Foreseeing 2022丨 Exclusive Dialogue with Zhao Ying: Joint ventures are a win-win game, not a zero-sum game

21st Century Business Herald reporter Song Doudou reported that recently 21st Century Business Herald officially launched the "Foresee 2022" series of interviews, inviting experts in various fields of China's automotive industry to predict the pattern and trend of Chinese automobiles in 2022.

Since January 1, 2022, the joint venture share ratio limit for passenger cars in Mainland China has been officially "opened" after nearly 30 years of implementation. With the completion of the equity change of BMW Brilliance, the opening of the share ratio restriction has brought opportunities and challenges to the entire automotive industry; in addition to the internal adjustment of the old joint venture, the new energy joint venture car companies represented by Volkswagen Anhui and Audi FAW have also been established. It is undeniable that in the post-joint venture era, the adjustment of the equity ratio of joint venture companies will be a protracted game.

Zhao Ying believes that "joint ventures are a game that seeks a win-win situation, not a zero-sum game, and just changing the share ratio does not necessarily change the original intention of multinational companies' joint ventures." It is certain that the restriction on the shareholding ratio in automobile joint ventures will be abolished, and the competition pattern in the automobile market will change greatly, and Chinese local enterprises and multinational companies will have advances and retreats, and what kind of situation to adopt depends on the specific competitive situation and needs of enterprises. ”

In his view, whether multinational companies continue to adhere to the original form of joint ventures in China's auto market depends on three aspects: First, depending on their own strength, the auto industry is an asset-heavy industry, and even multinational companies with strong strength need to diversify risks through joint ventures; second, it depends on the strength and discourse power of the Chinese side in the joint venture; third, depends on the field of competition, in the field of new energy vehicles in which Chinese auto companies have certain advantages, foreign capital does not necessarily adopt the form of sole proprietorship.

While traditional car companies continue to change, the light orange era, box cars, group cars, etc. have opened the "car-making industry". In this regard, Zhao Ying said, "Now that it is claimed that if you want to build a car, the public and the media must look at the real guys. New energy vehicles have entered the current stage of development, and ticket prices have been greatly improved; after several years of beating and tempering, the "new forces" of car manufacturing have a deep understanding of car manufacturing; the public's understanding of new energy vehicles is also much more mature. ”

The following is a transcript of the interview, with abridgements:

21st Century Business Herald (hereinafter referred to as "21st Century"): How to view the trend of China's auto market in 2022? What are the highlights? What are the challenges?

Zhao Ying: It is expected that in 2022, China's auto market will show a low-speed growth rate of about 3%-4%, and new energy vehicles will still grow at a high rate. At the same time, this year's automobile exports will continue to grow, and China's automobile exports will increase by more than 2 million vehicles in 2021, which not only shows the overall improvement of China's automobile level, but also reflects China's advantages in the field of new energy vehicles. Chips, supply chain and other issues still restrict the development of the car market, but compared with last year, this year will be alleviated to a certain extent.

"21st Century": From January 1, 2022, the restriction on the joint venture share ratio of passenger cars has been officially abolished, what is the impact of this policy on the development of domestic automobiles?

Zhao Ying: Looking back at the development of China's auto industry and the evolution of the government's auto industry protection policy, 2022 is indeed a historical moment for China's auto industry. China's auto industry has basically lifted government protections, and Chinese auto companies have basically relied on their own strength to fight in the commercial sea.

Of course, the challenges remain, and the task is still long. The development process of China's automobile industry shows that only in the open market, give full play to the autonomy of enterprises, supplemented by appropriate and gradually reduced government support and protection, can promote the rapid development of the automobile industry. From the perspective of the development history of the global automobile industry (especially in Japan and South Korea), the government's protection of the automobile industry can only be protected in a certain period and in certain fields, and indefinite protection can only protect backwardness.

Judging from the historical experience of the development of the global and Chinese auto industry, even if the restriction on the share ratio is lifted, it will not have much impact on the development of China's auto industry. Judging from the internal logic of the global development of the automobile industry, the lifting of the shareholding ratio restriction will not have much impact on the development of China's automobile industry.

"21st Century": How will this policy affect the development pattern of foreign car companies in China?

Zhao Ying: When multinational companies enter a certain market, they must always consider their own strengths and weaknesses, limited and optimal allocation of resources, strategic needs in related markets, global strategic layout, technology, limited capital, product composition, market research and development and production factors, government regulations, market competition, cultural differences, consumer characteristics and other factors.

Because of the constraints of many factors, multinational companies need to find partners. Joint ventures are win-win games, not zero-sum games. Therefore, just changing the shareholding ratio does not necessarily change the original intention of the multinational company's joint venture.

Whether multinational companies continue to adhere to the original form of joint ventures in the Chinese auto market depends on three aspects:

First, it depends on its own strength. The automotive industry is an asset-heavy industry, and even strong multinational companies need to diversify risks through joint ventures.

Second, it depends on the strength and voice of the Chinese side in the joint venture. China naturally has the advantage of home games, if the Chinese side is strong or equal, has enough voice, and has the right strategy, it can influence the choice of multinational companies in the joint venture. Of course, if the Strength of the Chinese Side is weak (such as Brilliance), there may also be a situation of foreign holding or even sole proprietorship.

Third, it depends on the field of competition. In the field of new energy vehicles, where Chinese auto companies have some advantages, foreign capital does not necessarily take the form of sole proprietorship, which is what we have seen.

In short, the abolition of the shareholding ratio restriction in automobile joint ventures, the greater change in the competitive landscape in the automobile market is certain, China's local enterprises and multinational companies will have advances and retreats, and what kind of situation to adopt depends on the specific competitive situation and needs of enterprises.

"21st Century": When the head enterprises of the new car-making forces are gradually gaining a firm foothold in the market, at the end of 2021, a wave of car-making "after-wave" emerges, such as the light orange era, box cars, Maverick electric, group cars, etc. into the field of vehicles, opening the "car-making industry", is it too late to cut into the car-making track at this moment? What are its prospects?

Zhao Ying: In China's new energy vehicle market in 2022, not only the first-line enterprise "Wei Xiaoli", a new force of car manufacturing, has entered the stage of annual output of 100,000 vehicles, but also the second-line "new forces" you chase me, and the traditional automobile companies are even more eager. In 2021, China's new energy vehicle production ranks in the top few, and it is precisely the traditional automobile companies that enter the Chinese new energy vehicle market, and the threshold for entering China's new energy vehicle market has been greatly improved.

When new energy vehicles enter the current stage of development, ticket prices have been greatly increased; after several years of beating and tempering, the "new forces" of car manufacturing have a deep understanding of car manufacturing; the public's understanding of new energy vehicles is also much more mature. Now claiming to build a car, the public and the media have to look at the real guys. In the past few years, there has been a car-making fever, there are many PPT car-making, but now it is basically dissipated, and the situation of "more money and stupid people" in The Chinese new energy vehicle market is no longer "more money, people are stupid", PPT car-making is somewhat difficult, and the team is not very good.

"21st Century": Recently, the market rumors of Volkswagen's acquisition of Huawei's autonomous driving business unit have been raging, how to view the competition and cooperation between technology companies and car companies? With the continuous expansion of Huawei's circle of friends, how should car companies defend their "soul"? What kind of enterprises are expected to win under such a cooperation model?

Zhao Ying: The new technological revolution has brought about profound changes in the organizational form of the automotive industry itself, and the restructuring and differentiation between the automotive industry and technology companies, as well as important parts companies, has become more and more intense. The model is roughly divided into four types: one is to invest in the establishment of enterprises, the second is to hold related enterprises but not directly manage, the third is to invest in related enterprises to carry out strategic cooperation, and the fourth is technical cooperation. It remains to be seen what kind of model becomes the mainstream of the restructuring of the industrial chain and supply chain structure.

21st Century: How has the "Double Carbon Target" changed the automotive industry?

Zhao Ying: The "double carbon target" has accelerated the technological progress of the automotive industry, product upgrades and provided a great impetus to the revolution of new energy vehicles.