Where the policy allows, there are still many constraints to the change of equity in the joint venture. The first thing multinational car companies need to do is to assess the value of their Chinese partners.
Author 丨 Huang Yaopeng
Edited 丨tian grass
Produced 丨 Automan Media
On 27 December, mofcome promulgated a new version of the Special Administrative Measures for Foreign Investment Access (Negative List) (2021 Edition).
It confirms that in the passenger car field, the restrictions on the number of joint venture partners and the restriction on the share ratio will be lifted on January 1, 2022. The "catalog system" that has been implemented in the automotive joint venture for 24 years will be put back in history.
At this point, the five-year transition period has been completed in accordance with the timetable formulated at the end of 2017, and the restrictions on special vehicles, new energy vehicles, commercial vehicles, and passenger cars have been lifted in turn. This order is obviously based on market influence.
As with "WTO accession", when discussing this matter in 2015, the industry was worried that after the removal of all restrictions, market competition would not lead to a large-scale exit of Chinese brands, which was obviously not in the national interest. At that time, the famous "joint opposition letter" can be said to put this concern on the table.
1
New energy competition has been "unlimited"
Now it seems that at least for new energy vehicles, there is no need to worry.
According to data released by the China Automobile Association, in the first 11 months of this year, the share of Chinese brand passenger cars increased for 8 consecutive months (not only production and sales growth). At present, the market share of Chinese brand passenger cars is 44%, back to the historical high, of which the market share in November is 46.6%, and the bullish trend is obvious.
If you talk about new energy vehicles alone, the share of Chinese brands is likely to exceed 50%, but it lacks specific data support. WANG Chuanfu, chairman of BYD, even boasted that Chinese brands will occupy 70% of the market share in 2030. He was referring to the whole, not the new energy vehicles.
It is worth noting that Chinese brands used to rely on "cost performance" to circle the low-end market, and now after the exploration of new energy vehicle start-ups, they have gained a foothold in the high-end market. On the contrary, in addition to Tesla, the promotion of high-end electric vehicle products of multinational companies is a bit out of step.
Since Chinese brands have more advantages in new energy vehicles, and the current development of new energy vehicles is beyond imagination - the 20% penetration rate expected to be reached in 2025 can be achieved in 2022, so there is no reason to think that Chinese brands will lose after the restrictions disappear. After all, the biggest rival, Tesla, has been operating in China as a wholly-owned company for 26 months (starting from the mass production offline).
In the new energy vehicle market, "unlimited competition" has long begun. There are no heavyweights at the moment, because restrictions are kept out of the country.
China has become the world's largest brand, the largest number of models, the largest absolute sales of new energy vehicle market, the intensity of competition ranks first in the world, the integrity of the new energy vehicle supply chain, power battery production capacity also ranks first in the world. There is nothing to be feared of any competitors coming in, or multinational companies setting up new energy vehicle companies in China alone. After all, their respective pounds and two pounds have already weighed each other.
Rivian and Lucid in the United States, as well as Apple cars that have been diving, and possibly even Waymo, which takes the Robotaxi route, there are no obstacles to entering China. But winning a place and influencing the competitive landscape are two different things.
China's new energy vehicle market is already a realistic behemoth, and the possibility of new entrants gaining the power to influence the pattern is too small.
2
Mountain rain has been blown by the wind
Unlike the situation of new energy vehicles, the fuel vehicle market was not so optimistic at the beginning.
In 2018, when the restriction on the joint venture share ratio was just lifted, BMW Brilliance negotiated a 25% equity transfer, and BMW will obtain 75% of the equity. The proposal was supported by a majority of votes (63%) at the shareholders' meeting, approved by the State-owned Assets Supervision and Administration Commission, and agreed to complete the equity delivery by 2022. Now it seems that there is no hope of this matter being completed in 2021 and will be postponed until 2022.
There is gossip that in 2020, Mercedes-Benz also made similar requests to BAIC, which was resisted by Jiang Deyi, the chairman who just came to power, and no one mentioned this matter later.
In 2018, Jaguar Land Rover and Lexus are "candidate brands" for going it alone in the future. Their common feature is that they all have the market recognition of luxury car brands, and at the same time, they all feel that they have not played well.
However, to this day, is the chinese consumer's awareness of the original European and American design (Lexus was also designed according to the taste of the American market) as it was originally seen? The so-called "original" is when they first came to China as an import trade.
A very important reference information, as early as 2017, the golden age of joint ventures has gradually passed. This is a realistic basis for the formulation of the "stock ratio liberalization" policy. At the end of the market development period, the rest is to protect the territory, and those who cannot be saved can only exit. In the past 4 years, we have seen that there are almost no newcomers, and those who quit are three or three and two.
Due to the huge technical gap between the two sides of the joint venture, the foreign party provides the model, technology and quality system, as well as the "initial" supply chain; the division of labor obtained by the Chinese side is mostly adaptive development, production management, establishment and management of sales channels.
In this way, it is easy for foreign parties to think that China's competitiveness is built around the marketing system and is "laid down". If the foreign party thinks that it can also grasp the local sales, the value of the Chinese side is relatively low, and the technical contribution of the Chinese side is about equal to zero.
However, the continuous localization of the supply chain, and even the branding of China, subverts the perception of foreign parties. China's contribution to the technical side is also getting bigger and bigger, and even the "native models" that can't listen to China's opinions have hit the street. In this case, the foreign side cannot try to get rid of the Chinese side and go it alone.
3
Where is China's core competitiveness
The Chinese side of the Chinese joint venture has invariably made its own brand, and later all of them have become new energy vehicle start-up brands. The original starting point was that after the expiration of the joint venture period, people did not renew the contract with us, and we had to find a way out ourselves.
However, doing a good job of autonomy will refresh foreign parties' understanding of China. If the independent brand is done, for the outside world, it is obviously short-sighted to get rid of a capable partner in order to reduce the profit (there are also financial needs for consolidation).
There is also a previously unexpected point, that is, most of the "double points" of joint ventures are negative, and their foothold is to try to solve them within the group. A very important function of Chinese brand new energy vehicles is the back point.
The result of this is that several of the new forces led by Tesla, who sell points, give a price that is bullish as the threshold of policy supervision becomes higher, but it is reasonable. If everyone went to the market to buy points, the price at that time was unimaginable.
Who makes the joint venture new energy products slow to advance?
Putting aside all this, over the years, the supply chain, human resources and channels of the joint venture have been highly localized. Supervision will also change, is foreign companies sure that they can do it alone and can quickly re-adapt? It seems that there is no one who intends to abandon the Chinese partner and go it alone, not even as a whistle as a bargaining price.
We wouldn't be surprised if there were any joint ventures trying to change the share ratio, as there was precedent before. But brilliance mode is also over, and it will not completely break up. This situation applies to the unprecedented strength of the foreign side, while the Chinese side has not done its own part. So far, it's all Ashkenazi brands with a little more ideas.
Even if Brilliance has a weak situation, BMW first gave a sweet date, renewed the joint venture agreement until 2040, and promised to provide technical support before obtaining consent.
This is a positive chip, and the negative chip is nothing more than the establishment of a joint venture company, or the establishment of a new energy company by itself, similar to Volkswagen's approach (the joint venture between Volkswagen and JAC).
For the Chinese side, this is not a real threat, and seeing how many years of buffer period SAIC Audi has set (and the SAIC Volkswagen joint venture has long existed), it can be seen that this matter is not simple. At least from the perspective of the National Development and Reform Commission, the production capacity of new fuel vehicles is infinitely close to zero.
In the second half of this year, the market share of the German and Japanese systems that have been strong is also declining, and the Chinese system is rising. At this time, it is even more unlikely to break up the partnership, depending on whether the Chinese brand is a phenomenon-level rise or a transient rebound.
The market has evolved into what it is today, that is, the situation that it is difficult for sole proprietorship of fuel vehicles to have a chance of winning, and it seems to have been predicted. The 5-year transition period is exhausted, and the shock factors of the market are dissolved by the prefabricated "damping", and the intention of the policy is to achieve this effect.
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