Xu Haidong, | of dialogue: Growing up independent brands have been able to compete head-on with foreign capital

Xu Haidong. Courtesy of respondents

"The abolition of the restriction on the joint venture share ratio is a sign of further opening up to the outside world and the inevitable result of international development." Xu Haidong, deputy chief engineer of the China Association of Automobile Manufacturers, said in an exclusive interview with the Beijing News Shell Financial Reporter, "After the relaxation of the restrictions on the joint venture share ratio, it will promote more fierce competition in the domestic automobile market, and also promote the acceleration of the brand upward of independent brands." ”

A sign of a high level of opening up to the outside world the result of international development

Beijing News Shell Finance: What is the reason for the cancellation of the joint venture share ratio restriction?

Xu Haidong: The state unswervingly implements the policy of opening up to the outside world and better integrates into the world. The abolition of the restriction on the joint venture share ratio can be said to be a sign of further opening up and high-level opening up.

In 2018, the National Development and Reform Commission announced in the form of formulating a negative list to gradually abolish the foreign ownership restrictions, giving the corresponding time to cancel the foreign ownership restrictions on special vehicles and new energy vehicles in 2018; the foreign ownership restrictions on commercial vehicles in 2020; the restrictions on foreign ownership in passenger cars in 2022, and the restrictions on no more than two joint ventures.

Beijing News Shell Finance: What are your views on the abolition of the restriction on the joint venture share ratio?

Xu Haidong: The liberalization of the restrictions on the joint venture share ratio is a sign that China has further integrated into the international community and abided by the rules of the international community. In the international market economy or international investment rules, there are relatively few restrictions on the stock ratio or investment restrictions. With the increasing degree of opening up to the outside world and the continuous growth of economic strength, such policy-related restrictive measures will generally not be adopted.

Beijing News Shell Finance: From the overall point of view, is the abolition of the joint venture share ratio restriction the result of the development of the automobile market?

Xu Haidong: It is more the result of international development and the result of development under international rules. At present, when we further open up to the outside world at a high level, we actually need to use or better adopt some international rules.

Independent brands have been more affected but have the ability to compete head-on

Beijing News Shell Finance: Cancel the restriction on the joint venture share ratio, who will be more affected?

Xu Haidong: After the cancellation of the restriction on the joint venture share ratio, independent brands will be more affected. In the joint venture company, the Chinese joint venture party is relatively beneficial, the joint venture company can be said to be the "cash cow" of its own brand, and through the joint venture share ratio restriction policy, the Chinese joint venture party gets the relevant benefits.

Of course, the Chinese market has great potential and many opportunities, and foreign-funded enterprises can enter the Chinese market through the form of joint ventures, and they have also earned a lot of profits after entering the Chinese market.

Beijing News Shell Finance: Do independent brands have enough ability to cope with changes?

Xu Haidong: At present, we have such conditions. After years of reform and opening up, the world's major foreign brands have entered the Chinese market, and independent brands have not been washed away, but have grown tenaciously in the process.

In 2021, a total of 9.543 million Chinese brand passenger cars were sold, an increase of 23.1% year-on-year, accounting for 44.4% of the total passenger car sales, and the share increased by 6.0 percentage points over the same period last year. After years of development, independent brands have the ability to compete head-on with foreign brands. At the same time, independent brands are also accelerating their going out and accelerating the development of the layout in the international market, it can be said that independent brands becoming an international brand is also a basic symbol of China's construction of an automobile power.

In the local market, independent brands account for a certain market share, in the global market also accounted for a certain market share, while having a certain degree of popularity of Chinese brands, so that it can be called an automobile power.

Beijing News Shell Finance: After years of development, is the Chinese joint venture still obsessed with the restriction of the joint venture share ratio?

Xu Haidong: From the perspective of revenue alone, the Chinese joint venture may hope that the policy can be maintained or can be extended for a longer period of time; but this does not mean that it will not survive without foreign brands.

Beijing News Shell Finance: In what ways is China's competitiveness manifested?

Xu Haidong: China's understanding of the market, consumer demand and business environment is a clear advantage; in addition, Chinese managers have fully entered all aspects and aspects of enterprise management, especially in terms of technology research and development, and the advantages of both shareholders of the joint venture in the future may need to be determined through the market.

Beijing News Shell Finance: Is the abolition of the joint venture share ratio restriction a promotion for independent brands?

Xu Haidong: The liberalization of the joint venture share ratio will promote the acceleration of the brand upward of independent brands; at the same time, it is both an opportunity and a challenge for independent brands. On the one hand, the more fierce the market competition, the greater the pressure, but if you want to become a well-known brand, you must accept fair competition under the same conditions and move from the domestic market to the international market. On the other hand, independent brands have grown up and can compete with foreign brands on the same stage and compete head-on.

The balance between contribution and marketization is the key to adjustment

Beijing News Shell Finance: What does the adjustment of the stock ratio in the passenger car field depend on?

Xu Haidong: The adjustment of the share ratio depends on the strength of both parties, involving the role played by both parties and the agreement signed by the two sides, especially the future strategic development plan of the joint venture parties in the Chinese market. The change in the joint venture share ratio may be based on the overall strategic considerations of the two parties to the joint venture, which is a relatively complex process.

There have also been some changes in the share-to-equity adjustment. For example, the adjustment of the equity ratio of Dongfeng Yueda Kia, the listing and transfer of the equity of Dongfeng Yueda Kia held by the Chinese party Dongfeng Motor, this is an active act of the Chinese side. Therefore, the adjustment of the equity ratio of the joint venture company is a strategic positioning and adjustment of the two parties according to the future development of the Chinese market, and many aspects will be balanced in this adjustment process.

In the fierce market competition, enterprises with weak brand power will bear the brunt of the impact, under this impact, their profitability, future operations may face changes, and their equity may be adjusted accordingly.

Beijing News Shell Finance: Will it start an equity battle between the two sides of the joint venture?

Xu Haidong: I think this is a normal situation. The foreign side will contribute according to its own strength, and then consider whether it should get more shares or even invest; the Chinese side also has its corresponding role, and the two sides will balance or game according to the future strategic development.

For the outside world, it ultimately hopes to develop in the Chinese market and maintain its brand influence in China, and in this process, The Chinese and foreign parties need to consider the cooperation of the Chinese side. If it is solely owned, what kind of impact will it have on its future brand development. Therefore, for the adjustment of the equity ratio of the joint venture company, it is more important for everyone to find a balance point in the marketization.

Beijing News Shell Finance: From the perspective of investment, has the liberalization of the joint venture equity ratio triggered a new round of large-scale investment in the domestic automobile market?

Xu Haidong: Probably not. At present, the production capacity of automobiles is in a state of control, and the development of traditional fuel vehicles is actually not encouraged at this stage; for the development of new energy vehicles, it is hoped for high-quality development; and the replacement problem between traditional vehicle production capacity and new energy vehicle production capacity is also involved.

Beijing News Shell Finance: What kind of impact and promotion effect will the full liberalization of the joint venture share ratio have on the strategic transformation of electrification?

Xu Haidong: In fact, the restrictions on pure electric joint ventures have long been relaxed, such as Tesla's wholly-owned factory in China. In the future, as the transformation of electrification accelerates, international car companies will also see opportunities in the Chinese market, so they may consider increasing research and development or investment in electrification in the Chinese market.

Beijing News Shell Finance: Will the joint venture share ratio restriction be fully abolished to have an impact on the domestic automobile market?

Xu Haidong: At present, I don't think it will have much impact on the market. In the first year of the opening of the joint venture share ratio, there will be no more major changes except for the changes in the share ratios of several joint ventures that have been agreed upon. The share ratio is subject to the contract, and the contracts of other joint ventures have not expired. At the same time, the change in the joint venture share ratio requires a long period of business negotiation, involving many factors, and it needs to be comprehensively considered according to its own strategy, the contractual agreement between the two parties and other factors, and it is not a simple matter to adjust.

Beijing News Shell Finance: What kind of impact does the abolition of the joint venture share ratio restriction have on the competitive landscape of the overall domestic automobile market development?

Xu Haidong: From the perspective of market competition, it may become more intense. If the joint venture share ratio is liberalized, it may be that the parties will make some adjustments according to their own interests, whether to continue to cooperate or pursue holdings, and even say whether it is possible to be sole proprietorship in the future, so in general, it will lead to more fierce competition in the automobile market.

At the same time, china will certainly not sit still, China will go all out to develop its own brands, and the joint venture party will certainly ensure the joint venture brand, so the future competition will be more intense, not only in the domestic market, but also in the international market.

Beijing News shell financial reporter Wang Linlin Editor Xu Chao Proofreader Yang Xuli