If the Chinese auto market before 2022 is more like a free fight game with more rules, then the Chinese auto market after 2022 is an MMA with fewer restricted offensive methods.
On 27 December 2021, the National Development and Reform Commission and the Ministry of Commerce officially issued the Special Administrative Measures for Foreign Investment Access (Negative List) (2021 Edition). In the field of automobile manufacturing, from January 1, 2022, the restriction on foreign ownership in passenger car manufacturing will be abolished, and the restriction that the same foreign company can establish two or fewer joint ventures in China to produce similar vehicle products.
That is to say, the 5-year transition period for the automotive industry released by the National Development and Reform Commission and the Ministry of Commerce in 2018 is coming to an end. From special-purpose vehicles, new energy vehicles to commercial vehicles, and finally to passenger cars, restrictions no longer exist. The arrival of this day is obviously conducive to the deepening of market-oriented competition.
In Uncle Zhong's view, the cancellation of the restriction rule means that the comprehensive strength of car companies is more demanding, and the survival of the fittest is inevitable. Those car companies that have a mixed life will surely usher in the darkest moments in their careers, and those car companies that are working hard and constantly cultivating their internal skills will eventually glow with new vitality.
The era of "lying flat" has disappeared, and weak brands have been eliminated
Looking back at the initial stage of China's auto joint venture, in order to protect the local auto industry, the "China Auto Industry Policy" promulgated in 1994 restricts the foreign equity ratio in china joint venture projects to no more than 50%, and stipulates that foreign car companies can only joint venture with two domestic car companies at most. Exchanging markets for technology and cultivating their own enterprises is the original intention of the policy.
Unfortunately, it backfired, and there are always some independent brands that have gone astray. In particular, state-owned automobile groups rub the huge profits of joint ventures and are satisfied with existing market interests, resulting in low independent innovation capabilities and weak independent research and development strength. Only by opening up the shareholding ratio can we further force the reform and innovation process of some car companies and stimulate new vitality.
There are only two paths left for weak self-owned brands, either good enough or decadent from then on. For example, BMW Brilliance, which opened a joint venture stock ratio. As early as October 2018, Brilliance Auto announced that it would sell a 25% stake in BMW Brilliance to BMW for 29 billion yuan, and the stake ratio would be changed from 50:50 to 75:25 from 2022.
Brilliance Auto is only a microcosm of many independent automobile groups, and there is also a strong dependence on joint ventures FAW, BAIC and Dongfeng in terms of profits, etc. Based on the nature of state-owned enterprises and the larger system, there is still a certain right to speak. However, with the opening of the stock ratio, such a pattern will inevitably be shaken, such as Daimler has begun to seek more shares in Beijing Benz, and BAIC can only play by increasing its shares in Daimler.
Weak independent brands such as Zotye, Lifan, Brilliance and Cheetah have withdrawn from the stage of China's auto market; the remaining independent brands such as Dongfeng, FAW, BAIC and so on, if they cannot be reorganized, may only be mergers and reorganizations; and the more powerful independent brands such as Geely, Changan, Great Wall and Chery are defending the dignity of their own brands with proud results.
No rules, independent brands do not shy away from the stage
The achievements of independent brands in recent years are obvious to all, especially in the field of new energy, which is almost crushing on joint venture brands. Strengthening the strength of independent research and development, establishing the core competitiveness of the "three major pieces", shaping the advantages of intelligent interconnection and accelerating electrification have become the keywords for the rise of independent brands. The continuous launch of blockbuster products is widely recognized by consumers and has achieved good results in the market.
Especially due to uncertainties such as the epidemic, independent brands have benefited from strengthening their supply chain advantages, effectively resolving the pressure of chip shortages, seizing opportunities when the sales volume of joint venture brands is declining, and achieving a contrarian upward trend. According to data from the China Automobile Association, a total of 8.406 million Chinese brand passenger cars were sold from January to November, an increase of 25.1% year-on-year, accounting for 44.1% of the total passenger car sales, and the share increased by 6.4 percentage points over the same period last year.
In the past, consumers chose their own brands, which may be more out of price considerations. However, at this stage, the strong rise of independent brands is not just a simple price advantage, but from multiple dimensions such as product design, core technology, power performance, and intelligence, it comprehensively surpasses the demand for consumers' cars and realizes the upward development of the brand.
The most intuitive performance of brand influence improvement lies in the increase in the average selling price of brand bicycles. The average selling price of WEILAI in the first quarter of 2021 was 434,700 yuan, surpassing luxury brands such as BMW and Audi; the average price of bicycles of Lynk & Co and BYD reached 156,000 yuan, surpassing a number of established joint venture car companies such as Volkswagen, Nissan and Hyundai.
In addition to the domestic market, the overseas market has also undergone a leap forward in its own brands. According to data from the China Automobile Association, the cumulative export volume of Chinese automobiles in the first 11 months of this year reached 1.793 million units, an increase of 1.1 times year-on-year. Domestic sales performance may have limitations, but being able to go abroad and continue to rise in sales is enough to prove that the brand, product and technology are highly recognized by foreign consumers, and have the strength to face the challenge of joint venture brands.
The battle for the right to speak, private enterprises have great opportunities
It is not difficult to see that with the opening of the stock ratio, the Independent Brand Matthew Effect is fully displayed. Strong such as Chang'an, Geely, the Great Wall, etc. naturally have the courage to meet this challenge, and the weak ones such as BAIC, FAW, Dongfeng, etc., not to mention whether their own brands can rise, it is a huge challenge to maintain the equity ratio of the joint venture company.
Like Beijing Benz, in 2020, it will achieve revenue of 169.69 billion yuan, accounting for 96% of BAIC's total revenue. There is also BMW Brilliance, with a net profit of 4.383 billion yuan in the first half of 2020, but the net profit of the parent company Brilliance China is 4.045 billion yuan, and if the profit share of BMW Brilliance is deducted, the loss is about 340 million yuan.
As the main profit contributor among these car companies, foreign investors obviously want to get more voice. After stepping into 2022, the shareholding ratio of joint venture companies will become more and more fierce, especially those foreign car companies that have only one joint venture company in China, once they cannot negotiate with the original joint venture party, they can also find other domestic independent brands to discuss cooperation and tilt more resources to new joint venture companies.
It is certain that in 2022, foreign brands will launch a fierce offensive in the field of new energy.
For example, Volkswagen has completed the capital increase of JAC Volkswagen, with a shareholding ratio of 75%, renamed "Volkswagen (Anhui) Co., Ltd."; Audi and Volkswagen Group will hold 60% of the shares of audi and Volkswagen Group in the Audi FAW New Energy joint venture project in Changchun; Geely and Daimler jointly established Smart Motor Automobile Co., Ltd. to promote the transformation of smart to a high-end electric vehicle brand; Great Wall and BMW signed a joint venture agreement, and the beam car project has been advancing in an orderly manner.
Unlike some state-owned car companies that are accustomed to "lying flat", private car companies may have more opportunities after the opening of the stock ratio in 2022, and create a win-win situation with foreign car companies and open up a new situation.
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The comprehensive cancellation of foreign investment restrictions in the automotive industry does not only mean that it will bring unfavorable factors to Chinese auto brands, but it is the inevitable result of the policy orientation to market orientation, which is conducive to the deepening of market-oriented competition. While accelerating the elimination of marginal brands, it also further forces the upward development of independent brands.
Taking advantage of the first-mover advantage of new energy vehicles, China's automobile industry is no longer the catch-up in the field of traditional fuel vehicles, but plays the role of a front-runner. Uncle Zhong believes that after accelerating the survival of the fittest, China's auto industry is full of vitality, will usher in a stage of high-quality development, and open up a new era of development.