Who is China's Detroit?

As major auto brands dig the soil in major cities and build factories one after another, the question of "Who can become the Detroit of China?" has been mentioned again and again. Even when Detroit filed for bankruptcy protection in 2013 due to debts of $18 billion, which made those cities vying to become the "Detroit of China" embarrassed, it could not stop the industrial radicalization brought about by this title.

Those cities that occupy a pivotal position in the Chinese auto market and support the production and sales capacity of millions of auto companies all hope to add a "Chinese Detroit" hat as their prefix. The hat is filled with glory and satisfaction, just like China's "Wall Street" and China's "Bill Gates", full of glory.

In 2013, Huang Qifan, then mayor of Chongqing, publicly stated at a forum that "Chongqing will become China's Detroit in 2015". This statement caused a stir in the industry. The "Chongqing Automobile Industry Three-Year Revitalization Plan" clearly stated that Chongqing's vehicle production capacity will reach 4.8 million vehicles in 2015. If successfully achieved, it is not impossible for Chongqing to become China's Detroit. However, to date, Chongqing, with its frequency of "one new factory per month" for auto parts factories, has not been able to make the question of "who is China's Detroit" a definite question.

However, Chongqing is not the only city that wants to become the "Chinese Detroit", and the dream of "Chinese Detroit" did not start in Chongqing. Coincidentally, the head of Gaoling County in Xi'an also once boasted that he would build Gaoling County into the "Chinese Detroit". While the boast is still ringing in our ears, Detroit in the United States has gone from its heyday to decline. Today, the prosperity of the US auto market recovery no longer belongs to Detroit.

But this did not affect the fermentation of the "China Detroit" dream. In 2009, when the Chinese auto market experienced a blowout and surpassed the United States to become the world's largest auto market, the "China Detroit" dream began to ferment further. Cities such as Changchun, Shanghai, Guangzhou, Ningbo, and Chongqing have expressed or fantasized about becoming "China's Detroit", and major groups such as FAW, SAIC, and Changan have all worked hard to carry out a new round of "arms race", expanding production capacity in various places, hoping to become the creator and participant of "China's Detroit".

As a long-established base of China's automobile industry, Geely Changchun, the hometown of FAW, is perhaps regarded by the industry as the city closest to "Detroit". Automobiles have almost become the only business card of this city full of northern flavor. The first automobile manufacturing plant and the first car in New China were born here. It is praised as the cradle of China's automobile industry and has prospered for more than 50 years. It is very much like the Chinese sample of Detroit in the United States - "over-reliance on the automobile industry". In Changchun's GDP growth, automobiles as the secondary industry have contributed more than 60% to Changchun's economic growth, and there is a trend of continued growth. According to the plan, the "13th Five-Year Plan" target is to achieve a production capacity of 2 million vehicles and the total number of parts manufacturers will exceed 500.

In other words, this city prospers because of cars, but it may also decline because of the car industry, just as the three major American auto giants supported Detroit's glory with more than 70% of the industry share, but they failed to save Detroit from decline. Detroit is no longer a "commendation" full of glory. Learning from the past, Changchun's city leaders are also working tirelessly to find a "second pillar industry", but to this day, the economic status of the automobile industry in Changchun is unbreakable.

Wuhan, located in the central part of China, is the headquarters of Dongfeng Group. It has factories all over the city, and countless new cars are driven out of Dongfeng Honda, Dongfeng Peugeot Citroen and other factories. Like Changchun, which is far away, cars support the prosperity of this city. According to the plan, by 2020, Wuhan's automobile production capacity will exceed 3 million vehicles, and the scale has long surpassed Detroit in the United States. Liuzhou has played a more thorough role in the importance of the automobile industry. Just imagine how much the economic output value of Liuzhou would drop if there was no SAIC-GM-Wuling? Just like the years when Dongfeng's headquarters moved from Shiyan, the output value of Shiyan Automobile Base dropped by hundreds of billions of yuan.

As an important city in the southwest, Chengdu has become more and more important in the auto market in recent years. The call for "China's Detroit" has become increasingly louder. There is even a saying that "In Chengdu, there are luxury cars that you can't imagine, but you can see them". Chengdu has introduced 11 vehicle manufacturers, including FAW-Volkswagen, FAW-Toyota, Geely, and Volvo, and built a production platform with an annual output of 1.7 million vehicles and a 100 billion yuan automobile industry cluster. But the question is, can this become the "China's Detroit"? Obviously not. Ningbo, where the Geely Chunxiao factory is located, even has an annual output of 1 million vehicles and is surrounded by a parts industry cluster, which is not much different from Detroit in the United States. Will such a grand scene and vitality become the future version of "Detroit"?

Speaking of this, perhaps we should take a look at what Detroit is? Detroit is a city, but it is also a microcosm of American automobiles. Here, the three major automobile groups, General Motors, Ford and Chrysler, are located in sequence, forming an interconnected industrial cluster. In other words, the American auto market is Detroit, which was once so prosperous, but now it is difficult to recover.

So the question is, can Wuhan represent the Chinese auto market? Can Changchun? The answer is not hard to guess. Just like the 13 Japanese auto companies, which have gone through decades of history, still do not have a Detroit because their bases are scattered all over the place. Another example is Wolfsburg, the base of Volkswagen in Germany, which may be the place that best represents the prosperity of modern automobiles after Detroit. However, no German would call Wolfsburg "German Detroit". Stuttgart and Munich are both world-famous auto cities, but no one wants to be called "Detroit", just like Italians will not look for the so-called "Detroit" in Milan.

It seems that, except China, no country wants to copy it, and of course no country can copy it.

Along the way, more than a dozen cities have publicly declared that they want to be the "Detroit of China". Even Changshu, where the Qoros and Chery Jaguar Land Rover factories are located, has the ambition to become the "Detroit of China" with a production capacity of only a few hundred thousand. As for who can become the Detroit of China, perhaps this is a false proposition, because China does not have the soil to cultivate Detroit. There are more than a hundred automobile brands of all sizes, and their annual sales have ranked first in the world for several consecutive years. However, the Chinese auto market is not the home of Chinese brands. It has always been "other people's hometown and other people's testing ground". How can the "Detroit of China" be born?

However, for the vanity brought about by this false proposition, China's pace of automobile production capacity expansion has become radical and impetuous, to the point that overcapacity has become the norm.

Data shows that in 2016, China's automobile production and sales reached 28.119 million and 28.028 million respectively, up 14.5% and 13.7% year-on-year respectively. It is no surprise that China has led the world for the eighth consecutive year. However, the comprehensive production capacity of China's auto market has seriously exceeded the standard, and the current used + planned production capacity has approached 40 million. The Wall Street Journal once used "that is a place where miracles happen" to marvel at the sales of 28 million vehicles in China's auto market, but it cannot hide the current situation of overcapacity and difficult problems in China's auto market.

It took only five years for the Chinese auto market to go from "undercapacity" to "overcapacity". Along the way, the surprise of the sales surge was accompanied by the radical and impetuous expansion. In 2010, the Chinese auto market broke through the threshold of 10 million vehicles, and the auto market boomed. Auto giants led by Volkswagen and General Motors began to realize the potential of the Chinese auto market and the gap in their own production capacity.

In just two years, production capacity increased by 15 million vehicles. In 2012 alone, 60% of the global production capacity flowed to China, resulting in a sharp decline in capacity utilization. In 2013, the average capacity utilization rate was only about 53%.

Even so, various investors have no intention of withdrawing, resulting in a situation where there are too many wolves and too little meat. Some car companies have overcapacity, some have insufficient capacity, and some are still in a "chicken blood" state.

Detroit's declining urban area

It is predictable that in the next two years, the domestic automobile production capacity may gradually approach 40 million vehicles. However, the fact is that in 2015, the domestic automobile sales volume was 24.598 million vehicles, a year-on-year growth of only 4.7%. In 2016, the sales volume was 28 million vehicles. According to this sales growth, it is almost impossible to effectively utilize the 40 million vehicle production capacity in the next two years.

Compared with the nearly 80% capacity utilization of Volkswagen, Ford, Nissan and other brands, the capacity utilization rate of domestic brands is "sad", and the capacity utilization rate of some brands is less than 50%. You know, only when the capacity utilization rate reaches 75% to 80% can there be a chance to make a profit, otherwise the unsold vehicles will continue to accumulate, and the pressure on dealers will become increasingly prominent.

A survey conducted by a consulting agency on automobile production capacity under construction shows that China's automobile production capacity will reach 40 million vehicles by 2018 and 50 million vehicles by 2020. However, based on the current sales growth rate, the overall sales volume of China's automobile market by 2020 will only hover around 30 million vehicles. This means that after all vehicles are put into use, the capacity utilization rate will be only about 60%. However, some consulting companies have predicted that the Chinese automobile market will experience another low point in 2018, and it will be difficult to guarantee the ideal growth rate of 10%. Whether the overall sales volume of 30 million vehicles can be successfully achieved remains unknown.

Even if it can be successfully achieved in 2020, who will sell the extra 20 million cars? If we follow Detroit's example, which city can afford such a feast?

As production capacity and sales volume become increasingly unbalanced, the inventory index continues to rise, dealers are under increasing pressure, and the debt ratio is climbing. The most direct consequence of oversupply is price wars, with dealers making zero or even negative profits. I believe the damage from the price wars involving GM, Ford, and Hyundai in 2015 is still fresh in our minds. Which is more important, gaining sales volume or losing brand premium?

Idle production capacity and difficult situation of dealers have become an unavoidable reality. Why are car companies still expanding non-stop? Is the temptation of "China's Detroit" so strong? In the final analysis, it is all because of "the number of cars per thousand people in the United States is more than 800, while China has only 125." Let's do some calculations. When the number of cars per thousand people in China reaches half of that in the United States, that is, the number of cars per thousand people reaches 400, our total number of cars will exceed 500 million. Is this possible?

When tens of millions of new cars are facing a situation where no one is interested in them and huge idle production capacity cannot be absorbed, we should stop talking about "China's Detroit" with the hat of "the world's largest market" because that is nothing more than a pipe dream.

Detroit has gone from glory to decline, and the past of the three major American auto giants from their heyday to filing for bankruptcy protection has begun to become clear. Prosperity has disappeared and depression has returned. This is the past of the American city of Detroit, and it may also be the future of those cities that want to become the "Chinese Detroit."

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.