Investment Promotion Report on Auto Industry 2015
"Investment Promotion Report on Auto Industry 2015" was jointly issued by CIPA, Deloitte China and Auto Business Review. This report focuses on the auto aftermarket, new energy vehicles, and smart connected vehicles. It analysed the development of automotive industry from multi-dimensional aspects such as macro-economy, policy, market landscape, enterprise dynamics, etc. and compared the gap with mature markets, to point out the existing opportunities and challenges, and predict the emerging trend in the industry. It aims to facilitate an in-depth understanding of the industry's future developments and potential investment opportunities for the policy makers, regulators, industry enterprises, cross-industry participants, investment institutions and other related industry players.
Viewpoints / key findings
As one of the pillars in China's manufacturing industry, automotive industry has experienced the dilemma of "a sharp slowdown in demand, rapid fluctuations in sales, high inventory for dealers" in the past year. It's expected that China's vehicle sales will keep an annual compound growth of 5% till 2020. Based on the path of mature markets, China auto industry will soon transform from "car manufacturing, car consumption" to "car service". The followings are the key findings from the report:
- According to China Automobile Dealers Association, China automotive aftermarket size reached RMB 766 billion in 2015, and is expected to exceed trillion in 2018. The report chose a couple segments in aftermarket including auto repair and spare parts, used car, insurance, leasing, maintenance, sports and culture, and elaborated the development status, competition landscape, main players and restriction factors, then analysed the potential investment opportunities and risks in the market.
- Auto repair industry in China still has diversified business entities, and the market is highly fragmented. The market is expected to grow at an annual rate of 16% in the next five years, to reach a market size of RMB 1.5 trillion in 2019.
- China's current used car market is still in the early stage of development. It features in fragmentation of car sources, unbalanced regional development, diversification of business entities, and low efficiency in transaction. It's expected that independent used car dealers will be significantly differentiated, with acquisitions between large and medium-sized dealers intensified, and will gradually develop into regional used car brands with more advanced management level and higher bargaining power, and the small dealers will be phased out.
- At present, China auto insurance market has a large number of business entities with fierce competition, but the market concentration is also high, with the top three insurance firms dominate around 70% of the market share. A high degree of homogeneity existing in domestic auto insurance terms and rates, the insurance companies are difficult to form diversified competition in price and terms, thus they can only rely on new sales channels to capture more customer resources.
- Deloitte forecasted that, China's car rental market is expected to reach RMB 58 billion in 2018. Compared to the European and American markets, China's car rental market is still in its infancy, with a penetration rate of only 0.5%. Currently long-term rental service is the mainstream, individual rental is in its initial stage. Investments in P2P car rental tend to be cautious, as the industry will face a reshuffle period.
- With the development of auto aftermarket, consumer's awareness of car maintenance is changing from "repair" to "maintenance". At present, domestic chain brands for auto maintenance service are operated by regional, which haven't formed a national chain scale.
- Car racing in China is still in the early stage. Auto OEMs increased their investment in car racing in recent years. However, compared with the operation data of sports car operators in the United States, China's sports operation enterprises have lower profitability and bargaining power.
- In 2015, new energy vehicles (NEV) sales in China reached 331,100, an increase of 3.4 times, surpassing the United States to be the world's largest NEV market. Considering the industry development trend and national policy, there is huge market potential in China's NEV industry. In the following few years, China's NEV industry will be gradually led by the market rather than the government, and will be driven by the quality instead of subsidies.
- The business model for Internet of Vehicles (IOV) is still in the primary stage, with wide coverage which increases the difficulty in integration, and lack of powerful service platform to lead the market. However, market driven, technology maturity, standardization advancement, policy guidance will promote explosive growth in IOV market, to achieve the industry's acceleration.