What is more dangerous than a "black swan"? It's a "gray rhinoceros"!
In 2017, the Korean and French car industries faced major setbacks, with Leshi's automotive bubble bursting. When people look back at these events, they often attribute them to bad luck or low-probability "black swan" incidents. However, these were actually "gray rhinos"—events that are not random but high-probability crises with clear warning signs. Unlike black swans, which are unpredictable, gray rhinos are obvious, yet ignored until it's too late.
For example, the decline in Korean car sales was partly due to the cooling of Sino-Korean relations, but the real issue was the long-term pressure from Japanese and domestic brands. Similarly, before Leshi collapsed, there were plenty of warnings—media reports highlighted its weaknesses, and debt collectors were already making noise. This is very different from the sudden, unexpected crises like Takata airbag recalls or Volkswagen emissions scandals.
The "gray rhino" concept, introduced by economist Michael Schick in 2017, highlights the dangers of ignoring clear, high-probability risks. As the People’s Daily put it, the gray rhino is heavy and slow-moving, but once it charges, it's hard to escape. It's not mysterious, but far more dangerous.
So, will 2018 bring gray rhinos in the auto industry? The answer is almost certain. Fortunately, unlike black swans, gray rhinos can be predicted.
One of the first signs is the price war. In the last quarter of 2017, we saw major price cuts from luxury brands like Cadillac and Jaguar. In 2018, more models like Cadillac XT4, Volvo XC40, and Mercedes-Benz GLA will hit the market, pushing prices even lower.
This price drop will eventually affect mid-tier and budget brands as well. Companies like Beijing Hyundai and Changan Ruixin have already reduced their prices significantly, forcing weaker players out of the market. Some automakers may even sell off factories or production licenses to survive.
In 2017, Dongfeng Yueda Kia was reportedly operating at half capacity, and rumors circulated about selling its factories. Similar stories emerged around Chery and SAIC. Meanwhile, Baoneng Group's entry into the auto industry signals a shift in production capabilities.
With over 100 automakers in China, the industry is facing massive overcapacity. Analysts predict that by 2020, China could have 20 million excess vehicles. As competition intensifies, some companies will exit the market, while others may find opportunities in acquiring production assets.
Experts like Zhong Shi believe that these "shell resources" are valuable for new entrants. With companies like Baoneng already making moves, the reshuffling of the industry is accelerating.
Looking ahead, 2018 brings more challenges. Retail sales are expected to grow almost zero, driven by demographic shifts and tax policy changes. Consumers may have bought cars earlier in 2017, leading to a dip in 2018 sales. Additionally, the rise of electric vehicles won't be enough to boost overall numbers, as the EV market remains small.
When the auto market slows down, only the strongest will survive. Weak brands like Shenlong Motors and Lifan may struggle to keep up. Without effective strategies, the gray rhinos of 2018 could be even bigger than those of 2017.
In short, the price war, overcapacity, and market saturation are all potential gray rhinos in 2018. As Huang Zhen noted, black swans challenge our imagination, while gray rhinos test our resilience. In this fast-changing world, many obvious threats are getting closer—and we need to be ready.
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