April 02, 2020

Whose foreign investment in China's auto market tightens equity

Recently, three seemingly irrelevant news have been exposed one after another.

First, General Motors chairman and CEO Daniel A kerson disclosed to outsiders that General Motors had informed its Chinese partner SAIC to repurchase the 1% stake in Shanghai GM previously sold to SAIC; It is Volkswagen's intention to increase its share of FAW-Volkswagen from the current 40% to 49%; the third is that Mercedes-Benz intends to integrate imported car channels with domestic car channels.

The three seemingly unrelated actions revealed a common signal that as China’s auto market grows in size, multinational giants increasingly value the Chinese market. Strengthen the control over joint ventures in China to maximize benefits.

In response to this, multinational giants are constantly investing in and expanding production this year. Among them, Volkswagen announced that it will increase its production capacity in China to 3 million units in the medium term; Shanghai GM will expand its Shenyang base to provide capacity support for 1.5 million sales targets in 2015; Dongfeng Limited stated in its new mid-term business plan that it will China's production capacity has increased to 2.3 million; Ford Motor also announced that it will introduce and launch 15 new models in China by 2015.

These two common moves of multinational companies in the Chinese market have allowed the author to rethink the development model of the Chinese auto industry that has led to this situation.

Today, the “market-for-technology” model of Chinese autos has proved to be less than expected. In the past 30 years of joint ventures, multinational auto giants have become the biggest profiters. Today, China has become the largest single country market for auto giants such as Volkswagen, General Motors, and Nissan, and has become an important source of profits.

After the "technology exchange market," it is now a controversial "joint autonomy." The autonomy of the joint venture can indeed enable the joint venture to gradually penetrate into the upper reaches of the industrial chain, and is also a repositioning of the joint venture company's role as a mere “production base”. However, this does not change the role of Chinese joint venture companies in the global layout of multinational corporations. The joint venture companies are still firmly tied to the chariots of multinational corporations.

Corresponding to the joint venture company, it is the difficulty of China's own brand. Chinese self-owned brands that have grown up in the cracks are "congenitally deficient and acquired disorders" and are their consistent assessments. In the past two years, its "low-cost win" development model has also encountered the brand's ceiling.

Especially in the downturn of the auto market this year, self-owned brands have become the most affected group. According to statistics, from January to July of this year, China's auto sales exceeded 10 million, and its own-brand passenger vehicles sold a total of 3.5343 million vehicles, a year-on-year decrease of 1.03%, and the occupancy rate decreased by 3.06 percentage points from the same period of last year.

In South Korea, which is almost at the same time as China’s auto industry, its Hyundai Group has long been overseas. It is still a brand that China’s own brand companies are looking for in order to break the brand ceiling for their own brands.

This kind of reality has to allow us to reflect on who is the Chinese auto market?

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