Quantity and profit balance can be virtuous cycle

Recently, relevant departments released the first quarter production and sales data of the automotive industry. This data clearly describes the production and sales volume of each subdivided vehicle. However, there is no data describing the profitability of the company. There may be various reasons for this phenomenon, but it may also be related to the traditional thinking of “heavy output and light profits”.

The world’s highest car production company is U.S. GM, but the most profitable company is Japan’s Toyota. The company with the highest domestic truck output is Futian, but the enterprises with better profits are Sinotruk, Jianghuai and Jiangling. This difference shows that all companies pursue different goals. Some companies put quantity first, and some companies put profits first.

For many years, the production and sales volume has always been an important indicator for government appraisal companies, and it has also become the most important indicator for most domestic auto companies. Quantity is the product of large-scale production, but also the foundation for the company to become bigger and stronger. However, the one-sided pursuit of quantity will become a “standard” for measuring whether an industry and a company are big and strong. Therefore, in order to win more products in the market, companies continue to carry out a series of actions to expand market share. Reflected in the end consumer market is the "you die" price war, with lower and lower car prices to tempt consumers to buy, so as to achieve the "volume" goal.

However, this technique is quite primitive, and the price paid for it can be described as “high”. A survey of the profits of 10 commercial vehicle listed companies in the past two years shows that only Sinotruk, Jiangling, and Hebei Changan's profits have increased in 2006, and profits of the remaining seven companies have fallen sharply year-on-year.

It is an indisputable fact that the profits of the domestic light truck market have been meager in the past few years, and that “house leaks are almost always rainy.” In recent years, the continuous rise in raw material prices and continuous increase in manufacturing costs have led to a continued decline in light truck profits. At this time, prices are also pushed down to fight sales, and companies can only "pick up their teeth and swallow them." In the end, in the face of a production-sales figure that has a name of vanity, and less and less profit, it can only be forgiven, and it is because it is strong.

Fortunately, some commercial vehicle companies have come out of the turmoil of many years and began to emphasize the profitability of products. Dongfeng Commercial Vehicle Co., Ltd. adjusted its business objectives from the mere pursuit of sales volume to the direction of enhancing product profitability and pursuing higher profits. Make people feel that our business is gradually becoming rational and mature. In fact, the strength of product profitability is also a sign of the strength of a company's competitiveness.

Pursuing profit is the company's natural motive. Theoretically speaking, sales and profits are not absolutely antagonistic. It is only when the profit rate is relatively low that the so-called “increased output will not increase income”. The pursuit of sales by companies that abandon their profits is essentially insignificant in value and significance. The balance between the quantity and profit of the company's products will enable the company's production and operations to be in a virtuous circle, which will be a good thing for the industry and the company, including for the consumers.

After all, the factor that determines the ultimate success or failure of a business is profit.

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