Recently, most auto companies have released their 2019 financial reports. A careful study found that most companies have reduced their costs in 2019 compared to 2018. Among them, the cost of passenger cars in some car companies has also declined year-on-year. It can be seen that the "cost reduction model" of major auto companies in 2019 has achieved significant results.

However, at the beginning of 2020, a sudden new crown epidemic broke the development rhythm of auto companies. Pressing the "pause button" at the beginning of the year makes the auto industry, which is already stressed, feel difficult. However, as the domestic epidemic has been effectively controlled and the national economy is recovering in an orderly manner, cost reduction and efficiency increase have become the "highlight" of the next development of auto companies. So in the post-epidemic period, how can auto companies reduce costs?

Market environment forces down costs

On March 18, Jianghuai Automobile released its 2019 annual report. The data shows that JAC’s operating costs have been brought under control. In 2019, operating costs have been reduced by about 7%. Sales expenses and R&D expenses have fallen by 10% and 18% year-on-year, respectively.

On March 31, Dongfeng Motor released its 2019 performance report. The report shows that the total cost of sales of Dongfeng Motor in 2019 was about 87.596 billion yuan, a decrease of about 3.532 billion yuan from about 91.128 billion yuan in the same period last year, and a year-on-year decrease of about 3.9%.

The report pointed out that the decrease in sales and distribution costs was mainly due to the decline in sales of Dongfeng Peugeot Citroen Automobile Sales Co., Ltd., which led to a decrease in transportation costs; at the same time, the promotion of publicity fees was carried out in order to improve the performance of Dongfeng Peugeot Citroen Automobile Sales Co., Ltd. reduce.

On the same day, GAC Group released its 2019 financial report. From the data point of view, the cost of GAC passenger vehicles in 2019 decreased by 17.1% year-on-year. In terms of cost reduction and efficiency enhancement, GAC Group's sales and distribution costs decreased by approximately 520 million yuan from the same period last year, mainly due to the combination of advertising and marketing expenses decreased year-on-year. Administrative expenses decreased by approximately 929 million yuan compared with the same period last year, mainly due to a year-on-year decrease in the allocation of A-share option incentive expenses.

According to SAIC's 2019 annual report. Under the condition of actively controlling costs, operating costs were 726.1 billion yuan, a decrease of 5.7%, sales expenses were 57.4 billion yuan, a decrease of 9.4%, management expenses were 22.3 billion yuan, an increase of 4.6%, and financial expenses were 24.36 million yuan, a decrease of 87.5%. Research and development expenses were 13.394 billion yuan, a year-on-year decrease of 12.94%.

Great Wall Motor's 2019 annual report shows that from the perspective of operating costs in the financial report, the total operating cost of Great Wall Motors in 2019 has dropped significantly, from 92.992 billion yuan in 2018 to 91.408 billion yuan. At the same time, research and development expenses have dropped from 1.74 billion yuan in 2018. The increase was 2.71 billion yuan in 2019.

Regarding the general decline in the cost of car companies in 2019, Cui Dongshu, secretary general of the National Passenger Car Market Information Joint Council, believes that the main reason is that the car market has been declining year after year, and car companies have insufficient confidence in the market, reduced production and cleared inventory, especially in the second half of last year. Destocking characteristics continue to appear. It is also due to the reduction in production, which has resulted in insufficient supply in the auto market so far during the epidemic.

Cao He, president of Quanlian Automobile Investment Management (Beijing) Co., Ltd., also holds a similar view. He judges that the general cost reduction of auto companies in 2019 is related to the general market situation. After the negative growth of the auto market in 2018, auto companies generally judged that 2019 will also show a downturn, so they "tighten their belts and live a life" and actively reduce costs. Cost reductions are expected.

In addition to the above factors, throughout 2019, the news of car companies layoffs is endless. According to incomplete statistics, in 2019, mainstream global automakers have announced at least more than 100,000 layoffs, and layoffs are no longer the decision of one or two car companies. They have gradually evolved into the commonality of the entire industry. Domestic car companies are also layoffs. Among other things, this also reduces the personnel costs of car companies to a certain extent.

The cost of car companies is difficult to reduce and may rise

Obviously, this wave of layoffs and salary cuts has become more turbulent after the outbreak. In 2020, the global automotive industry will experience unprecedented demand stagnation. The new crown pneumonia pandemic has become the single largest risk factor facing the automotive industry over the years. From the perspective of foreign conditions, more than 1.1 million European auto workers will be fired. The three major US automakers have become the hardest hit areas for pay cuts and layoffs due to auto companies' suspension of production and plant closures.

Compared with the substantial layoffs and salary cuts by overseas car companies, domestic car companies have relatively mild cost-cutting measures, and most of them are based on salary adjustments.

SAIC Group made a salary adjustment decision from the group level, and then various subsidiaries responded. For example, the performance bonus of SAIC Maxus, which accounts for 35% of wages, will be "discounted" from March; BAIC Group also announced a salary adjustment, which will be paid based on the amount of tasks completed, and employees who have not completed tasks will deduct 20% to 70% of their monthly overall salary. Range; Jiangling Holdings announced a 40% reduction in the income of executive vice presidents and above, and a 30% reduction in the income of vice presidents and below.

Some car companies believe that the reduction of labor costs will be an indispensable business measure in the future, and this is also an important way for mainstream car companies in the world to deal with the impact of negative factors such as profit decline. Yuan Chengyin, general manager of the National New Energy Vehicle Technology Innovation Center, introduced to a reporter from China Automobile News that people are the best adjustment option in fixed costs, and layoffs and salary reductions are the last resort of car companies in special times.

However, Cao He bluntly said that this also shows that there is very little room for car companies to reduce costs. There is no other place to start, and only people can find a way. He analyzed in detail, such as the price of steel raw materials, logistics costs, parts procurement costs, etc., there is not much possibility of decline, and even the price of steel has risen for a period of time last year. Nowadays, the auto market is no more than ten years ago. Under the environment of lower and lower profits in the auto industry, many auto companies are already under the cost and even loss. If the cost is reduced, the parts suppliers may not be able to support it. .

However, the "layoffs and pay cuts" method that many car companies love to use is a double-edged sword. Originally, they wanted to lay off low-value employees, but the result may be that the core backbone will also be lost, which will damage the company. Core competitiveness. At the same time, it may aggravate the "panic" in the auto industry, easily cause a crisis of trust in the car company's brand, and easily cause unstable foundations and affect the development of the company. Cao He pointedly pointed out that when costs are difficult to reduce, it means that the market is forcibly changing the competitive environment and cruelly eliminating the fittest.

Cui Dongshu also believes that the current overseas epidemic is severe, and core components such as electronic and electrical required by domestic car companies still need to be imported overseas. At this time, the supply of overseas components is unstable and the cost will inevitably rise; coupled with the continuous depreciation of the renminbi, after the superposition of various factors, the car Not only will it be difficult to reduce the cost of an enterprise for a period of time, it will probably increase. In addition, cost-reduction methods such as process reengineering are commonplace, and it is difficult to make breakthroughs during the epidemic.

"The auto industry is essentially an economy of scale. Only when sales increase can costs be effectively amortized. In other words, only when the auto market resumes normal demand and production can costs really come down." Cui Dongshu said.

Cost reduction cannot reduce quality

In fact, reducing costs can be said to be a permanent topic of concern to car companies.

In particular, this year's new crown pneumonia epidemic has brought tremendous pressure to the market. Geely Automobile has stated that it will strive for a 10% or more cost reduction in terms of sales expenses and management expenses; it will steadily advance the restructuring work with Volvo to further reduce costs. ; Especially in the control of the cost of raw materials, Geely will take the opportunity to reduce procurement costs in conjunction with the sharp decline in the prices of most bulk commodities in the world at this stage.

Yuan Chengyin also believes that there is still room for maneuverability in the cost reduction of auto companies in 2020. First of all, from the perspective of technology research and development, platform-based automotive research and development can enable different models to use the same production line as much as possible, which can significantly improve the development efficiency of new models, shorten the research and development cycle, and reduce production and manufacturing costs. From the marketing perspective, many car companies are already transforming. Adopting major customer sales that are not entirely dependent on 4S stores, as well as cloud marketing methods such as live broadcast and VR, can also effectively reduce the marketing costs of car companies. Especially this year due to the impact of the epidemic, many auto shows will likely be cancelled, which is also a cost saving.

Yuan Chengyin further analyzed that the cost of auto companies can also be divided into narrow and broad sense. When the cost reduction progresses to a certain level, it will become difficult to continue to reduce the purchase cost of a bicycle, that is, the narrow cost, but it can turn to reduce the generalized cost, that is, the life cycle cost of the car. Car companies can reduce the user's cost per kilometer or day through the reliability of performance and a longer warranty period, which is also attractive to users to a certain extent, thereby achieving the purpose of reducing costs and increasing efficiency.

However, Yuan Chengyin specifically pointed out that under the influence of the epidemic this year, there are great variables in the cost reduction and efficiency increase of auto companies. On the one hand, the normal supply of imported key parts and components; on the other hand, auto companies may choose to maintain market share rather than profits during special periods. In other words, the economic downturn caused by the epidemic has brought liquidity risks to auto companies the greatest difficulty, and the rupture of cash flow is more terrifying than the failure of profits to cover costs. Therefore, in order to maintain market share, car companies may sacrifice bicycle profits and switch to lower prices to ensure that they will survive the special period. Otherwise, the best cost reduction plan will be empty talk.

Yuan Chengyin suggested that car companies should focus more on products and technologies that need to be solved at the research and development level; in terms of factory management, reduce the inventory of finished vehicles and parts as much as possible to ensure sufficient cash flow. "The more difficult times there are, the more opportunities you have to grow, and the less you can't relax product quality in order to reduce costs. It is very difficult to establish a car brand, but it only takes a moment to fall." said Cheng Yin Yuan.