The fourth quarter of each year, especially December, is the key period of the year for automobile companies to hit the target. However, contrary to many people's expectations, on January 7, 2019, Geely Automobile Holdings Ltd. (Geely) chose to announce its sales in 2018 by completing the target of 95%. In December, its sales were down 39% year-on-year; only 93,433 vehicles were sold. Geely explained in an announcement that "although the wholesale sales level is relatively low, the corresponding retail sales level is still stable, which reflects the determination of the management's active handling in the dealer's total inventory to a healthy level."
In fact, at the beginning of 2018, Geely set a sales target of 1.58 million units; its final sales of 1.5 million units did not meet the whole-year target. In 2019, Geely set a sales target of 1.51 million units, compared with 1.5 million units in 2018. The ratio is almost the same, the industry seems too conservative, and the capital market does not buy the performance of Geely in 2018. On January 8, 2019, the second day after Geely released its 2018 production and sales statistics, Geely Automotive plunged 11.28% and closed at HK$10.22 per share. The market value evaporated by about HK$11.7 billion and fell below the "100 billion market value" benchmark.
"High-speed growth" can be used to describe the performance of Geely Automotive in recent years. In 2015, Geely Automobile's annual sales volume was 509,800 units, and in 2016 it was 765,800 units. In 2017, it was 1,247,100 units, and in 2018, it was 1.5 million units. It is double-digit high growth. However, in 2019, Geely set a target of only 1.51 million units, even less than the target of 2018. Many investors describe Geely as "conservative". Geely Automotive believes that at this stage, being the winter of the car market, defensive is more important than offensive, and the goal cannot be achieved if done in haste; it is, therefore, better to be stable than to be fast. In terms of sales target and the health, stability, and sustainability of enterprise development, Geely needs to give and take.
In fact, it was not only Geely; the overall performance of the Chinese automobile market in 2018 was not satisfactory, and many people used the term "cold winter" to describe it. On January 9th, the China Passenger Car Association (CPCA) published statistics showing that in December 2018, the sales volume of China's passenger cars in narrow sense was 2,217,441, a year-on-year decrease of 19.2%, and a month-on-month increase of 9.8%. As a result, the annual statistics of the market of China's passenger cars in the narrow sense was officially released. In 2018, the cumulative sales of passenger cars in narrow sense in China reached 22,350,562 vehicles, a year-on-year decrease of 5.8%. This is also the first negative growth in China's automobile production and sales in the past 28 years since 1990.
In 2018, the trend of the automobile market was quite different from that of the previous year. In the case of a new high in sales in January, the comprehensive sales volume in December directly fell below the 2015 level. According to Cui Dongshu, secretary general of CPCA, this sales trend is because of the market pressure factors, as well as related to the stimulus policies of the past three years. Before such policy was withdrawn, the automobile market was booming. At the beginning of the second year, sales would be shifted to the end of the first year, and the trend of "low first, high later" would be formed. In 2018, the sales trend had become "high first, low later", which is the self-adjustment of the market. If the market enters a reasonable cycle in 2019 and then supplemented with policy assistance, it is possible for the automobile market to achieve relatively stable growth, as the automobile market is far from reaching its height. The National Development and Reform Commission (NDRC) recently stated that it may introduce a series of measures to stimulate automobile consumption this year though ultimately, whether the desired results can be achieved is depending on many conditions.
With the downward pressure on China's economy and the sluggish manufacturing industry, the slump in sales of Geely has caused Anbound's chief researcher to think about the situation. In a daily internal discussion, Chen Gong pointed out his concern, that a challenge China's manufacturing industry must face in the future is that the manufacturing capacity needs to be managed. Such a trend is of no alternative; if it is not adopted, the company to fall into a crisis. Chan Kung explained that emphasis on capacity management is not blindly undergoing de-capacity, but rather an objective estimation and forecast of the scale of production capacity and the scale of profit return. It is not possible to blindly seek profit returns through the pursuit of the product; nor can it be blindly dumped at a low price; such is the management with capacity as its core.
Under such a concept of capacity management, manufacturing innovation, introducing new products, giving appropriate and reasonable prices, all these will be the goal of industrial development. Chan Kung further pointed out that in order to carry out capacity management, it is not only the private manufacturing industry such as Geely that needs to do this in the future; state-owned enterprise manufacturing industry like CRRC Group must also consider such adjustment. From the latest confrontations and boycotts faced by globalization, Chinese companies need to see that there will be more competitions and bigger challenges. If these companies do what they did in the past, they will face more and more difficulties. It should be pointed out that the capacity management here is both enterprise-level and macro-level. It is not only important for people engaged in productive work, but also for senior administrators in both enterprises and governments.
Final analysis conclusion:
In the future, China's manufacturing management should focus on production capacity. If this trend is not being taken attention of, it may cause the companies to fall into crisis. For China's industrial development, the idea of capacity management has strong applicability and universal significance.
