What is more dangerous than a "black swan"? It's the "gray rhinoceros"!
In 2017, the Korean and French car industries faced major setbacks, with the Leshi car bubble bursting. When looking back at these unexpected events in the automotive sector, many tend to blame them on the low-probability "black swan" theory—random, unpredictable incidents that are hard to foresee. However, these were not just isolated accidents. They were actual "gray rhino" events—high-probability crises that had clear warning signs long before they hit.
Unlike black swans, which are rare and unpredictable, gray rhinos are obvious and looming. They are large-scale risks that people often ignore until it's too late. For example, while the cooling of Sino-Korean relations was a direct trigger for the drop in Korean car sales, the real issue was the long-term pressure from Japanese brands and domestic automakers. The market was already setting the stage for their downfall. Similarly, before Leshi collapsed, there were plenty of warnings—negative reports, debt collection calls, and public skepticism. These weren’t sudden surprises but predictable failures.
The concept of the "gray rhinoceros" was introduced by economist Michel Schick in 2017. It highlights the dangers of ignoring obvious, high-probability risks. As the People’s Daily noted, the gray rhino is heavy and slow-moving, yet once it charges, it's hard to escape. It’s not mysterious, but its impact is far greater than that of a black swan.
So, what about 2018? There’s a strong chance that the auto industry will face a "gray rhino" crisis. Unlike the random shocks of black swans, this is a predictable event. One of the first signs is the price war. In late 2017, several luxury brands like Cadillac, Jaguar, and others started slashing prices, signaling a shift in the market. In 2018, more models, including the Cadillac XT4, Volvo XC40, and Mercedes-Benz GLA, will enter the market at even lower prices, pushing competition further down the pricing ladder.
This trend will affect both mid-tier and budget brands. Companies like Beijing Hyundai and Changan Ruixin have already reduced their prices, and the pressure will only grow. Some smaller manufacturers may struggle to keep up, leading to factory closures, production capacity sales, or even exits from the industry.
In 2017, reports suggested that Dongfeng Yueda Kia was operating at half capacity, and similar stories emerged about other struggling automakers. While some deals haven't been finalized yet, the movement of production assets is already underway. With over 100 car manufacturers in China and predictions of massive overcapacity by 2020, the industry is facing a critical moment.
For emerging companies, these challenges could be opportunities. As traditional players fall behind, new entrants can acquire "shell resources" and production lines. This dynamic is already visible, with groups like Baoneng entering the market.
Looking ahead, factors like population trends, tax policies, and the rise of electric vehicles will shape the 2018 market. With zero growth expected, the pressure on weaker players will intensify. The gray rhino is coming—and it’s not something we can afford to ignore.
In short, the price war, overcapacity, and declining demand all point to a gray rhino crisis in 2018. As experts warn, while black swans challenge our imagination, gray rhinos test our resilience. In a fast-changing world, these obvious threats are getting closer every day.
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