It is in a study of a Chinese researcher that we find the trace of the word “involution”. In this document that our colleagues in international mail, Wang Mingyuan, researcher, the Research Association on the Reformation and Development of Beijing, has found this word that uses this word which designates a very particular and very striking phenomenon in China. In this case, “it designates the phenomenon of absence of progress or qualitative change despite increasing investments”. Clearly, a kind of opposite to evolution. And this involution seems to win the automobile, Chinese as western. Manufacturers are investing more and more money for less and less visible progress for the customer, and sometimes even counterproductives, annoying or even dangerous for driving aids.
This researcher recalls major figures on the current state of industry in China. The country seems to have spent its golden age, even if its growth would still be dreaming of any region in Europe today. “The profit margin of the Chinese manufacturing sector dropped from 6.57 % in 2011 to 5.32 % last year, creating a paradox: While the industry is modernizing quickly and its position in the value chain is progressing rapidly, the beneficiary margins collapse ”.
Prix war is doing damage
If the margins collapse, it is also because China no longer knows what to do with some of its productés. Starting with the automobile. The occupancy rate of factories in China continues to lower and “The most important overcapacity can be found in the automotive sector” According to Mingyuan, with an occupancy rate of factories of only 71 %. It is too low to ensure the profitability of a production site.
It must be said that China is a paradoxical country: if it produces a lot of wealth, its pool of consumers is in fact quite reduced. All the more in the automobile: China has 1.4 billion inhabitants but its market is just exceeding 20 million new cars per year, with sales especially concentrated in large metropolises. A large part of the Chinese cannot afford a vehicle and the researcher recalls it very well in his document: “In 2022, the salary income of Chinese residents represented only 24 % of GDP, against 56.9 % for the United States”. The average salary of a large part of the Chinese remains quite low.
To try to seek new customers, car manufacturers have therefore been tempted for years to develop (very) low price vehicles. Less than € 10,000 for some electricity. But this war has its limits. In this context, The Chinese government expressly asks manufacturers to stop drawing prices down. This could actually cause serious social crises in the future.
A serious overproduction?
Chinese factories are under used and it is no coincidence: stocks are too large, especially among dealerships. Some even insurgent. At the beginning of summer, the stock of new unsold vehicles in China reached 3.5 million units, the equivalent of 57 days of sales. A record rate since the exit of the covid which does not reassure. Brands have therefore taken the lead, such as Volkswagen who had announced to export part of its Chinese production to the Middle East.
But the world will not be able to swallow everything that the Chinese will want to sell them. “China has already built a production capacity of 25 million new energy vehicles, and plans to exceed 50 million. Last year, global sales of new energies vehicles totaled only 18.3 million. This means that even with its existing production capacities, China is more than enough to supply the whole world “Comments the researcher. And with an American market that raises the road to Chinese brands and a Europe that has put its customs duties in place, China ultimately has little alternatives to its domestic market.