September 25, 2020

Interpretation of automotive stocks than liberalization: private and foreign competition, accelerated the loss of talent in state-owned enterprises

On April 17, China’s auto industry shares were officially demarcated on the time limit. It is understood that the auto industry will limit the number of shares to be restricted by category. In 2018, the foreign share ratio of special vehicles and new energy vehicles will be abolished; The ratio of foreign-invested shares of commercial vehicles is limited; in 2022, the foreign-invested-to-equity ratio of passenger cars was lifted, and the restrictions on the number of joint ventures not exceeding two were abolished.

Through the 5-year transitional period, the auto industry will completely cancel the share-ratio restriction. The Chinese auto market will be completely dominated by the market. The relevant personages have judged that the stock ratio liberalization will benefit China’s auto technology in the context of the improvement of the efficiency and scale of the Chinese auto industry. To further enhance and attract foreign-funded enterprises to gradually hold more shares of enterprises in China, it will help to inspire more advanced technologies to integrate with Chinese companies. Driven by the scale, efficiency, and technology, foreign-funded enterprises will cooperate with Chinese companies in the process of future marketization even if they do not require share ratios.

Manufacturing industry is the earliest field of our country's opening up, and it is also the most full field of market competition. As the most important component of the manufacturing industry, the opening of the automotive industry is also gradually being implemented. From 2016, no more than two restrictions on the number of joint ventures have been eliminated and the issue of shareholding ratio liberalization has been proposed. In the "Foreign Investment Industry Guidance Catalogue (Revised in 2017)" promulgated by the National Development and Reform Commission and the Ministry of Commerce, the restrictions on the ratio of auto electronics and power batteries and the relaxation of restrictions on joint ventures of pure electric vehicles have been removed.

Then, what kind of impact will the auto industry have on the auto industry when it is implemented in different types of transitions during the transition period? How will the use of car stocks after 5 years be released will have an impact on the Chinese passenger car market?

Share ratio liberalization will affect the new energy vehicle qualification?

According to the plan, in 2018, the share ratio restrictions in the areas of special vehicles and new energy vehicles will be liberalized, and new energy vehicles and special vehicles will allow foreign capital to enter the Chinese market solely.

Regarding the release of shares in the new energy vehicle sector, some media pointed out that the liberalization of new energy vehicle shares will mean the cancellation of the qualification of new energy vehicles. The construction and production of new energy vehicle companies will no longer need to be issued by the National Development and Reform Commission. New energy vehicle production qualification.

However, industry experts pointed out that the qualification review is necessary, especially for foreign-funded wholly foreign-owned enterprises investing in new energy companies, but as the company's stock ratio is released, more and more foreign-invested new energy auto companies The Chinese new energy vehicle market will be entered into solely by capital, and the binding force of the new energy permit will be smaller and smaller.

In addition, the stock of new energy vehicles will also affect the new forces of new energy construction vehicles. The liberalization of stocks will enable more talents and capital to be injected into new energy companies and new energy companies, and the new energy automobile market will also Under the dual competitive pressures of market testing and foreign investment, under this dual competition, the new energy automobile market will have the survival of the fittest, and uncompetitive new energy vehicle enterprises will be eliminated by the market.

It is worth mentioning that in the special vehicle sector, the liberalization of the stock ratio will speed up the competition in the special-purpose vehicle market, and for some special vehicles that rely on imports, the stock ratio liberalization will accelerate the establishment of foreign-owned special vehicles in China, and the cost of the bicycles. Will be reduced, depending on the price of imported special vehicles or will decline.

Commercial vehicles may come out of the joint venture

In 2020, the commercial vehicle sector will set a limit on the ratio of shares. In the future, China's commercial vehicle market may experience joint ventures, foreign investment, and autonomy. Competition in the commercial vehicle market will intensify.

Some media have pointed out that in the next two years, the commercial vehicle sector will not open. The auto companies including Volkswagen, Volvo and other commercial vehicle brands will choose to set up joint ventures in China, begin to lay out China's commercial vehicle market, and accelerate the use of commercial vehicle parts. Construction of supporting facilities.

After the supporting facilities such as parts and components are completed, some foreign-invested commercial vehicle brands may choose to enter China's commercial vehicle market by sole proprietorship in 2020. From the perspective of the commercial vehicle market, China is still one of the largest markets for commercial vehicles worldwide. According to statistics, the cumulative sales of commercial vehicles in 2017 were 4.161 million, an increase of 14% year-on-year. The total number of trucks sold was 3.633 million and the total number of passenger cars sold was 527,000.

Different from the passenger car market, China's commercial vehicle market is still dominated by independent brands, and its own-brand commercial vehicles can account for 70% of the market share. The joint venture brand commercial vehicle has almost no successful case, and the “joint venture failure” has basically become the strange circle of joint venture development.

Taking heavy trucks as an example, the mainstream brands in the commercial vehicle market are FAW, Dongfeng, Futian, China Heavy Vehicle, Shaanxi Automobile, and SAIC Iveco Hongyan. Of these six companies, only SAIC Iveco Hongyan is a joint venture. Industry experts pointed out that the expensive selling price has become an important reason for the joint venture's defeat in the commercial vehicle market.

In the future, after the liberalization of commercial vehicle shares, the wholly-owned foreign-owned brand in China will reduce the production cost of commercial vehicles in China and further reduce the price of the models. In addition, in the future, foreign brands of commercial vehicles will enter the Chinese auto market solely, which will increase the matching level of China's commercial vehicle market, and at the same time, will force China's independent commercial vehicle brands to develop upwards.

Passenger cars will face eight major influences

According to the commitments made by the NDRC, from 2018 to 2022, China's auto industry will be phased open for five years. Finally, by 2022, the foreign-invested equity ratio of passenger cars will be lifted, and at the same time, no more than two joint-venture companies will be removed. This will again be a disruptive influence on the Chinese auto industry. Specifically there are at least eight of the following:

First, the decline in car prices

For current Chinese consumers, self-owned brands are the representatives of cost-effectiveness. The reason why such distinctive features are largely localized advantages of spare parts. With the opening of the JV ratio, the production costs of foreign companies will also be further reduced, which will directly lead to lower prices. This will create a price retreat mechanism for independent brands.

In addition, due to the drop in production costs of foreign-invested auto companies, and even more cost-effective products entering the World Bank of China’s auto industry, the “car price” phenomenon will once again appear in the passenger car market five years later. Foreign-funded auto companies and independent brands will become the scene. The main opponent of the "price war".

Second, further diversification of automotive products

With the new foreign energy, commercial vehicles, and passenger cars, the foreign-capital-share limit has gradually been lifted, and no more than two joint-venture restrictions have been lifted. To a certain extent, it will stimulate the development of automotive companies. As China’s largest auto market, China’s demand for models remains high. In China, foreign car makers are bound to further carry out more models and increase product competition in China.

Third, improve China's spare parts manufacturing industry

After the auto industry's joint venture shares are released, with the further increase in the types of automotive products, foreign companies will bring excellent products to Chinese production, which will promote the further improvement of China's spare parts manufacturing and manufacturing. On the other hand, self-owned brand car companies have strong learning capabilities, and self-owned brands will accelerate their own sales through the joint venture brand.

Fourth, SAIC Audi mode just around the corner

The number of joint venture stocks is more liberal than that of joint venture automakers in China. These provisions will directly have a positive impact on the SAIC Audi project that has been on hold for one year. As early as November 2016, SAIC officially announced that it had signed a contract with Germany's Volkswagen. The two parties will establish a joint venture company to manufacture and sell Audi brand cars. Once this move was disclosed, it was immediately boycotted by 30 FAW-Volkswagen Audi dealers. This SAIC Audi project is stranded.

According to the “Sanya Statement” signed by both parties, the SAIC Audi project must be suspended until the annual sales target of 1 million Audi. Finally, Audi reached an agreement with FAW-Volkswagen Audi dealers to ensure sales of 900,000 units by 2022. SAIC Audi did not sell in China in January 2022.

Coincidentally, the National Development and Reform Commission announced a timetable for the full opening of the Chinese automotive industry in 2022. According to recent reports, the SAIC Audi project is about to restart. In terms of personnel, the personnel of Volkswagen China in SAIC Volkswagen has been put in place. In addition, Audi official website also issued a statement saying that it is discussing with SAIC on future cooperation.

In the future, the elimination of the restrictions imposed by more than two passenger vehicle companies will also accelerate the joint venture process between foreign-funded enterprises and self-owned enterprises. The phenomenon of multiple joint venture companies like SAIC Audi will also gradually increase.

V. China's independent brand discourse may weaken

At present, the issue of the advantages and disadvantages of the joint venture stocks compared with the opening is still the focus of industry disputes. Some commentators pointed out that with the opening of the joint venture stock ratio, the foreigner’s right to speak will also be enhanced. Currently, in the passenger vehicle market, the market share of the joint venture brand is approximately 60%, and the opening of the share ratio is also wholly foreign-owned. The car manufacturer's production offers possibilities. This will challenge the cost-effectiveness of China's own brands, and it is indeed a key opportunity and challenge for independent brands.

VI. Accelerating the Integration of China's Automobile Industry

According to incomplete statistics, there are no less than 100 car brands in China. The level of development of these auto companies is even more uneven, but because it is a pillar industry, local governments also provide transfusion support. In recent years, the number of zombie car companies that have been exposed has been reported frequently. With the opening of the joint venture stock market, the development of foreign car companies in China will also be further lifted. This will create a "fish effect" for Chinese cars. The competition in the domestic auto market will be fiercer, the outstanding self-owned brands will become more and more outstanding, and the development space for the backward-developed auto enterprises will be further squeezed. This will eventually promote the development of the auto industry in China.

VII. China's automobile intelligence and network integration will assimilate foreign cars

Compared with foreign-invested automotive products, China’s autos have not had a gap in terms of intelligence and network connectivity, and even surpassed foreign investment in certain areas. Contrary to the concern that Chinese autos lose their right to speak in the opening of shares, many Senior industry professionals believe that this is an opportunity for independent brands to truly participate in competition. The limitation of the ratio of joint stocks prior to the protection of the independent brands has also become limited, the opening of the joint venture ratio, foreign car prices may also be China's car companies intelligent, networked characteristics of guidance.

VIII. Accelerating the flow of talented people, or the loss of talents in state-owned auto companies

Whether in the areas of new energy, commercial vehicles or passenger vehicles, the liberalization of share ratio will inevitably attract foreign companies to enter the Chinese auto market, and talent will become one of the important resources for foreign companies, joint ventures and independent enterprises to compete for. For the talents of state-owned auto companies, more attractive foreign-funded enterprises and independent enterprises will become new gathering places. In other words, stock ratio opening will accelerate the flow of talents. More competitive foreign capital and autonomous automobile companies will attract more qualified car talents.

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