Automobile joint venture period will end, foreign companies will break through and break the ratio

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Time of issue:2014-04-26
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(Summary description)"The 30-year deadline for automobile joint ventures is about to come. Chinese joint ventures need to continue to develop, but some changes are needed in the way of development." Dong Yang, secretary general of the China Automobile Industry Association, stated again at the 2014 China Automotive Forum held on April 22. , Resolutely oppose the liberalization of joint ventures.

Automobile joint venture period will end, foreign companies will break through and break the ratio

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Automobile joint venture period will end, foreign companies will break through and break the ratio

(Summary description)"The 30-year deadline for automobile joint ventures is about to come. Chinese joint ventures need to continue to develop, but some changes are needed in the way of development." Dong Yang, secretary general of the China Automobile Industry Association, stated again at the 2014 China Automotive Forum held on April 22. , Resolutely oppose the liberalization of joint ventures.

Categories:Industry News
Author:
Origin:
Time of issue:2014-04-26
Views:0

"The 30-year deadline for automobile joint ventures is about to come. Chinese joint ventures need to continue to develop, but some changes are needed in the way of development." Dong Yang, secretary general of the China Automobile Industry Association, stated again at the 2014 China Automotive Forum held on April 22. , Resolutely oppose the liberalization of joint ventures.

The first domestically produced Santana was born. It has been 30 years since the Shanghai Volkswagen joint venture contract period is about to expire; FAW-Volkswagen, FAW Toyota, and several other joint ventures are also nearing the contract period. What's the future?

"The automobile industry is not a general manufacturing industry, but a strategic industry that supports the transformation and upgrading of the national economy. If the development dominance is abandoned, the automobile industry will become a processing plant for foreign products, and some Latin American countries will learn from it." Dong Yang According to 21st Century.com, the 30-year deadline for automobile joint ventures is approaching, and the scope of joint ventures can be further expanded, but joint ventures should increase independent research and development to reduce technological dependence on foreign parties, and change from pure Chinese manufacturing to R & D and manufacturing.

However, the supporters of the joint-stock ratio liberalization represented by Li Shufu, chairman of Geely Automobile, believe that only by liberalizing the equity ratio will it be possible to create a fair competition environment for foreign capital, state-owned and private car companies, and industrial policies will only protect domestic cars. Industry will weaken the competitiveness of the local auto industry.

Struggle for opening joint ventures

With the arrival of the 30-year term of the joint venture for automotive vehicles, the development direction of the joint venture has become a hot topic discussed at the 2014 China Automotive Forum.

For a long time, Chinese and foreign investment in automobile joint ventures must not exceed 50%, and foreign investment in joint venture partners must not exceed two restrictions. This is a “red line” for automotive industry policy. The dispute over the joint venture's share ratio stemmed from a statement by the Ministry of Commerce at the end of 2013: "The restrictions on foreign investment in general manufacturing sectors such as steel, chemicals, and automobiles will be further liberalized."

2On February 18 this year, Xiao Chunquan, director and spokesperson of the Ministry of Industry and Information Technology's Operation Monitoring and Coordination Bureau, once again stated that "the shareholding ratio of automotive joint ventures will be further liberalized."

Wang Zhile, a researcher at the Research Institute of the Ministry of Commerce, told the media that the issue of joint venture shares has been mentioned again, which is related to the more proactive opening strategy currently proposed by the central government. In order to adapt to the new reform and opening up pattern, some policies need to be adjusted, and the joint venture equity ratio policy of the automobile industry is also considered.

Dong Yang is an opposition in this debate over the opening of joint ventures. In Dong Yang's opinion, the joint venture is a buffer zone for Chinese brand cars to compete with foreign auto markets. If there are no restrictions on the share ratio of the vehicle joint venture, it means that zero tariffs and freight rates for imported cars will directly compete with Chinese brand cars. Large foreign companies can even use other means to stifle Chinese brand cars, such as holding companies and then discontinuing production of Chinese brand products, such as low-cost dumping, as some large foreign companies have done in some consumer goods sectors.

"Currently China ’s auto industry exports and produces overseas accounts for only 5% of total production. The growth of Chinese brand cars is more important than exports and overseas production." Dong Yang believes that Shanghai GM has already achieved good export performance in joint ventures. .

On the other hand, supporters of the joint venture, such as Li Shufu, chairman of Geely Auto, said that if industrial policy blindly protects the domestic automobile industry, it is just like parents' excessive love for their children, which is not conducive to the rapid development of the Chinese automobile industry, but will weaken it The competitiveness of the local auto industry.

Li Shufu's views are also supported by some other companies. Miao Xuezhong, deputy chairman and general manager of GAC Gonow, said that if the restrictions on equity ratios in joint ventures were lifted, it would definitely be unfavorable for state-owned enterprises in the automotive manufacturing industry, but it would be beneficial to private car companies. Multiple resources.

The breakout battle for foreign enterprises

In fact, foreign car companies have been “working hard” for the liberalization of joint ventures.

Previously, Allen Mulally, president and chief executive officer of Ford Motor Company, also stated publicly that the liberalization of stock ratio is the future development trend. Ford very much hopes to see an open market, which is a good thing for Chinese consumers.

And the public is always doing various "breakthroughs".

FAW-Volkswagen was established in 1991; by 1995, Audi was included in the FAW-Volkswagen production contract, and FAW-Volkswagen's shareholding structure became: FAW 60%, Volkswagen 30%, and Audi 10%.

It has been a long time that Volkswagen plans to adjust the shareholding structure of FAW-Volkswagen. According to media reports, as early as 2011, Volkswagen's "FAW-Volkswagen stock adjustment plan" proposed by FAW has been adjusted. From 2012, FAW-Volkswagen's performance was calculated based on the new stock ratios of 51% by FAW, 30% by Volkswagen, and 19% by Audi.

However, the plan was denied by both parties at the time. The relevant authorities pointed out that the adjustment of the share ratio was too sensitive and depended on the outcome of the game; the relevant ministries and departments were in principle unwilling to set a precedent for joint venture equity disputes, and it was impossible to support FAW-Volkswagen and Audi equity Adjustment.

However, it is understood that Volkswagen still hopes to increase its shareholding in the joint venture company FAW-Volkswagen, from 40% to 50%.

Volkswagen has not been able to increase its shareholding ratio, but some car companies are using other methods to circumvent this limit.

11In November 2013, Daimler invested in a 12% stake in BAIC, a privately owned passenger car segment of BAIC Group. Both parties carried out equity reorganization of the joint venture Beijing Benz. After the reorganization, the shareholding ratio of BAIC increased to 51%, and the financial statements of Beijing Benz were consolidated.

Daimler indirectly holds a 6.12% stake in Beijing Benz by holding 12% of BAIC shares, plus its direct 49% stake. Daimler's equity in Beijing Benz is 55.12%, more than 50%. limit.

"The reason why Daimler can increase its shareholding in BAIC Mercedes-Benz may be related to the overall listing of BAIC Group. And this restructuring model may also become a way of reference for the increase in the share ratio of foreign companies." An automotive commentator told the 21st century Net said.

In fact, the flexible operation of the company is also close to the effect of opening the share ratio. Xiao Jinang, the consulting manager of Xinhuaxin Automotive Marketing Solutions, said that since the phased transfer of shares between SAIC and GM in 2010, there is more room for share ratio operations. The mutual shareholding at the parent company level is used to redistribute the Chinese and foreign share ratios in the joint venture, and the curve form indirectly achieves an effect similar to the "opening of the share ratio".

Tide or restructuring the tide of car companies

Obviously, with the liberalization of joint ventures, foreign car companies are very much looking forward to it, because they all want to share more in the Chinese market. However, because of the many interests involved, the dispute over the joint venture's share ratio has continued. Until recently, the Minister of Industry and Information Technology Miao Wei stated that he would not let go of the joint venture's share ratio until the end.

At the symposium of representatives of the two members of the automobile industry in March 2014, Minister of Industry and Information Technology Miao Wei said that in view of China's negotiations on joining the TPP (Trans-Pacific Partnership Agreement: Trans-Pacific Partnership Agreement), the proportion of automobile joint ventures Opening up is under pressure, and within the jurisdiction of the Ministry of Industry and Information Technology, such as steel and chemical fiber, will be released in "phased" and "orderly". He said that in order to protect the automotive industry, the pressure to relax joint ventures will be topped out, but "the time is limited" and "the resources are limited". The trend of liberalization is imminent.

For this reason, in this limited time, how China's automobile development has become the focus of attention again.

When talking about the development direction of Chinese automobiles, Kim Tae-nin, director of the International Cooperation Department of the Korea Automobile Industry Association, believes that the reorganization of Chinese automobile companies is necessary in the future.

Wu Jintainian believes that for Chinese local automobile manufacturers, the key point is the industrial scale. At present, there are more than 200 automobile manufacturers in China, but many of them produce less than 10,000 vehicles per year, so they cannot achieve economies of scale. Jin Tainian suggested that the Chinese government must make some decisions to restructure the auto industry, because reorganization is very important for the auto industry.

Dong Yang agreed with the restructuring proposal mentioned by Jin Tainian. Dong Yang said that Chinese cars are actually very open and there are many joint ventures that have introduced many foreign brands, but Chinese brands still have a market of 11 million cars, and Chinese car brands have a market of more than 3 million cars, but are scattered across many brands. However, the companies that have obtained joint venture opportunities have to develop their own brands. The result is that they are very fragmented. The lack of cooperation between Chinese brands and excessive competition is causing fatal damage to the development of Chinese automobile brands.

In fact, the coming wave of automobile restructuring is inevitable.

Earlier, the State Council issued the "Industrial Transformation and Upgrade Plan (2011-2015)", which proposes that by 2015, the industrial concentration of the top 10 companies in the Chinese automotive industry will increase from 82.2% in 2010 to more than 90% in 2015. Encourage enterprises to implement mergers and reorganizations to form 3 to 5 large automotive enterprise groups with core competitiveness.

Miao Wei also stated clearly that the number one in production and sales does not mean that it is the automobile powerhouse. The true powerhouse is to have one or two companies enter the top few in the world. There are some technologies that can lead the development of the global automobile industry. Reorganization is the only way for enterprises to grow bigger and stronger.

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