Guideline an overseas road map for automakers

Editor's note: China has released a guideline to regulate the overseas competitive practices of its automakers and enhance corporate compliance for the orderly global expansion of its auto industry. China Central Television spoke to Sun Xiaohong, former secretary-general of the automotive division of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, on the importance of the guideline. Below are excerpts of the interview. The views don't necessarily represent those of China Daily.

The guideline is designed to promote the high-quality development of China's auto exports. Building on the experience gained over the past five years, it lays a solid foundation for the industry's next phase of development and provides companies with practical guidance. This is crucial for businesses and serves as a road map for the industry to better meet the needs of overseas consumers.

In the first seven months of this year, China's auto exports reached 6.4 million vehicles, averaging around 900,000 vehicles monthly. At this rate, annual exports could potentially surpass the 10 million mark by the end of this year, making this guideline particularly timely.

A key focus area in the document is pricing strategy. It calls upon companies to avoid frequent or substantial price changes and to adopt reasonable pricing practices. While price is a critical competitive tool in the auto industry, companies also compete through value, technology and brand strength. But traditionally, price competition has been most widely used by Chinese companies. It is also a dominant feature of competition in overseas markets.

Price competition can quickly boost sales and market share. At the same time, it can also create several problems. For example, it can destabilize the market, especially with the profusion of new energy vehicles. Excessive price cuts can erode the technology premium that these vehicles should command.

Moreover, price competition can lead to dissatisfaction among market stakeholders and negatively affect consumer sentiment. Overseas markets assign considerable importance to vehicle residual values and the total cost of ownership over a vehicle's entire life cycle. Frequent and steep price cuts can make consumers concerned about the future residual value of their vehicles, leading to various adverse effects.

Apart from the pressure from price competition, data is another major challenge facing new energy vehicles and intelligent connected vehicles. Companies not only have to comply with local regulations on consumer data protection, but also pay close attention to issues such as the sovereignty, access, flows and storage of data.

Localization and compliance are closely linked. In practice, localization runs through the entire compliance process and has a more profound effect on compliance compared to traditional trade exports or semi-knocked-down assembly.

Only when both localization and compliance are properly implemented can a company achieve comprehensive adherence to regulations, supporting its broader compliance efforts in other areas and stages of overseas operations. The underlying logic is that compliance drives localization, while localization continually brings new issues to the fore, prompting companies to address them.

Chinese automakers are increasingly facing barriers as they expand overseas. Alongside traditional barriers, new tariff and nontariff barriers are emerging. Tariff barriers are relatively straightforward and mainly involve import duties. Nontariff barriers, by contrast, take many forms. Chinese automakers operating overseas are now subject to multiple constraints, including antitrust requirements, data regulations and technical regulations.