Written by | R3 drift
Edit | Routing Agency
On the last day of March, the switch between China's economic center and the focus of epidemic prevention on both sides of the Pujiang River attracted the attention of a considerable part of the public.
At the same time that Puxi residents had dinner and were busy with the last round of purchases before sealing, BMW online released a blockbuster message -
The new BMW X5 was officially launched at a price of 605,000 yuan to 775,000 yuan.
Brand new BMW X5
What makes this product particularly special is that in the future, it will assume the identity of "the new flagship of BMW's domestic models". This is also the first time that the BWM X5 model has been manufactured locally in China.
Because of the epidemic, the press conference that should have been grand and grand was forced to move online. The zero-distance contact between the new car and the public was also changed to the "cloud car appreciation" model due to the postponement of the Beijing Auto Show.
Only a small number of residents living in Beijing have the opportunity to find the new BMW X5 in the Universal Studios Resort, between Transformers and Harry Potter and their friends - BMW held a small roadshow at the BMW JOYCUBE brand store on Universal City Avenue.
For Thousands of Bimmers in China and even around the world, they have to be separated from the new car in front of the screen. This also makes people feel sorry for the luxury car manufacturer's helpless move.
But from a business point of view, everything is already the best arrangement.
Make a fortune with a muffled voice
In 2019, the new generation 3 series was listed, which once created a sensation in the physical world. In contrast, the arrival of the new BMW X5 is somewhat deserted and lonely.
However, this may help BMW to interpret the saying "make a fortune with a muffled voice" more vividly.
The BMW X5 is undoubtedly one of the BMW Group's most popular models. Since 1999, the model has been one of the BMW Group's best-selling products worldwide.
In 2021, sales of bmw X5 models reached 60,725 units and 43,103 units in the BMW Group's two major global markets, the United States and Europe, respectively, an increase of 19.9% and 5.2% year-on-year.
In China, the world's largest auto market, sales of the model exceeded 50,000 units for the first time last year, becoming the fourth-selling product of the BMW Group's nearly 20 models on sale.
"It is worth noting that the BMW X5, as a medium-sized luxury SUV, can contribute to BMW's bicycle profits, which are not the same as the top three series sales of the 3 series, X3 and 5 series." Independent auto analyst Liu Rui reminded.
This is also the reason why BMW is eager to accelerate the expansion of X5 model sales in the Chinese market.
In this case, it would be a good option to domestically produce the model.
Liu Rui said that compared with the imported car form, the domestic X5 will have a more controllable cost, and the sales terminal can form an attraction for consumers through a lower selling price, and ultimately achieve the purpose of promoting sales growth.
Compared with the imported version (699,900-839,900 yuan), the newly announced entry price of the new BMW X5 is nearly 100,000 yuan lower.
Obviously, the benefits of local manufacturing do not stop there.
"In the process of domestic production of products, multinational automakers can freely adjust their products according to the special needs of the Chinese market." Liu Rui analyzed.
As an exclusive wheelbase extended version for the Chinese market, the new BMW X5, which is named "Li", has increased its wheelbase by 130 mm to 3105 mm.
This also means that the parameters of the new BMW X5 have been comparable to the BMW X7 (3105 mm) and have entered the ranks of large SUVs.
Of course, for Chinese consumers, it is not a new thing for multinational automakers to carry out similar "exclusive operations" on "China special" models.
Like Europeans who prefer station wagons and Americans who prefer pickup trucks, Chinese car owners prefer the wide space that long-wheelbase models bring.
Correspondingly, a considerable number of multinational automakers will make similar adjustments when introducing global models to the Chinese market.
Still take BMW as an example. In the Chinese market, it has been 10 years since the group launched the first 3 Series Li model with a wheelbase length of 110 mm in response to local demand.
The additional wheelbase will provide rear passengers with more knee and legroom, creating a competitive advantage with greater comfort.
"This new car reaffirms once again that we will give the highest priority to the Chinese market." Dr. Wei, President and CEO of BMW Brilliance Johann Wieland) said.
On the second day of the launch of the new BMW X5, his position was led by Former BMW Brilliance Senior Vice President of Technology and Production Dr. Dai. Franz Decker) will be replaced, and Wei Lander will also return to Germany after his term of office.
BMW Chairman Oliver Zipse wants to draw on new trends in China's automotive market that will help companies grow.
"We see China as a frontrunner on topics like electrification or digitalization. What drives China today will push the world of tomorrow. He said.
Chiptzer added that BMW's four innovation and digital bases in China are the group's largest R&D sites outside Of Germany.
China, one of the best investment destinations
For the continuous expansion of local manufacturing in China, BMW has shown a continuous enthusiasm.
On the day of the launch of the new BMW X5, the BMW Group simultaneously launched the new BMW i3 model. The latter will also be localized at BMW Brilliance's Shenyang plant, becoming the first pure electric sedan launched by the BMW brand in China.
The new BMW i3
On the other hand, BMW Brilliance's Shenyang Dadong plant reconstruction project and Tiexi's new plant will be completed this year. In addition, Beam Auto, a 50:50-share joint venture between BMW Group and Great Wall Motors, will also build a factory in Zhangjiagang, Jiangsu Province, within the year.
This may be seen as a microcosm of the eastward expansion of production capacity of Western car companies.
Another German luxury car manufacturer, Audi, and its Chinese partner FAW Group launched a new pure electric vehicle production project in Changchun, Jilin Province, in February this year, which is expected to start production by the end of 2024 and reach an annual production capacity of 150,000 units.
After the completion of the new base in Changchun, Audi plans to produce the first three electric models there, including an SUV and a sedan. The site is expected to be carbon neutral in the automotive manufacturing process and has its own battery assembly workshop.
Although many Chinese cities are currently rebounding in the fight against the new crown pneumonia epidemic, from a global perspective, China's active anti-epidemic measures and relatively stable economic development trend still make it a less risky choice among multinational investment destinations.
According to the latest data from China's Ministry of Commerce, in the first two months of this year, the actual amount of foreign direct investment used in the country reached 243.7 billion yuan, an increase of 37.9% year-on-year.
As of now, China remains one of the main investment destinations for overseas automakers, especially German companies.
Recently, Xinhua News Agency quoted a report jointly released by the German Chamber of Commerce in China and KPMG as saying that nearly 60% of German companies in China showed that their business operations improved last year. At the same time, 71% of companies plan to invest further in China.
President and CEO of the BMW Group greater China Gao Le
Gao Le, president and CEO of BMW Group Greater China, said that China's determination and confidence in opening up to the outside world at a high level and continuously improving the business environment of multinational enterprises have made the Chinese market more attractive and brought win-win results to China and multinational companies.
"They need an actuary"
Of course, for multinational automakers, it is obviously not a reliable practice to force their products to be domestically produced without judgment.
Before they get an output, they have to think about inputs.
In the future, BMW Brilliance's Shenyang Dadong plant, which will be responsible for the production of the new BMW X5, invested 7.6 billion yuan.
In fact, since 2010, BMW's production base in Shenyang, Liaoning Province, has invested a total of 73 billion yuan to build it into BMW's largest production base in the world.
The site is believed to produce 650,000 units a year.
Since July 2020, BMW has also started an upgrade to the south workshop of the Dadong plant for the production of the X5 model.
BMW Brilliance Dadong plant
In Audi's case, the total investment scale of the new pure electric vehicle production project with FAW reached 30 billion yuan.
In addition to the investment required to build production capacity, the lower transaction price of domestic models compared with imported products, the distribution of domestic model revenue and joint venture parties will have an impact on the profitability performance of multinational car companies' business in China.
This becomes a complex mathematical problem.
"In the face of such variable calculations, they may need a good actuary." Liu Rui said.
First, multinational automakers may be able to take into account the benefits of domestic production in China: in China, they will be more closely connected to a large potential consumer base, while enjoying lower-cost, more professional human resources.
More importantly, the highly localized supply chain and product manufacturing links help multinational automakers avoid risks such as capacity constraints or surge in operating costs caused by the global epidemic, international trade frictions, and parts supply cuts.
Still take the BMW X5 model as an example. Before the model was produced in production, it was produced by BMW at its Spartanburg plant in South Carolina, USA.
Originally, BMW Spartanburg plant, which exclusively produced the BMW X5
In 2018, there was a trade friction between China and the United States. As the United States unilaterally raised trade barriers, the Chinese side immediately fought back and began to impose 40% tariffs on goods imported from the United States.
To avoid passing on additional tariff charges to consumers, the BMW Group has been producing 10,000-20,000 BMW X5s per year at its Rayong plant in Thailand since March 2019 to supply Chinese customers.
"For Chinese consumers, if there is a trade-off between a Thai-made BMW and a Chinese-made BMW, the answer is obvious." Liu Rui said.
Benefit from high-quality openness
For multinational car companies, the biggest concern about increasing domestic investment may come from the distribution of benefits with partners.
In this regard, BMW has successfully used the greater openness policy of Chinese regulators to set a model for the success of multinational car companies.
In February this year, BMW strengthened its partnership with its Chinese business partners by extending its joint venture contract until 2040.
What's more, the German automaker also added 27.9 billion yuan to the joint venture in China, increasing its shareholding from 50% to 75%.
Chairman of the BMW Group, Oliver Zipse
"We will continue to strengthen our long-term commitment to the Chinese market and continue our business development." Chiptzer, chairman of the BMW Group, said at the time, "We always firmly believe that the success of the BMW Group in China is inseparable from the growth of the joint venture BMW Brilliance. ”
It is not difficult for Chiptzer to make such a statement.
Although, unlike German companies such as Volkswagen Group and Mercedes-Benz, BMW Group has always adopted a unified sales channel in China, a higher shareholding ratio in the joint venture still means that BMW will gain more benefits from its China business in the future.
At present, China's commitment to high-quality and institutional opening up offers broad prospects for overseas investors.
In the government work report released in March this year, China's State Council listed promoting a higher level of opening up to the outside world and promoting the steady growth of foreign trade and investment as the main tasks of the government in 2022.
In January this year, the National Development and Reform Commission and the Ministry of Commerce further shortened the length of the negative list for foreign investment access, reducing the number of restricted projects from 33 a year ago to 31.
These include further opening up of the manufacturing sector and the lifting of the cap on foreign investment in China's automotive industry. This has also led to more overseas automakers like BMW expanding their investment in China.
Audi's parent company, volkswagen Group, is also seeking to increase its stake in the joint venture in China. In May 2020 and September 2021, the Volkswagen Group increased its stake in Volkswagen (Anhui) Co., Ltd. (hereinafter referred to as "Volkswagen Anhui") to 77.14% through two fixed increases.
Volkswagen Anhui, another joint venture company of the Volkswagen Group in China
In April last year, Volkswagen officially opened its third new MEB electric vehicle plant in China through Volkswagen Anhui, which is expected to start production in 2023 and will form a production capacity of 300,000 units per year.
At the new plant, Volkswagen Anhui plans to produce a new energy model codenamed SE316/8. Volkswagen's internal information shows that the SE316/8 refers to the Seat Cupra Tavascan model, which is a high-performance pure electric SUV.
In addition to German automotive companies, transatlantic companies such as The Stellantis Group are also trying to gain control over joint ventures in China and to strengthen them in a similar way.
At the end of January and the beginning of March this year, the group reiterated its plan to increase its shareholding ratio in GAC FCA from 50% to 75% through its official website and global strategy conference.
GAC FCA is a joint venture established 13 years ago between Fiat Chrysler Automobile and GAC Group. After the merger of Fiat Chrysler Automobile and PSA Group, GAC FCA became one of the most important joint ventures of Stellantis Group in China, and is currently responsible for the production of Jeep brand models.
Stellantis Group said it had reached an agreement with GAC on the above plan, but the deal still needed to wait for approval from Chinese regulators.
Write at the end:
In the current market environment, multinational automakers increasing investment in China and increasing the proportion of domestic models in the product matrix are a less error-prone choice.
Compared with the potential risks such as limited premium ability, declining bicycle revenue and complex intertwining of interests, further narrowing the distance between products and consumers is still a business initiative with more advantages than disadvantages.
After all, in the business world, what you want will be given first. Risk is an eternal proposition, and rewards are mostly derivatives hidden in them.
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