"21 Gold Engine • Looking for New Samples of Joint Ventures" officially opened: How to see how automotive joint ventures innovate and break through?

Lai Jiyue, a researcher at the 21st Century New Automobile Research Institute

In May 1983, Beijing Jeep Automobile Co., Ltd., the first Sino-foreign joint venture automobile enterprise after the reform and opening up, was established. In the past 40 years, joint venture car companies have brought the auto industry management experience, standard system and technical technology of industrially developed countries to China, and the joint venture car brand and the Chinese national automobile brand have launched a wonderful competition and cooperation game, jointly promoting China's growth into the world's largest automobile consumer market and automobile producer. In the grand chapter of China's reform and opening up, the automobile joint venture has undoubtedly left a strong mark.

With the promulgation of the National Development and Reform Commission's "Special Administrative Measures for Foreign Investment Access (Negative List) (2021 Edition)", the restriction on foreign ownership of passenger cars has been abolished, and the restriction on no more than two joint ventures has been abolished, and joint venture car companies have ushered in a new test in the new era.

The change does not only come from the revision of national policies: in China, the growth of traditional fuel vehicles is weak, new energy vehicles have entered a blowout period, new car-making forces are gradually entering a better situation, and Internet giants have successively fallen... The market is changing rapidly, challenges are emerging in an endless stream, whether the traditional joint venture car companies can cast brilliant again, and how the new joint venture car companies can take a new road are becoming one of the most concerned issues in China's auto industry.

The curtain of change begins

On March 22, Dongfeng Yueda Kia officially changed its name to Kia Automobile Co., Ltd. The tripartite joint venture, established in 2001 by Dongfeng Motor Group, Yueda Group and Kia Automobile on a 25%, 25% and 50% shareholding ratio, has reached a fork in the road in history after 20 years.

At the highest moment in history in 2016, Dongfeng Yueda Kia once touched the height of annual sales of 650,000 vehicles, ranking among the first echelon of the joint venture, but then fell into the quagmire of endless decline, and sales fell off a cliff, with sales of 359,000 units, 370,000 units, 289,800 units, 249,000 units and 158,500 units in 2017-2021, respectively.

In November 2021, Dongfeng Motor Group transferred 25% of its Dongfeng Yueda Kia shares for 297 million yuan, officially withdrawing from the tripartite shareholding model. After several months of negotiations and tug-of-war, the share ratio of the new joint venture company was also adjusted along with the name change, and the registered capital of Kia Automobile Co., Ltd. was increased from US$624 million to US$1.224 billion, and the new shareholding structure was: 50% of Kia Co., Ltd., 25% of Yueda Investment, and 25% of Yueda Automobile Group. After the change in the share ratio and the renaming, Kia Co., Ltd. is responsible for accelerating the introduction of global models and the layout of new energy models, from 2023 to 2027, starting from the first pure electric vehicle model EV6, Kia plans to launch new electric models in the Chinese market every year to accelerate the electrification transformation.

Coincidentally, just before and after the foot, the two shareholders of BAIC Investment and Hyundai Motor announced that they would jointly increase the capital of Beijing Hyundai by a total of about 942 million US dollars, and the joint venture share ratio remained unchanged at 50:50. The capital increase funds mainly provide financial guarantee for future product layout. According to the plan, Beijing Hyundai will launch two exclusive EV models in the Chinese market from 2023 to 2024, in addition to investing in the global Ani Kr 5 and subsequent models, strengthening the electric vehicle product line, improving brand image and enhancing product strength.

The industry reshuffle

The once-glorious brand has failed, like a sad footnote in the process of falling behind the curtain of the old era. Just in 2021, the two joint venture brands of Dongfeng Renault and FAW Mazda have officially withdrawn from the historical stage; Dongfeng Venucia and Dongfeng Infiniti have also announced their return to Dongfeng Nissan around the Spring Festival and will no longer operate as independent companies.

Zhu Ronghua, chairman of Changan Automobile, proposed that with the popularity of new energy vehicles, in the next 3-5 years, 80% of China's fuel vehicle brands will be "shut down and turned". Passenger car stock ratio cancellation policy landing or will accelerate this process, traditional fuel vehicles stagnation, independent brand attack and luxury brand downward attack, the competition of joint venture car companies will also be more intense.

In 2021, domestic automobile production and sales both exceeded 26 million units, ending a three-year decline since 2018. However, under the overall data, the retail sales of a number of mainstream joint venture car companies have declined year-on-year, and the joint venture car companies in the two-three-four camp have declined even more, among them Dongfeng Yueda Kia sold 158,500 vehicles, down 27% year-on-year; Beijing Hyundai sold about 385,000 vehicles, down 23.3% year-on-year; Skoda sold 71,200 vehicles in the whole year, down 58.8% year-on-year; GAC Mitsubishi sold 66,000 vehicles in 2021, down 12% year-on-year. GAC FCA sold only 20,100 units, down 50.33% year-on-year.

Poorly run businesses have had to make tough choices about whether to save or give up.

The equity transfer of Denza Automobile, a joint venture between Daimler and BYD, is expected to be completed in the first half of 2022, and after the completion of the transfer, BYD's shareholding in Denza will increase from 50% to 90%, and Daimler's shareholding will decrease from 50% to 10%. In addition, BYD has also established an independent sales channel for Denza and wholly established Denza Automobile Sales Service Co., Ltd. to "rebuild high-end services and experiences".

Tang Weishi, CEO of Fiat Chrysler Group, recently mentioned that he hopes to increase his shareholding in the joint venture company GAC FCA from 50% to 75%, and has now expressed that he is in consultation with GAC Group on the adjustment of the equity.

Compared with enterprises in poor condition, joint venture car companies with mature operation and stable profitability, the change of the joint venture pattern is like a still water and deep flow, and both shareholders will not easily retreat.

In 2018, the BMW Group acquired part of the equity of BMW Brilliance, a joint venture in China, for 3.6 billion euros, increasing its shareholding ratio to 75%, and the new joint venture contract officially came into effect after the Spring Festival in 2022. After BMW fired its first shot at increasing its holdings, Daimler began to show its willingness to increase its shareholding ratio, planning to reach at least 65%.

However, after several years of glue, a breakthrough was also made in March this year, and there were media reports that the negotiations between Mercedes-Benz and BAIC Group on the former's proposed increase in the shareholding ratio of Beijing Benz have been basically completed, and it is planned to be announced within this year.

21 Gold Engine • Looking for a new sample of joint ventures officially opened

In the field of new energy vehicles, a new joint venture model has long been opened. There is a new joint venture model in which Volkswagen and Audi have achieved holdings through new energy, there are also joint ventures between Mercedes-Benz and Geely, BMW and Great Wall, which still maintain a 50:50 share ratio, and there is also a joint venture model developed by Toyota and BYD for the first time by Chinese-led models.

In addition to the joint ventures between Chinese and foreign vehicle companies, more cross-border joint ventures have changed the usual definition of automobile joint ventures. The so-called "joint venture" is no longer just a link in capital, but more of a resource integration in the electrification and intelligent industrial chain. Baidu, Alibaba, and 360 have found a foothold in the automotive field in different ways, while CATL and Huawei have transitioned from supply chain cooperation to capital chain cooperation.

The new energy automobile industry will undoubtedly be the most thermal industry in China in the future, and for all newly joined joint venture partners, this track will realize the dream of bringing enterprises into the most sustainable new manufacturing field in one step.

In 2022, the 21st Century New Automobile Research Institute grandly launched the special topic of "21 Golden Engines : Finding New Samples of Joint Ventures", which plans to decipher the innovation and transformation of Chinese automobile enterprises and the fission and rise of China's automobile industry under the new joint venture era through reports + visits + reports. Stay tuned!