key drivers: product quantity and competitiveness, total car ownership cost, consumer preferences and attitudes, and infrastructure readiness.

Liu Xiaoming, China partner at Deloitte Management Consulting

Under the trend of intelligent electric, car companies reshape the research and development system

New energy intelligent connected vehicles have become one of the key trends in the global automotive industry. New energy vehicles, especially pure electric vehicles, are not only facing the upgrading of the power system, but also reshaping the structural design of automotive products, making the structural design of the vehicle relatively simplified, and the number of assembled parts is greatly reduced, which provides the possibility for the design and manufacture of more standardized products. This is one of the reasons why sliding chassis technology has been able to develop rapidly recently.

The development of new energy and intelligent network technology also has a profound impact on the research and development system of automobile companies, including research and development positioning, research and development mode, research and development infrastructure, and research and development management system.

For research and development positioning, leading car companies are shifting their research and development goals from "functional satisfaction" to "experience excellence" and accelerating the development of software-defined vehicles.

For R & D mode, digital technology, as the core of intelligent network technology, has been widely used in all aspects of R & D business process, from virtual simulation to in-the-loop testing, from automated calibration to virtual test ground. The future research and development mode will be the organic combination of offline physical development and online virtual development, and the research and development meta-universe mode will become the main research and development mode of intelligent connected vehicles in the future, which will greatly accelerate the research and development process, especially the iterative speed of virtual development.

For R & D infrastructure, the realization of future R & D positioning, product operation, and R & D model need strong data support, and the infrastructure represented by cloud technology is one of the core elements of leading car companies to achieve these goals, and there must be a matching tool chain, especially software development tool chain, AI technology development tool chain. How to obtain a tool chain suitable for the enterprise's own development is an urgent issue placed in front of every car company, especially the traditional car company.

For R & D management system, leading automobile enterprises urgently need to introduce a new management system targeted at new R & D positioning, new R & D model, and new R & D infrastructure, so as to integrate new technology with new management system, give full play to the advantages of new technology, support enterprises to create new business models, and go through the industry change cycle. Become a leader in the new automotive industry.

Zhou Xiaoliang, China partner at Deloitte Management Consulting

The automobile supply chain is gradually transitioning to a stable recovery period

In the past year, after experiencing shocks such as lack of core and rising raw material prices, China's automotive supply chain will gradually transition to a stable recovery period in 2022, preparing for a full rebound into the new normal. Under the continuous influence of two external factors, anti-globalization and COVID-19, the automotive industry supply chain will show three major trends in 2022:

Supply localization: Auto companies will further improve the overall risk management ability of the supply chain, step up supply source control and build the integrity of the local supply chain

Operation lean: through digital and intelligent means, to achieve the cost reduction and efficiency improvement of the supply chain, lean supply chain operation and layout

Optimization of the internal structure of the industry: accelerate the structural adjustment of the industry, expand new production capacity, and clean up backward production capacity

As the core of connecting upstream and downstream, vehicle enterprises should continue to play the role of "chain master", actively deepen upstream and downstream coordination, and improve the visibility of the overall supply chain. At the same time, take the initiative to plan and monitor supply risks, and strengthen support for suppliers to ensure that the healthy industrial chain ecology is restored as soon as possible. Looking forward to the future, automobile enterprises should build a future supply chain of "rigid and flexible" by building a capability-oriented strategic supply network, digital empowerment, and win-win cooperation, in order to cope with the market competition under the new normal.

Mou Jiawen, China partner of Deloitte Management Consulting

The new automobile retail revolution enters the deep water zone

As a consumer category with low frequency and high price, heavy experience and service, automobile determines the definition of new retail and the path of transformation to new retail are different from other industries. Automobile new retail not only focuses on consumer experience and data as the core driving force to improve and optimize existing channels, at the same time, automobile new retail is also the innovation of future sales formats and business model reconstruction.

New automotive retail will continue the trend of change in 2022, mainly reflected in four aspects: first, consumer experience as the core, including more direct channels, store location closer and closer to consumers; Oios are no longer simply selling cars, but extending their reach to all stages of the life cycle, and changing the one-way logic of product focus to redesign the retail process. Second, the "centralized" retail system is mainly reflected in the Oems moving to the front desk, horizontally expanding their service boundaries, and creating direct contact points with consumers; Vertically skip dealers, strengthen the control of traffic/lead entry, and improve the ability to identify, analyze and transform leads. Third, the digital retail process, on the surface refers to the 4S store intelligent management, data on the cloud, but in fact, more emphasis on the realization of the interconnection between various channels, the establishment of online and offline integration of retail experience. Fourth, the open whole chain ecology, which is specifically reflected in the Oems out of the closed system, actively use the access ability of Internet channels, hardware and software infrastructure services, and tap the purchasing power outside the traditional marketing network.

Hui Liang, China partner at Deloitte Management Consulting

The future of automobile finance is good, and the residual value management of trams is explored

China's auto finance market as a whole is under a certain pressure caused by the slowing growth of auto sales, and the Oems of the manufacturer system are facing the impact from financial leasing companies and banks. However, compared with the penetration rate of auto finance in mature countries (more than 70% for new cars), the financial penetration rate in China still has room to rise even if the overall growth of auto sales slows down. Therefore, the growth momentum of China's auto finance market will not change in the short term.

On the other hand, due to the gradual strengthening of competition in the industry, the carrier of auto finance, in addition to the mature new oil vehicles so far, will face the issues of how to do a good job in the rapidly rising second-hand car market and new energy vehicle market. Although so far due to the second-hand cars, new energy vehicles there are some difficulties in the assessment of residual value, low retention rate and do not want to be involved, but the market trend can not be changed after all, how to do these difficult markets will become the key point of differentiation competition. Due to the technological development of the automobile industry and the gradual changes in market demand, new trends such as car-electric separation and travel services will further bring great pressure on the traditional products and traditional business models of auto finance, and in the long run, the possibility of disruptive changes to the industry cannot be ruled out.

Zhang Zhen, Deloitte China risk advisory partner

In the era of strong compliance, car companies need to internalize data compliance and cybersecurity capabilities

In 2021, the automotive industry enters the era of strong compliance supervision in the field of network security and data compliance, which is the first year, and a series of domestic laws and regulations including personal information protection law, data security law, automobile data security management regulations, and strengthening the requirements of Internet of vehicles network security and data security make most car companies overwhelmed. In 2022, the state will also introduce new regulations and mandatory standards, and some boots will land, but car companies should be more proactive and positive about how to build a systematic network security and data compliance capability, and implement digitalization, big data, vehicle networking, and connected vehicle business more efficiently from security governance, compliance and security management, compliance and security technology and other aspects. Timely security and data compliance controls.