Text/Shanshan Liu
FAW-Volkswagen Audi is a very familiar name for consumers. However, in the near future, consumers will also see Audi FAW's pure electric vehicle models on the market.
On February 18, the Audi FAW new energy vehicle project (put into production of pure electric vehicle models on the PPE platform) was officially launched in Changchun, and the name of the new project attracted widespread attention - "Audi" and "FAW" changed orders.
Image source: China FAW
According to the information of Tianyancha, the registered capital of Audi FAW New Energy Automobile Co., Ltd. is 5.267 billion yuan, of which Audi and Volkswagen hold 60% of the shares of the company, and FAW Group holds 40% of the shares. Unlike FAW-Volkswagen Audi and SAIC Audi, Audi FAW became Audi's first joint venture in China. According to the plan, the project plans to have an annual production capacity of 150,000 vehicles, and will produce three pure electric new energy models after completion.
Audi FAW's new energy vehicle project is not a joint venture stock ratio adjustment case. With the liberalization of the joint venture share ratio on January 1 this year, multinational companies including Volkswagen, BMW, Hyundai, Kia, Ford, and Stellantis have begun or completed negotiations to adjust the share ratio. The game between China and foreign parties over the right to speak in the joint venture company has begun.
Anchor the high-end new energy market
In the face of the historical opportunity of the liberalization of the joint venture share ratio, the path chosen by Audi and FAW is to complete the adjustment of the share ratio through the newly established new energy automobile company.
According to the "Memorandum of Understanding on Audi FAW's High-end New Energy Vehicle Cooperation Project" signed by China FAW and Audi of Germany, the new company will produce pure electric vehicle models based on the PPE platform jointly developed by Audi and Porsche, and the first model will start production in 2024, while PPE products will be sold in the existing FAW Audi dealer channels in the future.
Image source: Audi China
The PPE platform introduced by Audi will be mainly used to produce high-end new energy products, with the purpose of strengthening Audi's position in the field of high-end new energy vehicles. At present, Audi has developed four electrification platforms of MLB evo, MEB, PPE and J1, and PPE is jointly developed by Audi and Porsche. Because of this, it has triggered the outside world's reverie about whether Porsche pure electric models will introduce domestic products in the future.
"The introduction of the PPE platform is an important practice of continuous open cooperation between the two sides. The cooperation between China FAW and Audi began in Changchun, and over the past three decades, Changchun has also witnessed the success of the cooperation between China FAW and Audi. Qiu Xiandong, director, general manager and deputy secretary of the party committee of China FAW Group Co., Ltd., said.
Dusman, Chairman of the Board of Management and Head of China Business of Audi AG, said: "With the establishment of the Audi FAW BJEV joint venture project in Changchun, we will further expand our influence in the Chinese market and strengthen the positioning of high-end pure electric vehicle manufacturers through local production." ”
Today, the rapid rise of China's new energy vehicle market is attracting more participants. According to the data, in 2021, the production and sales of new energy vehicles in China reached 3.545 million units and 3.521 million units, respectively, an increase of 1.6 times year-on-year, and the market penetration rate was 13.4%, an increase of 8 percentage points year-on-year.
According to Audi's product planning, it is expected that by 2025, the sales of electric models will account for 40% of the total sales share, and Audi has launched more than 30 electrified models, of which 20 will be pure electric models. In the Chinese market, Audi plans to increase sales of electrified models to about one-third of total sales in China by 2025.
The policy is favorable, and there are many people who test the waters
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, from 1 January 2022, the restriction on foreign ownership in passenger car manufacturing and the restriction that the same foreign investor can establish two or fewer joint ventures producing similar vehicle products in China will be abolished. This means that the red line of the joint venture that has lasted for more than 20 years with a foreign equity ratio of no more than 50% has disappeared, and foreign investment in automobiles will be fully opened.
50% of the share ratio red line, officially issued in 1994 "Automobile Industry Policy". In the past 20 years, under the general trend of market for technology, foreign car companies have entered the Chinese market through the establishment of 50:50 joint ventures with large domestic automobile groups. But now, with the adjustment of the joint venture policy, many joint venture automobile companies are engaged in the share ratio game.
In fact, the first foreign-controlled traditional joint venture car company after the liberalization of the joint venture share ratio is BMW Brilliance. On February 11, the BMW Group announced that its new joint venture contract in China, BMW Brilliance AG, came into effect on the same day.
According to the new joint venture contract, as of February 11, 2022, the BMW Group will hold 75% of the shares in BMW Brilliance, and the remaining 25% of the shares will be held indirectly by its partner Brilliance China Automotive Holding Co., Ltd. In addition, the validity period of the joint venture cooperation between the two parties has been extended to 2040.
Prior to this, Stellantis Group announced directly on its official website in January this year that it plans to increase its shareholding in GAC FCA, a joint venture with Guangzhou Automobile Group Co., Ltd. (hereinafter referred to as "GAC Group"), from 50% to 75%, and GAC Group and Stellantis have agreed to the relevant procedures for the transaction, but still need to be approved by the regulatory authorities.
However, GAC Group immediately issued a statement, saying that the equity adjustment was not approved by GAC, and that the two sides had not yet signed a formal agreement on gac FCA's equity adjustment. Some people believe that although Stellantis and GAC Group may not have reached a final agreement on the equity adjustment, Stellantis' willingness to increase its shareholding ratio is very obvious.
At the same time, it is worth noting that JAC Volkswagen, which is 75% owned by Volkswagen Group, has now been renamed Volkswagen (Anhui) Co., Ltd.
The era of "lying down and making money" is over
The liberalization of the joint venture share ratio has stirred up a pool of spring water in China's auto market.
Before the policy was officially implemented, the domestic auto market had set off a heated discussion about whether the joint venture equity ratio should be liberalized.
At the discussion meeting held by the China Automobile Association at that time on the liberalization of the joint venture share ratio, automobile groups including FAW Group, Dongfeng Group, Changan Group and BAIC Group jointly expressed their opposition to the liberalization of the share ratio. The reasons for the opposition are complex, the joint venture company has very high profits, 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. The liberalization of the joint venture share ratio is tantamount to attracting wolves into the house.
Proponents believe that the liberalization of the joint venture share ratio will activate independent brands to participate in competition. Li Shufu, chairman of Geely Group, said bluntly: Only when the stock ratio is liberalized, can the automotive industry have a fair competitive environment.
In the past many years, foreign companies have exchanged technology for the domestic market, and auto companies from China have made huge profits in joint venture projects, but the development of their autonomous sectors has generally been unsatisfactory. Some analysts believe that the traditional 50:50 joint venture model has only exchanged for the lying flat of Chinese auto companies. The liberalization of the shareholding ratio will promote foreign capital and independent participation in competition, and in this process will accelerate the elimination of backward enterprises, which is in line with the law of the market.
Strong brands such as BMW, Volkswagen and Mercedes-Benz, which were previously subject to the restrictions of joint venture share ratio, have to distribute billions or even tens of billions of profits to Chinese joint venture partners every year. Moreover, due to the lack of a controlling stake, the performance of its joint venture in China cannot be incorporated into the financial reports of listed companies, which inevitably makes foreign investors who provide key technologies and expect to use the huge profits of the joint venture to enhance the attractiveness of the capital market.
Image source: Tesla
At the same time, Tesla, which has achieved wholly-owned factories in China, is undoubtedly the earliest beneficiary of the liberalization of the joint venture share ratio. According to the association data, Tesla's deliveries in China reached 484,130 units in 2021, accounting for 51.7% of Tesla's global 936,000 deliveries. In 2021, Tesla's revenue in the Chinese market reached $13.844 billion, a year-on-year increase of 107.8%. Nowadays, tesla, which has made a lot of money in the Chinese market, has also revitalized the domestic new energy vehicle market, which not only drives a series of new car-making forces such as Weilai, Xiaopeng and Ideal to participate in healthy competition, but also promotes the improvement and deployment of the upstream and downstream industrial chains.
In the long run, the liberalization of the joint venture share ratio is a difficult challenge, and it will be a new opportunity. A new competitive landscape is taking shape, and the competition and reshuffle in China's auto market will become more and more intense. Those who can go to the end will be strong people with real strength.