The automotive industry is facing huge cost pressure next year

Information from the recent Central Economic Work Conference has led senior executives of major auto companies to discuss and adjust their work plans for the next year.

In the first three quarters of this year, the automotive industry showed rapid growth. Statistics from the China Association of Automobile Manufacturers show that in the first nine months of this year, the total profit of the automobile industry key enterprise groups showed rapid growth, with total profit growth exceeding 45%, and the profitability of most enterprises has increased significantly.

At the end of the year, unfavorable news came to the automotive industry. First, the international crude oil price approached 100 US dollars per barrel, followed by Baosteel, which accounts for half of the domestic automotive steel market, and announced that it will significantly increase the sales price of domestic steel futures in the first quarter of next year, and there will be hints of auto glass makers making price increases next year. Even the two major foreign investment banks, Morgan Stanley and Macquarie, have come together to increase their global market prices for copper, aluminum, lead and zinc next year.

The just-concluded Central Economic Work Conference revealed important information, and monetary policy will shift from steady to tight. This means that next year will be more stringent control of money and credit and rhythm than stability.

Industry insiders believe that for the country's tightening monetary policy and price hike of raw materials next year, tight monetary policy means that the country should strictly control the amount of loans to be used, continue to use the upward adjustment of the deposit reserve ratio, raise interest rates, and issue targeted central bank bills. Such means of regulating the economy will increase the operating costs of auto companies and reduce the flexibility of capital. There are also auto parts companies and downstream distributors in the upstream, in the business, will be affected to varying degrees, and their living conditions in turn will affect the development of auto companies. In the fierce competition in the automotive industry, auto companies will not easily adopt price increases to absorb costs. The trend of differential competition and combined marketing will become even more prominent next year.