Economic Observer reporter Zhou Ju Automobile's joint venture stock ratio has been open for more than a month, and the news related to the adjustment of the stock ratio of joint venture car companies has become a frequent visitor to the hot search list in the automotive field.
On February 11, 2022, the BMW Group announced that with immediate effect, the new joint venture contract of BMW Brilliance Automotive Co., Ltd. (hereinafter referred to as "BMW Brilliance"), a joint venture of BMW Group in China, will come into effect, and the validity period of the joint venture between BMW Group and its Chinese partners will be extended to 2040. According to the new joint venture contract, from February 11, 2022, the BMW Group's stake in BMW Brilliance will be changed to 75%, and the remaining 25% of the shares will be indirectly held by its partner Brilliance China Automotive Holding Co., Ltd. This means that after a three-year transition period, China's first foreign-controlled traditional joint venture car company was born.
In addition to BMW, the Stellantis Group has also expressed its intention to increase its shareholding ratio in its joint venture in China. The group was formed in January 2021 by the merger of PSA (PSA) And Fiat Chrysler Group in a 50:50 share ratio.
Stellantis recently announced on its official website that it plans to increase its stake in the joint venture GAC FCA from the current 50% to 75%. It also said that "GAC Group and Stellantis have agreed to the relevant procedures for the transaction, but they still need to be approved by the regulatory authorities." However, what is surprising is that GAC Group immediately issued a statement saying that the equity adjustment has not been approved by GAC, and the two sides have not yet signed a formal agreement on GAC FCA's equity adjustment.
Such a rapid "reversal" suggests that Stellantis and GAC May not have reached a final agreement on equity adjustments, but Stellantis' ambitions to increase the equity ratio are no longer hidden.
The Economic Observer reporter inquired that although the GAC Group has issued a statement to refute the rumors, the news released by Stellantis on the official website has not been deleted.
Increasing its stake in GAC FCA is just one of Stellantis' moves in China under the policy wind. On February 10, it was revealed in the media that DPCA, another joint venture company of Stellantis Group in China, and Dongfeng Group, will undergo structural adjustments. The specific adjustment is as follows: DPCA maintains the existing 50:50 share ratio, but its Dongfeng Peugeot is led by the French side, and Dongfeng Citroen is led by the Chinese side.
In this regard, the Economic Observer reporter asked DPCA insiders for verification, but he said that the source of the information is not DPCA, and it is impossible to confirm whether the news is true. "We are also understanding the actual situation of shareholders internally, but what can be confirmed is that the way of future cooperation is still being discussed." The DPCA insider said.
While Stellantis is making business adjustments in China, including equity enhancements, the equity adjustment of Kia's joint ventures in China is also continuing. After dongfeng's withdrawal, Yueda and Kia have announced a capital increase of 900 million yuan to establish a new joint venture company, opening a new era of joint ventures in China, but the equity ratio between the two sides has not yet been determined.
In addition to these, previous data shows that Volkswagen, Daimler and others have also been hoping to adjust their equity in Chinese joint ventures. Behind the intensive actions of these foreign car companies, there are their own plans and plans. However, due to the uniqueness of each joint venture car company, the difficulty and realization path of foreign car companies to increase the equity ratio in the joint venture company are also quite different.
Stellantis who quickly "borrowed" it
According to the policy, from January 1 this year, the mainland will abolish the restriction on foreign ownership in passenger car manufacturing and the restriction that the same foreign company can establish two or less joint ventures in China to produce similar vehicle products. This means that foreign car companies can not only increase their shareholding ratio to more than 50% or even achieve sole proprietorship, but also set up more than two joint ventures.
Stellantis' statement of change in equity is considered "windy" under the policy. In fact, in September last year, there were rumors that GAC Group would transfer 20% of the shares of GAC FCA, but the shareholders did not respond at that time.
Previously, everyone generally focused on the focus of equity adjustment on BMW, Mercedes-Benz, Volkswagen and other foreign car companies that have developed well in the Chinese market, while The development of Stellantis in the Chinese market in recent years has not been very smooth.
Stellantis currently has two joint ventures in China, namely Dongfeng Dongfeng Dongfeng. Among them, GAC FCA was established in 2010, and currently GUANGZHOU AUTOMOBILE Group and Stellantis Group hold 50% of the shares. DPCA was established in 1992, and the shareholding ratio of the two parties is also 50:50. However, the current sales scale of the two companies is generally low and they are gradually marginalized.
It can be seen from the statement of GAC Group that the relevant negotiations between the shareholders of GAC FCA are indeed underway. "In recent years, due to the great difficulties in the operation of GAC FCA, the shareholders of the two sides of the joint venture have conducted in-depth communication and consultation on their joint venture and FCA revitalization plan." GAC Group said in the announcement.
For the future development of GAC FCA, Stellantis said in a statement released in September last year that Stellantis Group will fully integrate its Jeep brand import business in China and the Jeep brand local joint venture business.
For DPCA, Stellantis may also have some adjustments. According to media reports, DPCA will implement the "two rooms and one hall" model, that is, DPCA will retain it as a production base and maintain the existing share ratio; its two major brands, Dongfeng Peugeot will be led by the French side and Dongfeng Citroen will be led by the Chinese side. It is said that at present, the two shareholders are still negotiating, and the share ratio of DPCA will not be adjusted, but the internal division of labor may change. This means that the Peugeot and Citroën brands will once again move from the previous synergy to independent operations.
The sound of this series of adjustments shows that Stellantis may hope to take advantage of the "east wind" of the opening of the foreign equity ratio to carry out a deep change in the Chinese market to reverse the previous market decline. Because for Stellantis, the Chinese market is an important strategic market, although the market performance has been poor before, Stellantis has repeatedly said that it will not give up the Chinese market.
"The Chinese market is unique in many aspects of the world's automotive market, especially in the field of new energy and the field of car interconnection. In a sense, China's auto market represents the future. Oliver, member of the Stellantis Group's Global Executive Committee and Chief Operating Officer of China, said.
At present, the Stellantis Group is in a critical phase of the transition to electrification. Last year, it announced that it would launch 11 pure electric models and 10 plug-in hybrid models in the next 24 months, but did not announce specific plans for electric products in the Chinese market. It is reported that Stellantis will hold a strategic conference on March 1, when more information will be released.
Different paths to improving the share ratio
It can be seen that whether it is a strong brand that has developed well in the Chinese market or a weak brand in a weakening situation, after the restrictions on the joint venture share ratio are relaxed, they are eager to increase their shareholding ratio in the joint venture company, so as to adjust the business level.
For strong brands such as BMW, Volkswagen, and Mercedes-Benz, they were previously subject to the restrictions of the joint venture share ratio, and had to distribute billions or even tens of billions of profits to Chinese joint venture partners every year, and because they were not controlled, the performance of their joint ventures in China could not be incorporated into the financial reports of listed companies, which made foreign investors who provided key technologies and looked forward to using the huge profits of joint ventures to enhance the attractiveness of the capital market quite unwilling. In addition, for China, a key market, foreign brands also hope to grasp more development initiatives.
And for brands like Stellantis, which are currently underdeveloped in China, the driving force for improving the stock ratio is equally strong, although these brands are now weakly profitable or even loss-making. However, for foreign car companies, under the premise of not giving up the Chinese market, if they can achieve the holding of joint venture companies, they will have higher autonomy in brand development strategy and business decisions, and they can achieve a faster introduction of new products and decision-making, which is likely to come out of the trough.
However, there are also certain differences in the difficulty of different brands to increase the share ratio. For strong brands, the profit of the joint venture company is very high, and it has great attractiveness for both Chinese and foreign parties. For local governments, there will also be relevant taxation and risks to prevent the loss of assets.
It is reported that the reason why BMW Brilliance's equity adjustment failed to land before the expected end of 2021 is because it involves a multi-party complex game between BMW, Brilliance and the local government. In particular, Brilliance, the Chinese shareholder of BMW Brilliance, is still in the process of bankruptcy and restructuring.
In this case, BMW has taken a more gradual path. In 2021, BMW announced the acquisition of the Zhonghua factory for 1.633 billion yuan, and some analysts said that BMW may participate in brilliance's overall bankruptcy restructuring, and then promote brilliance's restructuring and BMW Brilliance's equity adjustment. But since then, there have been news that BMW's acquisition of the Zhonghua factory has been blocked. This also allows BMW Brilliance to adjust its equity after missing the scheduled deadline, which has triggered more industry speculation.
On February 11, in an official statement announcing the extension of the joint venture contract and the official adjustment of the share ratio, BMW Group Chairman Chiptzer said: "Today marks an important step for the BMW Group to invest in China. The new joint venture contract has been extended until 2040, which will lay a solid foundation for BMW's sustainable business success in China, while also contributing to the development and prosperity of local and other interested parties in Liaoning. ”
The new joint venture contract was also approved along with a project that BMW continues to invest in in Liaoning. According to the commitment, BMW will continue to expand its production capacity in China and introduce more pure electric vehicle models for domestic production, while also increasing the scale of procurement in China. In 2021, BMW Brilliance's total procurement in China will reach nearly 33 billion yuan.
Compared with BMW, Mercedes-Benz and Volkswagen, the weaker foreign brands may have less resistance in increasing their share ratios. Because for some domestic auto groups, it has become a trend to "dump baggage" to clean up non-performing assets and go lightly, while foreign parties hope to give it a go again in the case of leading operations, and the shareholders of both sides are more likely to "hit it off".
For example, the Korean brand Kia, before its joint venture in China, Dongfeng, Yueda, and Kia each held 25%, 25% and 50% of the shares. At the end of 2021, before the arrival of the general limit on the liberalization of the joint venture share ratio, Dongfeng Group chose to "let go" in advance, listed its shares and transferred out, and officially withdrew from the joint venture company. Dongfeng Yueda Enterprise smoothly changed from a three-party shareholding to a two-party shareholding. According to the latest news, Kia and Yueda recently increased their capital by 900 million yuan to the company, focusing on the development of the Kia brand in the future, and Kia will become the dominant player.
Although whether the share ratio will change after the capital increase has not yet been disclosed. But for Kia, yueda has been more like a financial investor after Dongfeng's exit, and Kia's development in China is expected to be more independent.
As for Stellantis' increase in GAC FCA's share ratio, although GAC said it did not approve of it, industry analysts believe that the equity adjustment may be a high probability, and GAC Group is largely dissatisfied with the news of Stellantis's early release. Accurate information may be confirmed on March 1.
However, for these foreign brands that hope to increase the share ratio, especially the relatively weak brands, although the increase in the share ratio can enhance their own development independence, with the weakening of China's right to speak, under the new strategy led by foreign brands, will the joint venture car companies usher in a new turnaround with a more differentiated route, or will they further deviate from the mainstream local consumption trend? This will be the biggest potential uncertainty after the liberalization of the equity ratio. Especially in the era of China's new consumption of automobiles leading the world in the development speed of electric intelligence, the double-edged sword effect brought about by the adjustment of the management structure may be more obvious.
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