Author: Zhang Dayan
Although the Beijing Auto Show was postponed for some reason, various online releases are still in full swing. Not only new products and new technologies, but also a new concept is revealed, that is, to strengthen the all-round systematic layout of China as the base for intelligent creation (not just production and sales terminals).
Taking Volkswagen, the largest automobile company in China, as an example, Volkswagen China recently announced that it will invite Chinese technology companies to participate in the group's global procurement, targeting pure electric vehicle hardware that is expected to be put into production in Europe and North America in 2025, based on the SSP platform and equipped with carIAD software platform, in order to further promote the strategic transformation of software as the core.
If I remember correctly, this will be the first time in 40 years that Volkswagen has entered China.
Times are different
The background of inviting Chinese companies to integrate into the global procurement system is that with the rapid rise of Chinese auto brands in recent years, traditional multinational car companies have felt greater pressure.
According to statistics, there are about 96 enterprise groups and more than 130 brands in China's auto market, which is the market with the most auto companies, the most brands and the largest sales volume in the world.
In the 40 years since the first Join venture license was issued, joint venture cars with overseas brands have become the absolute main force in the Chinese auto market. But with the addition of new energy vehicles, the speed of the sudden change of the times has far exceeded people's expectations.
In the past year, there are 85 brands in the traditional fuel vehicle market, and the number of brands with monthly sales of less than 1,000 units has reached 34, and 9 brands have disappeared. It is expected that in the next 3-5 years, 80% of brands will face shutdown and turnaround.
If there is no accident, there will be only more than 20 traditional brands left in the domestic market in the future, and the market concentration will be greatly improved. In the process, multinational companies have suffered an unprecedented squeeze.
In 2021, the market share of Chinese brand passenger cars reached 41.9%, exceeding 40% for the first time, while the market share of Chinese brand passenger cars in the first quarter of 2022 further increased to 45.2%. Among them, in the field of new energy, the share of Chinese brand passenger cars has reached 83%.
The result of this and the other is that, according to the data of the Association, the sales of 590,000 units of mainstream joint venture brands in March fell by 30% year-on-year, and under the momentum of the rise of independent brands, there are always some joint ventures that have become background boards: in March this year, the market share of German and Japanese passenger cars fell to about 20% respectively, and American cars accounted for only 10%.
Obviously, the pressure on the giants is quite not small. How to jump out of the downward spiral, it is necessary to fundamentally change the previous take-it-all from models to technology.
From small repairs to system reconstruction
We divide the development of multinational car companies in China into three stages, and by combing through the evolution of these three stages, we can reveal the changes in China's auto market: stage 1.0 - pure take-ism; stage 2.0 - minor repairs, including lengthening, increasing China's exclusiveness; 3.0 stage - overall layout, systematic Sinicization.
Stage 1.0 – Purely Take:
In the early days of Shanghai Volkswagen's domestic production of Santana, there was basically no supply chain that could be supported in China, and most of the parts needed to be imported from overseas, and Shanghai Volkswagen was more likely to assume the role of a CKD assembly at that time. However, this small step is a big step for the entire Chinese auto industry.
Stage 2.0 - Minor Repairs:
As the Chinese auto market cake grows bigger, more and more auto brands have begun to land in the Chinese auto market. The increasingly fierce market competition has made many multinational car companies begin to realize that the situation that one-way output can ensure hot sales no longer exists.
A small number of leading joint venture car companies have begun to seek some relatively simple changes to better meet the needs of domestic consumers, the most typical of which is to elongate the body, or add some Chinese people's preferred configuration to create a Chinese exclusive model.
However, the authority of the local engineering team is very limited, and there are few cases where they can intervene in the early development stage of the global project. Not to mention, let it have the relevant engineering development capabilities and independently develop new models. Therefore, the relevant localization projects can only be said to be small repairs.
Stage 3.0 - System Layout:
With the emergence of National Electric Vehicles, for multinational car companies, in order to continue to be recognized, the small repairs in the 2.0 stage are no longer enough, especially in the power battery, Vehicle Networking and automatic driving, relying on local suppliers has become a shortcut for the rapid growth of foreign car companies.
In the field of internet of vehicles, automakers themselves are not good at developing APP, and many domestic APP has been deeply rooted in the hearts of the people, multinational car companies only cooperate with these mainstream APP; in the field of automatic driving, China's strict surveying and mapping regulations require foreign car companies to bring more autonomous driving research and development functions into The domestic; in the battery field, China's Ningde era, BYD, etc. are world-renowned battery companies.
So we see that in the field of automatic driving, Volkswagen not only joined the camp of Baidu Apollo, but also rumored that it would acquire Huawei's automatic driving department or form a joint venture with Huawei's automatic driving department; and in the battery field, Volkswagen has become the majority shareholder of Guoxuan Hi-Tech, not only finding a reliable source of battery supply for itself, but also helping Volkswagen China to go deep into the upstream link of battery research and development.
Another point that has to be mentioned is that with the liberalization of the equity ratio of domestic joint venture car companies, for foreign car companies, they will inevitably put more and more functions in China. With China's relatively complete parts and components support, low labor cost expenditure and quality assurance that is not weaker than overseas, building a Chinese factory into a factory that radiates the Asia-Pacific region and even the world has become a profitable option.
Taking Volkswagen China as an example, it not only participated in the share reform of JacHuai Automobile and became a shareholder of Jiangqi Group, but also completed a 75% stake in JAC Volkswagen. In the future, JAC Volkswagen will become an important production base for Volkswagen in the world.
In fact, it is not only Volkswagen that has delegated power to China, including Mercedes-Benz to establish a double research and development center in Beijing and Shanghai this year; the new president of Audi China said that not only the car engine system and intelligence, but also the interior and exterior design will be transferred to China; Toyota announced the cooperation with BYD several years ago for electric vehicles; South Korea's Hyundai is also determined to build hydrogen plants in China and deepen the Chinese fuel cell market.
Therefore, from the R & D function to the supply chain, to the forward-looking technology-related production plants, foreign car companies are slowly tilting towards the domestic market.
The post-joint venture era is very different
The transfer of more functions to China, and even the relocation of some of the global R&D functions and production plants responsible for global supply to China, is bound to mean that these multinational car companies have invested a lot of resources and job opportunities in the Chinese market, but the opportunities will be placed in China, and the interests of headquarters and some overseas factories may also suffer certain losses. In this case, how to balance the interests of all parties has become a difficult problem that makes people scratch their heads.
Especially for European car companies such as Volkswagen and Mercedes-Benz, trade unions are often very strong. Once the investment of these car companies in China affects job opportunities in Europe, it is bound to cause a strong backlash from the unions.
In this case, the multinational car giants can only take into account better interests if they make the cake bigger. By making the cake bigger, we will create more profits, increase some of China's investment at the same time, and at the same time increase investment overseas, so as to achieve a win-win situation.
Bringing the whole system industrial chain to China, and using the Chinese market as a command base for drawing inspiration and creativity and perceiving user needs, this is a new post-joint venture era.