Recently, car companies have set off a wave of "cutting models". Toyota, Honda, Nissan, Strantis, Chang 'an, BYD and many other overseas car companies and independent brands have started streamlining product lines, shutting down redundant models, and consolidating categories. From the past of "winning with more" to the current initiative to cut off overlapping models and concentrate advantageous resources on advantageous tracks, this wave of streamlining may rewrite the market landscape.

At the same time, orders for parts and components are concentrated on the main models, and the upstream supply chain can further reduce costs through large-scale production, promoting the entire industry chain from "scale expansion" to "efficiency upgrading."

01 Car companies unanimously "cut vehicle models"

According to reports, Volkswagen Group has recently initially drawn a list of the first batch of models to be discontinued, and many models known to the market are on the list. Volkswagen Group said it will gradually streamline its product lineup, reduce the number of models by up to 50%, and further concentrate resources on the most attractive market segments. Previously, the Volkswagen Group Management Board has submitted a series of key measures to the Supervisory Board, including 12 action plans and the group's "2030 Goals". Streamlining product mix and configuration, making products, technologies and R & D more suitable for market needs in different regions, and adjusting production capacity and further optimizing organizational structure and equity portfolio are one of the important plans. In addition, Volkswagen Group plans to adjust its overall annual production capacity to approximately 9 million units to match market demand. Compared with the investment layout of approximately 12 million units before the epidemic, the Group needs to complete a production capacity optimization of approximately 2 million units.

Toyota is also actively engaged in the "war against inefficiency" campaign under the impetus of new CEO Kenta Sato. The unlimited expansion of model specifications and derivative versions is Toyota's primary streamlining goal. Lexus LF-ZC, originally planned for mass production in 2026, has become the first project to be abandoned, and the mass production plan of the car has been officially cancelled. Toyota will cancel mass production plans for a number of unpopular models, significantly streamline derivative versions and specifications, and tilt production capacity towards global best-selling models. Nissan plans to streamline its models from 56 to 45, plan to focus 80% of sales on three core product families, and aim to increase sales of individual models by more than 30%. Strelantis decided to abandon unprofitable electric models that were not noticed by consumers, Alfa Romeo electric models, Ram 1500 Revolution pure electric pickup trucks have been postponed, and low-sales product lines of Fiat and Peugeot brands have been cut directly.

In China, Changan Automobile plans to streamline its products from 63 to 36, concentrating resources to create one large single product with an annual sales of 500,000 vehicles and five models with an annual sales of 300,000 vehicles. In the first half of this year, Changan Automobile took the initiative to stop production and sales of Lumin models with weak profitability. Geely Automobile started the integration of brand and business, merged geometry and radar into the Galaxy system, and Gekrypton and Lingke integrated into Gekrypton Technology Group. The ideal car returns to the "single-vehicle single configuration" strategy, cutting off a large number of redundant SKU versions, integrating the product department into the R & D system, shortening the decision-making chain, and concentrating resources on L-series core products. It can be seen that more and more car companies at home and abroad are beginning to take the initiative to join the streamlined product camp.

02 Low profits force companies to "subtract"

Low or even non-profit profits are the direct motivation for car companies to actively streamline product lines and shut down redundant models. Volkswagen Group said that the global situation has continued to undergo profound changes in the past 12 months: intensified geopolitical tensions, tariffs have pushed up costs, stricter regulatory requirements, and increasingly intense global competition have brought more to the automotive industry, which is already in the deep water of transition. High challenge. This time, a comprehensive future plan is formulated to further enhance the Group's ability to respond to external shocks and risks and continue to enhance the Group's competitiveness. According to the plan, Volkswagen Group will further focus on its core automotive business and continue to optimize its equity and investment portfolio to make business operations more focused and more conducive to capital withdrawal.

"The profit level of the automobile manufacturing industry is at a historically low level, and the profit margin of vehicle manufacturing is only 1.5%." The latest data shared by Chen Shihua, deputy secretary-general of China Association of Automobile Manufacturers, truly reflects the current trend of continuous decline in profits in the automobile industry. Financial reports show that many domestic listed car companies experienced varying degrees of losses in the first half of this year. Although some car companies achieved profits, their net profits fell sharply. It is not difficult to see that the current profitability of major domestic automobile companies is generally poor.

Low bicycle profits are the core reason for lowering the overall profits of car companies. Estimates show that for a brand new model to achieve breakeven throughout its life cycle, sales must reach at least 100,000 vehicles. Among them, replacement models based on mature platforms, new models independently developed on new platforms, and derivative models relying on mature modular platforms will have slightly different break-even points, but 100,000 vehicles is still the threshold that most models must cross for profit. It is difficult for most models currently sold on the market to meet this standard.

According to incomplete statistics, in the first half of this year, more than 500 new cars were launched in China. Sales data shows that in the domestic passenger car market, there are currently less than 30 models with monthly sales stable at more than 10,000 units. On the one hand, the number of models covering various market segments continues to be enriched, and homogenization competition continues to intensify; on the other hand, there are fewer and fewer popular models, and more models have become "accompanying runners", making it difficult to gain recognition from consumers.

"Chang 'an has completely abandoned the previous sales model of' having more children is easy to fight 'and no longer blindly pursues the scale of production and marketing. The core principle of operation at this stage is to take into account quantity and profit, based on long-term sustainable development." As Tan Benhong, deputy secretary of the Changan Automobile Party Committee, said, in the face of low profit pressure, car companies have begun to abandon the past approach of "winning with more", actively streamline product lines, shut down redundant models, and concentrate superior resources to create hot models. Improve profitability.

03 Shift from scale expansion to efficiency upgrading

"Winning with more" has been the core strategy of automobile companies competing for the market for a long time. Especially in the past two years, competition in China's automobile market has intensified, and more and more automobile companies have promoted multi-brand and multi-model layouts. Almost all car companies have launched multiple brands, and each brand basically covers various models in various segments. This can be seen from the scale of more than 500 new cars released in the first half of this year. However, while the number of models has surged, the problem of "many but not strong" homogeneous competition has also become increasingly prominent. From exterior design, performance configuration to pricing range, a large number of models lack unique selling points."Similar appearance, similar performance, and similar experience" directly lead to fewer and fewer popular models. Most models have become "foil" in the market, and sluggish sales have further dragged down business operations.

Suffered by this inefficient and homogeneous competition, car companies have to start taking the initiative to "subtract" in the face of continued decline in profitability. The essence of cutting off redundant and overlapping models is to withdraw resources from invalid "convolutions" and focus them on advantageous tracks to match the current market demand structure. In the process of streamlining products and adjusting structures, cost control and creating hot items are expected to achieve effective results. The streamlining of product lines by automobile companies this time is not a simple business contraction, but an active product strategy restructuring. It is also a sign that the industry's development logic has shifted from competing for incremental space to tapping stock value. Enterprises will shift from pursuing scale growth by "laying a stall" to pursuing efficiency upgrades by "improving quality". When resources are concentrated in advantageous categories, it can not only reduce the operating costs of the entire industry chain, but also concentrate on polishing core products to better match consumer needs, ultimately drive the improvement of the profitability of the entire industry and push the auto market into a new stage of high-quality development.

Source: China Automobile News

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