Yueyue Yushi: The joint venture stock ratio is liberalized, why are "weak" multinational car companies moving first?

The multinational car companies that are eager to increase their shareholding ratio in joint ventures recently are not the strong brands that the industry predicted, such as Mercedes-Benz and Volkswagen, which have developed in the Chinese market, but rather those weak brands that are becoming increasingly frustrated. Perhaps in their view, by increasing the shareholding ratio, they can enhance their voice in the joint venture, grasp more initiative and autonomy, and then achieve rapid introduction of new products and decision-making, so as to get out of the trough.

On Friday (February 11), the BMW Group announced that its new joint venture contract in China, BMW Brilliance Automotive Co., Ltd. (hereinafter referred to as "BMW Brilliance"), has officially entered into force, and the validity period of the joint venture between BMW Group and its Chinese partners has been extended to 2040. According to the new joint venture contract, from February 11, 2022, the BMW Group's shareholding 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 Holdings Co., Ltd.

So far, after a three-year transition, the first foreign-controlled traditional joint venture car company in China was born.

According to the Special Administrative Measures for Foreign Investment Access (Negative List) (2021 Edition) issued by the National Development and Reform Commission and the Ministry of Commerce at the end of last year, from January 1 this year, "in the field of automobile manufacturing, the restriction on foreign ownership in passenger car manufacturing will be abolished, and the same foreign investor can establish two or less joint ventures in China to produce similar vehicle products." ”

Under the background of the liberalization of the joint venture share ratio, some multinational car companies have "heard the wind and moved first". Shortly before BMW's official announcement (January 27), Stellantis Group said in a statement that it "increased its shareholding in GAC FCA, a joint venture with GAC Group, from 50% to 75%" and that "GAC Group and Stellantis Group have agreed to the relevant procedures for the transaction, but still need to be approved by regulatory authorities." ”

Subsequently, GAC Group issued a statement saying, "I learned from the official website of Stellantis about its release on the equity adjustment of GAC FCA." This announcement is not approved by us, and GAC Group deeply regrets it. Regarding foreign joint venture cooperation, GAC Group will strictly abide by national policies and regulations and promote it in accordance with the principles of mutual trust and win-win results. ”

Coincidentally, Stellantis' other joint venture in China, DPCA, may also adjust the original joint venture model.

A few days ago, some media reported that DPCA will implement the "two rooms and one hall" model, of which "two rooms" refers to its two brands (Dongfeng Peugeot and Dongfeng Citroen) will be led by one party; "One hall" refers to the sharing of existing production bases, product planning, technology, quality and other public domains.

It is reported that at present, the two shareholders are still negotiating, and the share ratio of DPCA will not be adjusted, but its internal cooperation model may change.

While the shareholders of DPCA are discussing a new joint venture model, Kia is constantly adjusting its shareholding structure in the Joint Venture in China. Following Dongfeng Group's voluntary withdrawal from Dongfeng Yueda Kia last year, Yueda and Kia announced a capital increase of 900 million yuan in early February to establish a new joint venture. However, the proportion of equity between the two parties has not yet been determined. According to media reports, "[the new joint venture] will eventually form the state of Kia Holdings."

In addition, GAC Group has also been exposed that "the shareholding ratio of GAC Mitsubishi has dropped to 6.34%, the shareholding ratio of Mitsubishi Corporation has increased from 20% to 92.4705%, and the shareholding ratio of Mitsubishi Automobile Industry Co., Ltd. has decreased from 30% to 1.1864%." But this news was later confirmed by GAC Group as "a mistake in media reporting."

The reporter of China Economic Network found that the multinational car companies that are eager to increase their shareholding ratio in the joint venture company recently are not the strong brands that the industry predicted that Mercedes-Benz and Volkswagen have developed in the Chinese market, but rather those weak brands that are increasingly in business conditions.

Taking Dongfeng Yueda Kia as an example, its sales have continued to decline since 2017, and only more than 160,000 vehicles will be used in 2021. At the same time, Dongfeng Yueda Kia fell into continuous losses, with a total loss of 9.035 billion yuan in less than 5 years; Among them, the loss in 2020 was 4.75 billion yuan, and the loss in the first 10 months of 2021 was 2.612 billion yuan. The sales of joint venture car companies such as GAC Mitsubishi, GAC FCA, and DPCA have also declined for several consecutive years, gradually becoming marginal brands.

Today, the liberalization of the joint venture equity ratio policy seems to have rekindled the hopes of weak multinational companies to reverse the market decline. Perhaps in their view, by increasing the shareholding ratio, they can enhance their voice in the joint venture, grasp more initiative and autonomy, and then achieve rapid introduction of new products and decision-making, so as to get out of the trough. So, can their "self-help" action work? Leave it to time and the market to test it! (China Economic Network reporter Wang Yueyue)