【Introduction: The liberalization of the equity ratio of domestic joint venture car companies has allowed Stellantis after the integration to see new development opportunities. Through equity reform, injecting a booster into the development of China's auto market is the last card that many weak foreign car companies can play. So, can Stellantis Group's holding in China free Dongfeng DPCA? 】
Written| by Zhang Dachuan and editor | Hezi
On March 1, stellantis Group announced the "Dare Forward 2030" strategic plan. In 2022, the DPCA plant will be opened to third parties, with Stellantis managing the Peugeot brand under DPCA and Dongfeng Group managing the Citroën brand. In addition, Stellantis Group once again said that it will increase its shareholding in GAC FCA, a joint venture with GAC Group, from 50% to 75%.
Dongfeng Shenlong performed well in the first two months of this year, with sales in February increasing by 154% year-on-year, and cumulative sales of 20,633 vehicles from January to February, an increase of 106% year-on-year. However, while sales have rebounded sharply year-on-year, the total amount is still low, and the situation of annual sales of 700,000 at the peak and millions of planned production capacity is even more incomparable. To get back on the track and get back into the mainstream, change at the company level is essential. In this context, the "Dare Forward 2030" strategic plan is crucial to Dongfeng Shenlong.
Forced into a desperate situation, Stellantis took the initiative to adjust
Stellantis was formed by the merger of PSA and FCA. Compared with PSA in the European market, FCA in the United States and South American markets, the two foreign car companies seem to have lost their way forward in the domestic market in recent years. In particular, FCA's JEEP brand has rapidly experienced a cliff-like decline after enjoying the dividends of the early stage of localization. After PSA once reached an annual sales peak of 700,000, it also continued to decline for many years, and it did not increase year-on-year until 2021.
Guangfik and Dongfeng Shenlong, like many domestic second-tier foreign-funded car companies, under the double squeeze of the sinking of luxury brands and the upward of independent brands, have long ceased to be the courage of the past, the living space is getting smaller and smaller, and even the dilemma of "selling factories to survive" has emerged. Whether it is in terms of actual product strength or brand power in the minds of the Chinese people, the gradual marginalization of second-tier joint venture brands is a very significant feature of the domestic auto market in the past two years. Starting in 2022, the equity ratio of domestic joint venture car companies will be liberalized, so that The integrated Stellantis can see new opportunities for development. In particular, after BMW obtained 75% of the equity of BMW Brilliance, it was like opening the plug-in mode in the domestic luxury brand market to leave Mercedes-Benz and Audi behind, which made many foreign brands envious. Through equity reform, injecting a booster into the development of China's auto market is the last card that many weak foreign car companies can play.
As one of Stellantis' two joint venture car companies in China, The equity reform of Guangfeike has basically been settled: Stellantis will hold 75% of the equity of Guangfeike, which is almost subject to the official announcement after the approval of the government department. We can imagine that after the share-to-equity transfer is finalized, a large number of models owned by FCA and even Stell antis will be continuously imported into the joint venture. As another company of Stellantis, Dongfeng Shenlong also needs to make changes. According to the "Dare Forward 2030" plan, Dongfeng Shenlong's next strategy is also relatively clear: China leads Citroën and France dominates Peugeot, sharing public resources and fields, including manufacturing.
Compromise under a dual-brand strategy
In the reform of Dongfeng Shenlong, the Chinese side leading Citroën and the French side leading Peugeot is undoubtedly the biggest attraction. More details have not yet been announced, but the overall direction should not deviate too much. This reform model is actually the best arrangement for Dongfeng and Dongfeng Shenlong in the current situation.
From the perspective of the Chinese side, unless there is a better investment object, it is generally less willing to sell the equity of the joint venture company, of which Brilliance is the best case. Before GAC was willing to give up Guangfiq, on the one hand, GAC Toyota and Honda performed better, and at the same time, GAC Aean became the main focus of the group, and it needed to pour more resources. Under the premise of the success of Guangfeik's stock reform, if Dongfeng does not give up some benefits, then in the future, Stellantis will inevitably give priority to more new models and new technologies into Guangfeik's umbrella, because the same investment can be exchanged for greater benefits. And this will inevitably damage the interests of the East Wind and the Dongfeng Dragon.
In this case, ceding the dominance of Dongfeng Peugeot to Stellantis can actually make up for the psychological gap between the foreign parties and take into account some of their interests. After obtaining the dominance of Dongfeng Peugeot, it will inevitably stimulate Stallantis to invest more resources in the domestic market and help Dongfeng Peugeot and the entire Dongfeng Shenlong increase terminal sales. With the existing Dongfeng DPCA brand appeal ability and system capability, it is actually a bit difficult to operate a dual brand. If Stellantis can prioritize more resources on the Peugeot brand, it is undoubtedly the best choice for Chinese and foreign shareholders. As for Citroen, its performance in the country was already worse than Peugeot. Citroen, which is dominated by Dongfeng, can lower its body in the future and grab greater sales through cost performance.
Is there a prospect for the foundry business?
Previously, there were not many cases of domestic OEMs, especially foreign brand car companies actively seeking OEM business. In the case of the overall car market in the past two years, more like Beijing Hyundai, Jiangsu Yueda Kia and Dongfeng Shenlong themselves will sell or rent idle factories to reduce their own capacity vacancy rate. From the perspective of Dongfeng Shenlong, after a series of disposals in the early stage, dongfeng Shenlong's two major factories in Chengdu and Wuhan still have a production capacity of 400,000 vehicles. Considering that in 2021, Dongfeng DPCA will only sell 100,000 units, and the vacancy rate of enterprise production capacity is still very high. In order to achieve profitability, improving capacity utilization is also a problem that needs to be solved.
From the perspective of Stellantis itself, there have been rumors before that the Opel brand is about to enter the domestic market and be manufactured by Dongfeng DPCA. However, considering the current domestic smart electric vehicle fever, Dongfeng DPCA can help many capitals that want to enter the car manufacturing field to operate with an asset-light business model in the early stage through OEM. Taking Baidu's car brand Jidu as an example, in the early stage, it achieved mass production of models by introducing Geely's SEA haohan architecture and seeking Geely OEM. The rich experience of traditional car companies in the field of car manufacturing and relatively mature system capabilities are valuable assets for new forces. If we can achieve strong and strong cooperation and complementary advantages, it must be a win-win business choice. Another point has to be said that although there are already many capitals other than automobiles involved in the car industry, we believe that the incomparable charm of smart electric vehicles will continue to attract other capital to continue to enter this industry. Dongfeng Shenlong's foundry business still has certain prospects.
Comments
At present, it is a critical moment for the transformation of the major traditional car giants. A large number of electric vehicles and intelligent network technology have been gradually landed from out of reach planning. In this case, if foreign car companies can solve the problem of domestic joint venture share ratio, they will also be more willing to increase investment in domestic joint ventures and introduce the most advanced technology and models to the domestic market in the first time. For the Chinese automotive industry today, and even for the Chinese economy, this kind of investment is crucial.
(This article is the original of "Heyan Reading Car", without authorization, it may not be reproduced)