Over the past month or so, automotive companies have frequently announced strategic adjustments involving "mergers" and "integrations."

Recently, SAIC Volkswagen announced a major integration of its online and offline channels, with the entire range of Skoda models moving into Volkswagen brand dealerships. This also signifies that the Skoda brand, which became independent in 2016, has returned to the embrace of SAIC Volkswagen.

Two days prior to the aforementioned event, Geely Automobile also declared that the Geely Geometry series, established in 2019, has officially been integrated into Geely Galaxy, with its distribution channels also being merged. This is the first major move since Geely released the "Taizhou Declaration."

Not long before this, SAIC Passenger Cars also officially announced the integration of the marketing service organizations for Roewe and Flyme, with Flyme Automobile, which became independent in 2021, returning to SAIC Passenger Cars.

These strategic adjustments by leading automotive companies are not coincidental but rather indicative of profound changes occurring in China's automotive industry. When the automotive industry was thriving, car companies entered the "Age of Great Navigation." During this phase, car companies adhered to the philosophy of rapid expansion and the belief that more products are better for competition, continuously expanding their territories with a strong spirit of adventure. However, once the industry's growth slows down or even enters a phase of存量 competition, car companies officially bid farewell to the "Age of Great Navigation" and begin to retract their battle lines.

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Strategic contraction represents the attitude of brands caught in sales difficulties to "stop losses in time." Against the backdrop of the end of high-growth dividends and the onset of price wars, it is wise for car companies to reduce their territories. In this "half-time battle" of the automotive industry, survival is the most important belief for car companies.

Contraction of Multi-Brand Strategy

With the explosive growth of new energy vehicles in recent years, Geely Automobile Group has formed a vast matrix of automotive brands, including Geely, Lynk & Co, Proton,睿蓝, Geely Geometry, Geely Galaxy, Volvo, Polestar, Lotus, LEVC, Radar, and others.

The multi-brand strategy has allowed Geely Automobile's product layout to be very broad, covering products in the 0-1 million yuan range in the new energy field. This strategy of expansion has also allowed Geely to benefit from the dividends of the era. Geely's new energy vehicles, which started relatively late, have seen a rapid increase in sales in the past two years. Building on a 48% year-on-year growth last year, in the first nine months of this year, Geely's new energy vehicle sales continued to grow by 76% year-on-year, surpassing 91,000 units, with the proportion approaching 50%.

However, with the arrival of price wars and increasingly fierce market competition, whether Geely's strategy will increase internal consumption has also attracted a lot of market attention. On September 20th, Geely Holding Group Chairman Li Shufu officially released the "Taizhou Declaration," announcing that through five major initiatives of "strategic focus, strategic integration, strategic collaboration, strategic stability, and strategic talent," the company will focus on the main business of automobiles, enhance competitiveness, and officially enter a new phase of strategic transformation.The first major move in the aforementioned transformation is to incorporate Geely Geometry into Geely Galaxy. Geely's future mainstream new energy brand will focus on the Galaxy series, and "GEOME" will become the intelligent boutique small car series of Galaxy. Geely Geometry, established in April 2019, was Geely's first independent new energy brand launched in response to the new energy transformation. It was initially positioned as a high-end pure electric car brand and was launched with high profile in Singapore, introducing its first model, the Geometry A. However, under fierce market competition, Geometry's sales performance was not satisfactory, and its brand positioning had long deviated, becoming lackluster among its "brother" brands, making integration almost an inevitable outcome.

Marked by the "Taizhou Declaration," the market believes that Geely Automobile will shift from strategic expansion to strategic contraction, and there may be corresponding mergers and integrations among multiple brands in the future. However, within Geely, the "Taizhou Declaration" is not a strategic contraction but more of a focus on resources and strategy.

Recently, Geely Automobile Group CEO Guan Jiayue stated in an interview with First Financial Daily that the automotive industry chain is very long, and technology iteration is very fast, especially in new energy vehicles, with a short technology iteration cycle, such as in the "three electric" field and the intelligent field. Strategic focus means concentrating all of Geely's resources on green development, intelligent development, and new energy transformation. Around the aforementioned strategy, Geely's related resources need comprehensive collaboration, such as large-scale collaboration in procurement, which can make product prices and costs more competitive.

The fate of Feifan Automobile is similar to that of Geely Geometry. It was born in 2021, during the rapid growth of new energy vehicles, with its predecessor being SAIC R, positioned as a high-end new energy brand, and carrying the high hopes of SAIC Group for the transformation to new energy. However, contrary to expectations, Feifan Automobile did not gain market recognition in terms of sales. Public data shows that for the first nine months of this year, except for January, Feifan Automobile's monthly sales were not more than a thousand, with only 342 units in September.

At present, SAIC Group's own brands include Roewe, MG, Maxus, Feifan, and Zhiji, among others. With the overlap in positioning with SAIC Group's other high-end new energy brand, Zhiji, Feifan Automobile can only return to SAIC Passenger Cars.

At the Chengdu Auto Show, SAIC Passenger Cars Executive Deputy General Manager Yu Jingmin stated in an interview with First Financial and other media: "SAIC Group has always been committed to building a large passenger car sector. In order for SAIC's new energy to have better development, Roewe will further accelerate the integration with Feifan, further focus on core resources, and improve overall efficiency."

Unlike Geely Geometry and Feifan Automobile, SAIC Skoda was independent at the tail end of the development of China's fuel car boom. In April 2005, Skoda reached a cooperation with Shanghai Volkswagen, becoming the second brand under SAIC Volkswagen and officially entering the Chinese market. With the continuous growth in sales, Skoda prepared to "fly solo." In July 2016, Skoda officially operated independently in the Chinese market and enjoyed the last three years of dividends from China's fuel car market.

From 2016 to 2018, Skoda's sales in the Chinese market exceeded 300,000 units for three consecutive years, with 330,000 units, 333,000 units, and 341,000 units, respectively. However, since then, with the continuous shrinking of China's fuel car base and the rise of domestic brands, Skoda's sales have also continued to decline, with sales falling to 22,800 units in 2023. Obviously, at this stage, Skoda no longer has the capital to operate independently.On the basis of dealers continuously withdrawing from the network, Skoda returns to SAIC Volkswagen's channel. According to the information released by SAIC Volkswagen, nearly 500 Volkswagen brand dealers have applied to represent the Skoda brand at the same time, of which more than 330 have completed the authorization signing, enabling Skoda's network to cover 206 prefecture-level cities, with a city coverage rate of over 60% and a market coverage rate of 85%.

Shut down and merge will become the new normal.

In 2014, with the rise of the century-long transformation of new energy vehicles, new forces in car manufacturing sprouted like mushrooms after rain, with the number of new brands and companies established by cross-border car manufacturing and traditional car companies reaching a peak of over 400, ushering in a new round of expansion in China over the past decade.

Previously, second and third-tier new forces in car manufacturing had already experienced a wave of sifting. Now, the strategic contraction of leading automotive groups more clearly indicates that China's automotive industry is welcoming a profound new transformation. That is, against the backdrop of the continuous shrinking of the fuel car base in the Chinese market and the slowdown in the growth rate of new energy vehicles, price wars and fierce market competition have intensified. More and more car companies are expected to start strategic focus and integration, and "shut down and merge" will become the new normal.

Since 2018, which marked the end of China's 28-year continuous growth record in car sales, the car market has been in turmoil. After two consecutive years of year-on-year negative growth in 2018 and 2019, from 2020, new energy vehicles have supported a new round of growth in China's car market. However, the deceleration of new energy vehicle development in 2023 once again caught the market off guard, and "involution" has become a keyword in the automotive industry, and elimination is no longer just a concern for marginal car companies.

As early as 2022, Zhu Huarong, Chairman of Changan Automobile, sounded the alarm, saying that 80% of China's fuel car brands will "shut down and merge" in the next 3 to 5 years. In May 2023, at the performance explanation meeting of Changan Automobile in 2022, he mentioned again that in the past 3 years, 75 car brands have been shut down and merged, and in the next 2 to 3 years, it is conservatively estimated that 60% to 70% of the brands will face "shut down and merge".

At that time, Zhu Huarong's words were considered astonishing, but now they seem to be "every word is a pearl".

Under the fierce market competition, the once largest automotive group, SAIC Group, also has a strong sense of crisis. "Market elimination, is the (SAIC) group there? The (SAIC) group must be there. Is SAIC passenger car there? Must be there." Regarding the competition in the next three to five years, Yu Jingmin said at this year's Chengdu Auto Show that SAIC will stay at the table.

After the new leadership officially took office in August this year, SAIC Volkswagen's market approach has become particularly aggressive. Fu Qiang, Executive Deputy General Manager of Sales and Marketing at SAIC Volkswagen, said in an interview with the media that the market forecast that only less than 10 car brands may ultimately survive in the Chinese market in the future. If this forecast is true, then attack is the only strategy for SAIC Volkswagen, and only attack is the best defense. "We must sit at the dinner table to eat, and cannot become the food on the dinner table. This is the consensus of the Volkswagen marketing team, including the members of the executive committee." Fu Qiang said.

In the "Taizhou Declaration", Li Shufu also mentioned that in the face of the economic environment and industry competition, Geely must face challenges head-on, lay foundations, and practice internal skills. In terms of strategic integration, Li Shufu said that it is necessary to comprehensively sort out Geely's various business segments, further clarify the positioning of each brand, straighten out equity relationships, and reduce interest conflicts and redundant investments; in terms of strategic stability, Li Shufu emphasized "not to expand blindly" and "fight a good positional war".The chairman of an automotive parts company said to reporters: "Over the past 100 years, the automotive industry has been continuously experiencing a cycle from a hundred flowers blooming to being dominated by a few oligarchs, and the Chinese automotive market will be no exception."

Yu Chengdong, Executive Director of Huawei and Chairman of the Intelligent Automotive Solutions Business Unit, judged that the future direction of car companies is either to go bankrupt or to become a giant. He said at last year's Future Auto Pioneers Conference that only a few manufacturers will be able to survive in the future. Of course, each manufacturer may have multiple sub-brands under its umbrella, but there won't be too many main players in the market. BYD will become one of the few automotive giants that can survive in the future, and it is still difficult to say whether other companies can survive and become giants.