What is the automotive joint venture share ratio?
In 1994, the "Automobile Industry Policy" was promulgated, stipulating that the foreign capital of vehicle enterprises in China's joint venture projects should not exceed 50%. The fundamental purpose of this share-to-share distribution method is to incubate talents for Chinese automobiles, improve the business pattern, and promote the overall development of China's automobile manufacturing industry in the form of "opening the market for technology" under the premise of protecting China's independent automobile industry from being impacted by foreign brands.
This joint venture rule continued for decades, during which the mainland automobile industry achieved rapid development, and most independent car companies gradually stepped onto the international market stage to shine. In this process, the problems exposed by the joint venture share ratio distribution method of "foreign capital cannot exceed 50%" have been gradually amplified.
On the one hand, the party with a larger contribution rate in the joint venture project is strictly speaking, playing the role of a "profit cow" for the partner of the other party. For example, Brilliance Group, which has applied for bankruptcy reorganization, under the annual statement of corporate "profitability", if there is no BMW Brilliance project, its own profit is negative.
On the other hand, the 50:50 joint venture share ratio distribution method also restricts the right of foreign investment to speak, and even affects its own operation. For example, in the FAW Mazda project, Japan's Mazda increased its capital to FAW Mazda in the early years. After the capital increase, FAW Car, Mazda and FAW Group Company each account for 56%, 40% and 4% of the registered capital of the joint venture company. Since then, until FAW Mazda operated independently and disbanded, Mazda's shareholding ratio in the joint venture project was only 40%, and it never occupied the dominant position in the joint venture project, and FAW Mazda's operation also deteriorated.
With both pros and cons, there has been much discussion about whether to develop a joint venture share ratio for many years.
At the end of 2021, the National Development and Reform Commission and the Ministry of Commerce issued the Special Administrative Measures for Foreign Investment Access (Negative List) (2021 Edition) and the Special Administrative Measures for Foreign Investment Access in Pilot Free Trade Zones (Negative List) (2021 Edition); the new version of the Negative List shows that in the field of automobile manufacturing, from January 1, 2022, the mainland will abolish the restriction on foreign ownership in passenger car manufacturing and the restriction that the same foreign investor can establish two or less joint ventures in China to produce similar vehicle products.
The issuance of this policy means that the share ratio distribution method of "foreign capital cannot exceed 50%" will officially withdraw from the historical stage.
Comprehensively observe the current opening progress of the share ratio of each joint venture car company. Among them, from February 11, 2022, the new joint venture contract of BMW Brilliance Automobile Co., Ltd. officially came into effect, the shares held by BMW Brilliance Group in BMW Brilliance were officially changed to 75%, Brilliance China Automotive Holding Co., Ltd. indirectly held the remaining 25% of the shares, and the cooperation period between the two parties was extended to 2040.
In November 2021, Dongfeng Motor transferred 25% of the equity of Dongfeng Yueda Kia to Yueda Group, and Dongfeng Yueda Kia became a joint shareholding of Yueda Group and Korean Kia, and the final share ratio results are expected to be announced in April this year.
In December 2021, BYD and Daimler jointly announced that they intend to increase the capital of its joint venture, Denza, by 1 billion yuan each. The two sides re-signed the equity transfer agreement, after which BYD will hold 90% of Denza's shares, while Daimler's shareholding will drop to 10%. According to the latest news, BYD Automobile Industry Co., Ltd. has increased its foreign investment, and the new investment enterprise is Denza Automobile Sales service Co., Ltd., with an investment ratio of 100%.
In the first half of 2021, Southeast Automobile underwent an equity reform, and Mitsubishi Motors, which held 25% of the shares, withdrew and transferred its equity to Fuzhou Transportation Construction Investment Group Co., Ltd.
In January, Stellantis Group announced on its official website that it plans to increase its shareholding in GAC FCA, a joint venture with Guangzhou Automobile Group Co., Ltd. ("GAC Group"), from 50% to 75%, and that GAC Group and Stellantis have agreed to the relevant procedures for the transaction, but still subject to regulatory approval.
Recently, the industry has spread the rumor that the French joint venture car company DPCA is exploring the new joint venture model of "two rooms and one hall". Specifically, the understanding of "two rooms and one hall" means that peugeot and Citroen, the two brands of Peugeot and Citroen under DPCA, will be dominated by the Chinese shareholders and foreign shareholders of the joint venture, respectively, while DPCA will be mainly responsible for public business such as production and planning.
In December 2020, Volkswagen completed the capital increase of JAC Volkswagen, and JAC Volkswagen changed its name to "Volkswagen (Anhui) Co., Ltd.", with a Volkswagen shareholding ratio of 75%; at the beginning of 2021, Volkswagen Group announced the establishment of a second joint venture in China with more than 50% shareholding, Audi FAW BJEV Joint Venture, accounting for 60% of the shares.
It is not difficult to infer that with the trend of opening up the share ratio, in more and more joint venture projects, the voice of foreign car companies and independent car companies will be redefined. Then, looking at the evolution of the stock ratio rule in the automotive field, we can think that the share ratio distribution method in the early years was the protection of China's local automobiles, but in this protection, it breeds the development inertia of individual independent car companies, but it isolates the part of the independent car companies from the real market competition, affects the development of the enterprise, and needs to be "liberalized".
Similarly, the original share ratio distribution method also restricts the rhythm of foreign car companies entering the Chinese market, which determines that the competition in the domestic car market is still insufficient. Only by "opening up" and having a stronger say in joint venture projects can foreign-funded or wholly foreign-owned car companies become "catfish" that stir up the development of China's auto industry and bring the mainland's auto manufacturing industry to a higher level.