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Why it won't be easy for foreign automakers to part with Chinese partners
The Chinese government announced this week that it will phase out restrictions on foreign ownership of joint ventures with domestic automakers by 2020.
Khodrocar - The move bodes well for foreign automakers’ future in China as it will allow them to part from joint venture partners and gain full control of local operations.
But a complete separation will be hard for nearly all global brands that manufacture in China and may not be desirable for major global automakers such as General Motors.
The difficulty in ending ties with their Chinese peers varies among international auto manufacturers.
It might be relatively easy for Japanese brands such as Toyota and Honda and Korean companies such as Hyundai to part with their Chinese partners. For those automakers, the joint ventures they have established with local companies merely serve as manufacturing hubs.
Japanese and Korean automakers are mainly compact car makers in China. And they have steadily expanded their lineups of locally produced hybrid vehicles in the past few years.
The companies are confident that they can quickly launch more alternative energy vehicles in China to meet local regulatory requirements on fuel economy and electrified vehicles.
It is the same situation with European brands but the Volkswagen Group is an exception.
The VW group, which runs joint ventures with China FAW Group Corp. and SAIC Motor Corp., sold 4.18 million vehicles in China under various brands in 2017.
As China’s largest light-vehicle maker, VW has come under tremendous pressure to accelerate output of electrified vehicles as required by Beijing’s carbon credit program. The program, due to be enacted in 2019, is designed to prod automakers to ramp up output of electrified vehicles, notably EVs.
VW won’t begin producing EVs in China for its own brands until 2020. Fearing that it cannot meet the program’s requirements on its own, the German auto giant established a third joint venture in China, this time with leading Chinese EV maker Jianghuai Automobile Co. The new partnership, incorporated last year, is set to build and sell low-priced EVs under a new brand beginning later this year.
As long as the regulatory pressure to boost EV production persists, VW will continue to rely on the EV joint venture with JAC.
It might also be relatively easy for Fiat Chrysler Automobiles to terminate its joint venture with Guangzhou Automobile Group Co. That would allow more Jeep models to be assembled at a subsidiary wholly owned by FCA.
But it would be much harder for the two leading American automakers to break ties with their respective local partners.
Ford Motor Co., which delivered nearly 1.2 vehicles in China in 2017, has been slow to introduce electrified vehicles. To earn more carbon credits, Ford signed up small Chinese automaker Zoyte Automobile Co. last year to churn out inexpensive EVs.
Zoyte is the Dearborn company’s third local partner, following Changan Automobile Co. and Jiangling Motor Group.
Compared with other global automakers, General Motors may find it the most costly to free itself from Chinese partners.
GM operates two joint ventures in China: SAIC-General Motors, a 50-50 venture with SAIC; and SAIC-GM-Wuling Automobile, a 50.1-44.0-5.9 partnership among SAIC, GM and Guangxi Automobile Group Co., a state-owned company in southwest China’s Guangxi region.
SAIC-GM produces Buick, Chevrolet and Cadillac models while Wuling makes mini-buses under the Wuling brand and entry-level passenger vehicles under the Baojun marque.
In 2017, GM delivered 4.04 million vehicles in China, of which 53 percent were generated by Wuling and Baojun brands. Moreover, SAIC-GM-Wuling started selling a micro electric car late last year.
A breakup with SAIC would likely force GM to lose Wuling, a company majority owned by SAIC. That would cost GM more than half of its China sales and the benefit of accumulating carbon credits.
And it’s the last thing GM wants to do in China, its largest market worldwide.
Source: Automotive News China
But a complete separation will be hard for nearly all global brands that manufacture in China and may not be desirable for major global automakers such as General Motors.
The difficulty in ending ties with their Chinese peers varies among international auto manufacturers.
It might be relatively easy for Japanese brands such as Toyota and Honda and Korean companies such as Hyundai to part with their Chinese partners. For those automakers, the joint ventures they have established with local companies merely serve as manufacturing hubs.
Japanese and Korean automakers are mainly compact car makers in China. And they have steadily expanded their lineups of locally produced hybrid vehicles in the past few years.
The companies are confident that they can quickly launch more alternative energy vehicles in China to meet local regulatory requirements on fuel economy and electrified vehicles.
It is the same situation with European brands but the Volkswagen Group is an exception.
The VW group, which runs joint ventures with China FAW Group Corp. and SAIC Motor Corp., sold 4.18 million vehicles in China under various brands in 2017.
As China’s largest light-vehicle maker, VW has come under tremendous pressure to accelerate output of electrified vehicles as required by Beijing’s carbon credit program. The program, due to be enacted in 2019, is designed to prod automakers to ramp up output of electrified vehicles, notably EVs.
VW won’t begin producing EVs in China for its own brands until 2020. Fearing that it cannot meet the program’s requirements on its own, the German auto giant established a third joint venture in China, this time with leading Chinese EV maker Jianghuai Automobile Co. The new partnership, incorporated last year, is set to build and sell low-priced EVs under a new brand beginning later this year.
As long as the regulatory pressure to boost EV production persists, VW will continue to rely on the EV joint venture with JAC.
It might also be relatively easy for Fiat Chrysler Automobiles to terminate its joint venture with Guangzhou Automobile Group Co. That would allow more Jeep models to be assembled at a subsidiary wholly owned by FCA.
But it would be much harder for the two leading American automakers to break ties with their respective local partners.
Ford Motor Co., which delivered nearly 1.2 vehicles in China in 2017, has been slow to introduce electrified vehicles. To earn more carbon credits, Ford signed up small Chinese automaker Zoyte Automobile Co. last year to churn out inexpensive EVs.
Zoyte is the Dearborn company’s third local partner, following Changan Automobile Co. and Jiangling Motor Group.
Compared with other global automakers, General Motors may find it the most costly to free itself from Chinese partners.
GM operates two joint ventures in China: SAIC-General Motors, a 50-50 venture with SAIC; and SAIC-GM-Wuling Automobile, a 50.1-44.0-5.9 partnership among SAIC, GM and Guangxi Automobile Group Co., a state-owned company in southwest China’s Guangxi region.
SAIC-GM produces Buick, Chevrolet and Cadillac models while Wuling makes mini-buses under the Wuling brand and entry-level passenger vehicles under the Baojun marque.
In 2017, GM delivered 4.04 million vehicles in China, of which 53 percent were generated by Wuling and Baojun brands. Moreover, SAIC-GM-Wuling started selling a micro electric car late last year.
A breakup with SAIC would likely force GM to lose Wuling, a company majority owned by SAIC. That would cost GM more than half of its China sales and the benefit of accumulating carbon credits.
And it’s the last thing GM wants to do in China, its largest market worldwide.
Source: Automotive News China
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