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"Black May" is not necessarily a bad thing
In a sudden turn of events, the Chinese automobile market found itself in a state of "darkness." Flip through the newspapers or browse the web, and you'll find "Black May" dominating headlines. While a drop in car sales in April might have stunned many, the 20% increase in May sales left even more people struggling to comprehend the situation. However, I believe that the emergence of "Black May" isn't entirely negative—it may actually be a necessary phase for the industry's long-term growth.
First and foremost, this downturn helps identify truly strong companies. In a fast-growing or even shortage-driven market, it's hard to distinguish competitive enterprises. This is a basic economic principle. The Chinese auto industry has historically lacked competitiveness, and this period of decline reflects that reality. A clear example is the widespread price hikes seen across the sector. The "Black May" moment signals that the era of easy profits from car projects or 4S dealerships is likely over. As a result, companies must focus on internal improvements, while those with real strength will eventually rise to prominence.
Recently, we've seen automakers taking proactive steps—recalling defective vehicles and adjusting prices swiftly. These actions reflect a growing sense of competition and customer service awareness, which are positive outcomes of the current market shift.
Moreover, this period helps correct some long-standing distortions in the market. Issues like inflated car prices and unprofessional 4S dealership staff have been persistent problems. With the changing dynamics between supply and demand, these issues are expected to gradually fade, restoring consumer confidence. On a broader scale, China’s car prices remain higher than international standards, and the lack of truly independent models also represents a distortion. Increased competition will accelerate the alignment of domestic prices with global levels and encourage greater innovation among Chinese automakers, leading to more affordable, locally-tailored options.
Looking ahead, the Chinese auto market is likely to undergo a major transformation, with a new pricing system and competitive landscape emerging. From a national perspective, the slowdown in the auto market—though seemingly negative—helps eliminate bubbles and ease concerns about an overheated industry. While China remains a hot spot for investors, a slight cooling allows for more rational decision-making.
Additionally, after five years of rapid growth, the market has experienced a surge in demand, leading to various challenges such as urban imbalance, traffic congestion, and energy shortages. These issues require time and careful planning to resolve.
Some critics argue that the sudden decline was due to government intervention, but debating the causes of "Black May" is no longer productive. It's important to remember that the overall Chinese auto market is still a high-growth sector. Although sales dropped month-on-month, they still increased by nearly 20% compared to the same period last year, with a cumulative rise of 37.68%.
At this critical moment, companies must stay calm, avoid panic, and prepare for the long haul. No market can sustain ultra-fast growth indefinitely. The resilient enterprises should use this rare opportunity to restructure, optimize operations, enhance competitiveness, and align with sustainable development principles. This will better position them for the next wave of growth.
Jianjun Jian, *China Automotive News* (June 29, 2004)
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