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Huang Yonghe: Auto industry confronting four “new normals”

The auto industry is confronting four “new normals,”according to Huang Yonghe, chief engineer and director of policy research at the Tianjin-based China Automotive Technology & Research Center (CATARC).

The four “new normals” Huang referred to were vehicle registration and operation restrictions, anti-monopoly, parallel import and public disclosure of automotive repair information.

“There are 7 cities that have implemented vehicle registration and/or restriction policies, about a dozen other cities are contemplating similar measures,” said Huang. “Despite objections from different stakeholders, these policies are the most effective in combating traffic congestion and air pollution, and therefore I believe they will become the new normal.”

Asked if there is any possibility that the restrictive policies be lifted in the future, Huang’s response was negative. “This issue will be difficult to resolve within the next decade,” said Huang.

With regard to the ongoing anti-monopoly investigations, which have resulted in hefty fines levied on multinational brands and suppliers, Huang believes the issue is lack of transparency and guidance.

“There is yet an article or implementation detail with regard to the anti-monopoly investigations in the auto industry, and OEMs and dealers are at a lost what the government is really trying to catch or where the specific violations are,” said Huang. “China lacks a detailed anti-monopoly guide.”

The problem, according to Huang, is that the three ministries and commissions that drafted the Administrative Rules on Automobile Brand Sales are the same organs that carry out the anti-monopoly investigations and it is difficult to coordinate among the organs.

“But the public disclosure of automotive repair information (the third ‘new normal’) will be a key measure to solve the issue of OEM monopoly of aftersales parts supply,” said Huang.

The last “new normal” – parallel import – is expected to last about 3-5 years, predicted Huang.

“As prices go down further, there is less and less room to operate in the market place and people in the business may need to look for alternatives,” said Huang. China’s parallel import volume in 2013, according to Huang, was about 83,800 units worth $5.63 billion, accounting for about 7 percent of the passenger vehicle import volume. They were mostly mid- to high-end SUVs and originated primarily from the Middle East, the U.S. and Canada. Top three brands were Toyota, BMW and Mercedes-Benz.

Huang predicted that the future market growth of 5-8 percent would be “reasonable” and that automotive e-commerce will not disrupt China’s automotive aftersales market. “It would be complementary to the industry, but not disruptive,” said Huang in response to a question.

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