In the Chinese automobile market, joint venture cars can be said to be a very important term. In the past era, joint venture cars were in the limelight and were the absolute leader in the Chinese automobile market. Almost all major lists were dominated by joint venture cars, while domestic cars could only be ranked at the bottom. However, in recent years, the automobile market has undergone rapid changes, and joint venture cars have been retreating step by step, raising the question: is the era of Chinese joint venture cars really coming to an end?

I. Joint venture cars in retreat

According to Donews, Shenzhen Denza New Energy Automobile Co., Ltd. (hereinafter referred to as Denza New Energy) has undergone equity and business changes, with BYD Auto Industry Co., Ltd.'s shareholding increasing from 90% to 100%, and Mercedes-Benz (China) Investment Co., Ltd., which originally held 10% of the shares, withdrawing. The former director Hans Georg Engel has also withdrawn, and Denza New Energy has officially changed from a foreign-funded company to a domestic company. Denza Automobile has also transformed from a joint venture between BYD and Mercedes-Benz to an independent brand automaker.

However, this is not the only case. According to Jiemian News, in the first half of 2024, mainstream joint venture brands continued to shrink their market share to less than 30% despite aggressive price cuts and promotions. Five joint venture brands of SAIC Motor, Dongfeng Motor, and Guangzhou Automobile Group experienced varying degrees of profit decline, with a total loss of RMB 5.64 billion.

Joint venture brands with declining sales and prices have laid off employees and closed factories, and dealers who followed their development have suffered losses and withdrawn from the network. Honda, Nissan, General Motors, and other joint venture automakers have reduced production by millions of units, and more than 2,500 dealers have withdrawn from the network due to price wars.

In August of this year, 53.6 out of every 100 passenger cars sold in the Chinese market were new energy vehicles. Once stumbling, Chinese independent brands have become leaders in the production of smart electric vehicles that are cost-effective, pioneering in design, and superior in performance. However, joint venture brands have yet to launch truly popular new energy products.

In July of this year, China Business Journal reported that on July 26, Honda China announced that it currently has seven automobile production lines in China with a combined annual production capacity of 1.49 million units. Dongfeng Honda plans to shut down and suspend production at its second plant with an annual production capacity of 240,000 units in November 2024.

"To meet the demand for electrification transformation, the second plant's production line will be suspended in November this year, and a new new energy factory will officially operate in September this year to reduce fuel vehicle production and increase new energy vehicle production," Dongfeng Honda responded to reporters.

"In 2023, the most purchased products among China's new rich users were still German-made, accounting for up to 38%. However, the proportion of Chinese brands is rapidly approaching 30%, posing a threat to the German share. In terms of pre-orders, the proportion of Chinese brands has risen rapidly to 45.83%, completely outperforming the 27.20% of German brands and becoming the first choice for China's rich users," said the Yiche Research Institute. "If we extrapolate based on this proportion, in the next two or three years, once BBA products still fail to keep up with the pace of new consumption, they will inevitably face severe challenges."

II. Is the era of Chinese joint venture cars really coming to an end?

With the influx of the new energy vehicle wave, traditional joint venture automakers seem to be in an unprecedented dilemma, with their market share being eroded by rapidly rising domestic new energy vehicle brands. For a time, the argument that "the era of joint venture cars is coming to an end" gained popularity. Have joint venture cars really declined completely? How should we view the current predicament of joint venture cars?

First, the traditional joint venture model was the mainstream in China for decades. In the early days of reform and opening up, China's automobile industry was just starting and faced many challenges. There was a huge gap between China and international automotive giants in terms of production technology, management experience, and marketing strategies. To rapidly improve the level of China's automobile industry, Chinese automakers adopted a 50-50 joint venture model with foreign partners to introduce advanced foreign technology and management experience.

Joint venture brands represented by FAW-Volkswagen, SAIC Volkswagen, Changan Ford, and Beijing Benz emerged as a result. The emergence of these joint venture brands brought a new atmosphere to the Chinese automobile market. Almost all major global automakers have established joint ventures with Chinese enterprises, bringing the Chinese automobile market quickly in line with international standards.

In this era of joint ventures characterized by market-for-technology exchanges, foreign partners in joint ventures held the initiative for a long time due to their advanced technology, mature management experience, and strong brand influence. Joint venture cars, with their reliable quality, advanced technology, and good brand image, have long dominated the Chinese market.

The success of joint venture cars not only brought advanced technology and management experience to China's automobile industry but also provided Chinese consumers with more choices. At the same time, the development of joint venture cars also drove the development of China's auto parts industry and promoted the overall improvement of China's automobile industry.

Second, the decline of joint venture cars and the rise of independent brands. With the rapid development of the new energy vehicle market, joint venture cars have gradually shown signs of decline. On the one hand, traditional joint venture automakers have been slow to transform and upgrade, and some even feel powerless. In terms of new energy vehicle technology research and development, joint venture automakers are often constrained by foreign decisions and technical routes, making it difficult to quickly respond to the needs of the Chinese market. On the other hand, joint venture automakers are also lagging behind in market expansion models. The traditional dealer model faces many challenges in the new energy vehicle era, such as high costs, low efficiency, and poor user experience.

At the same time, a large number of domestic new energy vehicle brands have gradually seized this opportunity and risen rapidly. Independent brands represented by BYD and WENJIE have quickly occupied the top of the market with their advanced battery technology, intelligent product design, and innovative marketing models. These domestic new energy vehicle brands have not only continuously innovated in technology, launching products with longer range, faster charging speeds, and higher levels of intelligence, but also actively explored new models in market expansion, such as direct sales models and online-offline integration models, providing users with a better car buying and using experience.

The root cause of the retreat of joint venture cars lies in their slow technological innovation and outdated market expansion models. In the era of new energy vehicles, consumers' demands for automobiles have undergone profound changes, with greater emphasis on environmental protection, intelligence, and convenience. Joint venture cars have not performed satisfactorily in these areas and have been unable to meet consumer demand. In contrast, domestic new energy vehicle brands are closer to market demand and can quickly launch products and services that meet consumer needs.

Third, the predicament of joint venture cars does not mean the end. For the current market, the decline of traditional joint venture automakers is almost an indisputable fact. However, this does not mean that the era of joint venture cars is truly coming to an end. International automotive giants still have significant advantages in many areas such as automotive industrial design and automotive market development.

On the one hand, international automotive giants have rich experience and deep heritage in automotive industrial design. Their research and innovation in automotive exterior design, interior design, and ergonomics have set benchmarks for the automotive industry. These design concepts and technologies are still of great significance for improving the overall design level of China's automotive industry.

On the other hand, international automotive giants also have rich experience in automotive market development. Their strategies and methods in global market layout, brand building, and marketing are of great reference value for Chinese automakers to expand into international markets.

Although international automotive giants are currently facing difficulties in the new energy vehicle field, their own strength still needs to be taken seriously. Moreover, unlike traditional joint venture models, a new reverse joint venture model has begun to emerge. Volkswagen's investment in XPeng Motors and Stellantis Group's strategic cooperation with NIO have made it a trend for global automotive giants to reverse-join domestic automotive brands, especially new energy vehicle startups. In this model, Chinese partners play a dominant role with greater control.

The emergence of this reverse joint venture model has brought new opportunities for the development of joint venture cars. For foreign partners, international automotive giants can quickly enter the Chinese new energy vehicle market and share its dividends through cooperation with Chinese new energy vehicle brands. For Chinese partners, Chinese new energy vehicle brands can enhance their competitiveness and expand into international markets by leveraging the technology, brand, and market resources of international automotive giants.

Fourth, how should we view the future of joint venture cars? For the current market, we cannot ignore the advantages of the joint venture model. The joint venture model has not only brought advanced technology and management experience to China's automotive industry but also provided Chinese consumers with more choices. At the same time, the joint venture model has also promoted the internationalization of China's automotive industry and enhanced its competitiveness in the global market.

However, as mentioned earlier, the times have changed. The rapid rise of Chinese automakers in the new energy vehicle field will give them greater market influence. In the future, there will be more and more new joint venture models led by Chinese automakers. In this new joint venture model, Chinese automakers will give full play to their technological, market, and resource advantages and work with international automotive giants to promote the development of the automotive industry.

Joint ventures and independent brands are not inherently opposed. Cooperation leads to mutual benefit, which remains the general trend in the market. In the era of new energy vehicles, Chinese automakers and international automotive giants can achieve complementary advantages and jointly explore the market through cooperation. Chinese automakers can learn from the advanced technology and management experience of international automotive giants to enhance their competitiveness, while international automotive giants can leverage the market and resource advantages of Chinese automakers to achieve their own development.

Therefore, the current joint venture car market is undergoing a significant transformation. This transformation is not a zero-sum game but an opportunity for the emergence and popularization of a new model. Have you understood this transformation?