Dong Yang: The liberalization of the stock ratio and the new competitive pattern

One of the major changes in China's auto industry policy this year is the liberalization of the joint venture equity ratio. Many media friends have asked me what I think about this? The author's opinion is that the liberalization of the joint venture equity ratio will not have a major impact on the competitive landscape of China's automobile industry. However, I hope you will see that, more importantly, the competitive landscape and competitive environment of China's auto industry have undergone major changes, and the current joint venture cooperation should be viewed from the perspective of long-term development.

First of all, the liberalization of the joint venture equity ratio will not have a significant impact on the competitive landscape of China's auto industry. The most fundamental reason is that the equity ratio of China's vehicle joint venture has changed, which mainly refers to foreign holding or sole proprietorship, which cannot improve product competitiveness or reduce costs.

First, in terms of the performance and quality of the joint venture's automotive products, it has been managed in accordance with the rules of the foreign brand, in line with the requirements of Chinese laws and regulations and quality in line with international standards, and has not reduced the requirements due to the reciprocal joint venture production of the two parties. It is not true that some foreign brands circulating on the Internet have reduced their allocation and quality after joint venture production in China. In fact, after the joint venture production of many foreign brands in China, because the Chinese factories are newly built and equipped, the Chinese workers are disciplined and the technical level is high, and the quality level ranks at the forefront of the global production of the brand.

Second, from the perspective of cost, the Chinese partners of the vehicle joint venture have always been the promoters of localization and cost reduction. After changing to foreign holding or sole proprietorship, it is more likely to increase costs rather than reduce costs.

Third, from the perspective of introducing product resources, is it possible that after changing from a peer-to-peer joint venture to a foreign holding or sole proprietorship, foreign companies can introduce more new products to the Chinese market? This problem existed in the early days of reform and opening up, but after entering the new century, it has almost ceased to exist. Because China is currently the world's largest market and the most important battlefield for the competition of the world's major brands, except for a very small number of high-end brands and models that do not need to be mass-produced or must remain in local production, there is no major dispute between China and foreign countries in introducing new products to the Chinese market. So there is very little room for improvement in this area.

Fourth, from the analysis of decision-making efficiency, it is true that some joint ventures have the phenomenon of mutual ridicule and low decision-making efficiency due to the equality of shares between Chinese and foreign parties and the equality of rights. However, most joint ventures do not have this problem, and those that have this problem can be completely improved.

Of course, after the joint venture equity ratio is changed, it will change the pattern of interest distribution between the two parties. Do you want to change? In which direction will it change? It depends on the contribution of both parties to the joint venture and the economic and technological strength of both parties. This is market behavior, which side is strong and has a large contribution, the right to speak will be greater. For Chinese partners, we should strive to increase the contribution of our own side and strive for more discourse. If the force is not caught, reasonable concessions are also allowed, and there is no need to carry political baggage. Like Brilliance Group, giving up shares, striving for reasonable economic compensation, and doing a good job in corporate bankruptcy reorganization is also a reasonable move under helplessness. For foreign partners, the author suggests that we should not focus too much on the current distribution of benefits, but should pay more attention to the important role and development potential of Chinese partners, pay attention to the new changes in the competitive landscape and competitive environment of the Chinese market, and formulate a reasonable development strategy.

Second, the new changes in the competitive landscape and competitive environment of China's automobile industry. There are three main aspects.

First, the balance of strength between China and foreign countries has changed. In the early stage of reform and opening up, China's automobile industry was one lack of products, two lack of technology, three lack of funds, and four lack of modern market economy enterprise management experience. In the context of national reform and opening up and global integration of the world economy, China's automobile industry and the world automobile industry have cooperated closely for win-win development. While supporting the rapid development of the national economy, China's automobile industry has grown into the world's largest automobile producing country. The world's auto industry has also benefited, and large international companies that cooperate closely with China's auto industry have developed faster.

At present, China's automobile industry is still a general pattern of comprehensive opening up and cooperation, but Chinese brands and Chinese capital automobile enterprises have made great progress. Chinese brand automotive products account for more than half of the Chinese market. China's automotive industry R & D investment and the number of patents have ranked among the top in the world. From the perspective of joint ventures, locally developed products have accounted for a considerable share of the market, and the Chinese partners are no longer Wuxia Amon, playing an increasingly irreplaceable role in the development of electric vehicles and intelligent networked vehicles. For example, the pressure of double integration in the joint ventures where the Chinese partner electric vehicles have developed well is significantly lower than that of other companies. As the proportion of electric vehicles becomes higher and higher, and the technology application of intelligent and connected vehicles is increasing, the contribution of Chinese partners in joint ventures will also increase.

The second is to add new tracks such as electric vehicles and intelligent networked vehicles. Although in terms of technical reserves, large international companies are generally better than Chinese brand automobile companies. However, in terms of industrialization, Chinese and foreign automobile companies are also underprepared. Tesla's leadership in electric vehicles and intelligent driver assistance speaks volumes about this.

In terms of market conditions, China has given full play to its institutional advantages and taken the lead in building a large-scale market for electric vehicles, providing the best conditions for technological development and product development, driving the rapid development of Chinese brand electric vehicles, and product technology to reach the international advanced level. In contrast, the development of electric vehicles of traditional international automobile brand enterprises in the Chinese market is slightly slow. At present, the production scale of power batteries ranks first in the world, and the technology has reached the world's advanced level, and there are obvious advantages in cost.

China has the unique advantage of developing advanced technologies such as electric vehicles and intelligent networked vehicles. At present, China is at the peak of infrastructure construction, and the construction of charging and replacing facilities and intelligent road construction is likely to be ahead of the world. China's Internet is developed, and 5G communication is at the world's advanced level, providing good conditions for the development of new automotive technologies.

Third, the Internet of Everything and the dual carbon target have put forward new challenges to the automotive industry. Although in the 140 years of the development of the world's automotive industry, there has never been a shortage of new challenges, the depth and breadth of this new challenge are unprecedented, and it will make profound changes in the competitive boundary conditions and development models of the automotive industry. There are mainly the following aspects: The first is the obvious expansion of the field of automotive technology, on the basis of the original mechanical manufacturing plus electronic control, the addition of electrochemistry, Internet, artificial intelligence and new materials and other fields. The second is that the competition model has changed, no longer dominated by the performance-price ratio, and the importance of user experience and application services based on Internet technology has increased significantly. Taking Tesla as an example, although its quality level is average, it is not as good as traditional brands such as Mercedes-Benz and Toyota, but it has obvious advantages in user experience and application services, and the market is developing rapidly. Third, the trend of integration of automobile products and applications with social infrastructure construction, national economic operation, and people's daily life is very obvious. The car is no longer a single valuable mechanical product, but a mobile energy source and information source; the car is no longer a single means of transportation, but a third living space for people.

This is a huge challenge facing the world's automobile industry, and it needs closer cooperation from the world's automobile industry in order to deal with it well. If China's auto industry only attaches importance to the "card neck" problem and seeks closed development, it is impossible to truly build an automobile power. If some Western politicians want to hinder the development of China's auto industry by cutting off technical ties, the result is likely to be that traditional auto companies will gradually lose the Chinese market, lose the support of Chinese innovation for technological development, and become second-rate enterprises.

Some people may think that in the past, China's automobile industry lacked technology, products, funds and management, and it was very necessary to open up and cooperate with the outside world. Now we have the world's largest market, and technology has gradually caught up and can no longer be open for development. This is not entirely unreasonable, but it is somewhat biased and narrow-minded. The author believes that global economic integration and technological integration are major trends and objective realities. If China and the Western powers completely "decouple" economically and technologically, it will be a disaster for both sides. We should stand at a new height of the community of human destiny, look at the open development of China's automobile industry, we must not only contribute to the market, but also contribute to new technologies, to achieve our responsibility as a big country, we must also export our products and technologies to the world, do the 2.0 new stage of the opening and development of China's automobile industry, drive the development of China's economy and world economy, and benefit the people of Chinese and the world.

Third, new ideas for the new stage of development. From a macro point of view, the liberalization of the joint venture equity ratio should not be simply regarded as a step in the policy concession in the Sino-foreign industrial game. This is an important symbol, marking that in the new competitive pattern and competitive environment, the opening up and development of China's automobile industry has entered a new stage. At this critical juncture in the development of the industry, all participants in China's automotive industry need to re-examine their development strategies and revise their Sino-foreign cooperation strategies.

For existing Sino-foreign joint ventures, it is necessary to reposition the cooperative relationship between the two sides. Foreign countries need to not only continue to see China as an important market, but also use Chinese innovation as an important source of technology for themselves. As the main component of China's large state-owned enterprises, they need to realize that after the cancellation of policy protection, they will face both Chinese and foreign pressures. Only by continuously improving China's contribution to the joint venture can we have the strength to protect our own interests. Both Sides should recognize that it is essential to work closely together in all directions to improve the efficiency of decision-making. In the past, poor cooperation may only affect the speed of development, but now, whether cooperation is good or not is a big issue of life and death.

For large foreign companies, we should not only regard the liberalization of the joint venture share ratio as an opportunity to fight for their own interests, but should be regarded as a new starting point for multi-faceted cooperation with China's automobile industry. The liberalization of the joint venture share ratio and the unlimited number of cooperative enterprises have opened up a broader space for cooperation among large foreign companies. Of course, wholly-owned operations in the Chinese market are also allowed. However, the author believes that only with good Chinese partners can we make better use of China's resources and better achieve our development goals. Although Tesla, which is solely owned in China, has developed well in the past two years, it has also exposed the shortcomings of repeated mistakes in public relations. It is really impossible to say that in the long run, it will develop better than the joint venture.

This is also a new opportunity for other Chinese brand car companies, including new car manufacturers. In the old days, Wang Xie Tang Qianyan flew into the homes of ordinary people. After all, large quantities and specialization are the common laws of the automobile industry, and the rapid production of 100,000 vehicles per year is only a good start, and finding foreign partners with complementary technologies and cultural matching should become a good boost for the development of Chinese brand automobile enterprises. The cooperation between Geely and Volvo should be a model for this.

All in all, the author believes that the liberalization of the joint venture stock ratio is a key time node and an important opportunity, and China's auto industry will certainly be able to further grow in higher quality open cooperation and realize our Chinese dream of building a world automotive power.