The auto industry's foreign-invested shares are more open than the liberalization. The competitive landscape is facing adjustments.

People's vision

Since China announced a series of new measures to further expand its opening up, the stock ratio has become a hot topic in the automotive industry.

After the stock ratio is released or the number of joint venture partners is cancelled, will foreign investment tend to increase the current shareholding of the joint venture or try to establish a controlling or wholly-owned enterprise? How will this change affect Chinese partners in existing automobile joint ventures and develop well-established Chinese brands? What does it mean for China's new energy (6.350, -0.07, -1.09%) vehicles that are dedicated to changing lanes and passing cars?

With the above problems, this reporter visited domestic and foreign car companies responsible persons, industry and research institutions experts and found that everyone has a consensus: share ratio liberalization is the trend of the times, the Chinese auto industry competition landscape will face adjustments, as the WTO opened In the "golden decade" of China's auto industry, the liberalization of shares will become a new starting point for the automobile industry from "big" to "strong."

Industry competition will change in depth, many Chinese and foreign car companies welcome

"We welcome the Chinese government's policy of further opening up the market. There is currently no new joint venture plan." Chairman of the board of directors of Daimler AG and President of the Mercedes-Benz Automotive Group, Cai Che told reporters that the Daimler Group The sincere cooperation with Chinese partners is a solid foundation for the success of our business in China. With regard to the future development, Daimler will negotiate with existing partners.

“We very much support and very much welcome the Chinese government's further expansion of opening up, which will further increase global confidence in the future of China’s investment.” Heizmann, president of Volkswagen Group (China), said that “share ratio liberalization measures The joint venture has no influence, and we will continue to work together with our partners to develop joint ventures.” Volkswagen also stated in its official response: “The Group is carefully reviewing relevant information and exploring possible new opportunities in the future. ”

For the auto industry to liberalize stocks and other series of measures to further open up, more and more automotive multinational companies are not only welcome, but also the satisfaction of the existing cooperation framework, as well as respect for the Chinese partners. The first time to make such a statement, there are Honda Technology Co., Ltd. President Takahiro Kitahiro and many other high-level multinational companies.

It is not only foreign-funded enterprises that welcome the stock exchange to open up. Li Shufu, chairman of Geely Holding Group, expressed more than once his expectations for stock ratio liberalization. He told reporters that this policy is conducive to China's auto industry's self-awakening, self-struggle, China's brand cars will help improve competitiveness and research and development level, to provide users with more and better products, and constantly increase market share.

Applauded for the liberalization policy, there are many new energy startups. Cao Zhong, chairman of Cheung Kong Motors, welcomed and supported the liberalization of shares. He Xiaopeng, the founder of Xiaopeng Automobile, said that stocks ratio liberalization is a big plus for new energy startups and will become a key turning point for China's auto industry from “big” to “strong” in the future.

However, there are also some Chinese car company executives who are more open to the auto industry and have a relatively cautious outlook for cooperation with foreign parties.

"Joint venture sales accounted for 20% of global sales. Foreign parties are very satisfied with the contribution of the Chinese side. Only the joint venture contract will expire in 9 years. There will be a lot of gambling in the renewal," said a high-level Chinese automotive joint venture company.

“The comprehensive opening up of the auto industry will profoundly change the competitive landscape of the Chinese auto industry. It can be predicted that the auto industry will inevitably undergo major reorganization of resources, capital and interests.” Changan Automobile (10.210, -0.08, -0.78%) Group Directors Zhang Baolin said.

There is no significant impact on the current market competition

"After the stock ratio is released, the vast majority of auto multinationals will not set aside the existing Chinese partner to start a new venture." Zhao Changwen, minister of industry economics research at the State Council Development Research Center believes that this judgment is mainly based on three reasons:

First, in the 50:50 equity framework of existing automobile joint ventures, foreign companies earn far more than 50% of profits by controlling the parts and components industry, vehicle model transfer, and patent licensing. Although most of the new models and core technologies of the joint venture companies come from foreign countries, China still plays an irreplaceable role in dealing with the relations between government departments, local market demand analysis, dealer network expansion, marketing, and brand localization. The role.

Second, the global automotive industry is facing a major transformation from internal combustion engine vehicles to new energy vehicles, from traditional automobiles to intelligent network companies, and shared vehicles. China's auto market competition has also shifted from "incremental competition" to "stock competition." Any car company that repeats investment in the traditional internal-combustion-engine vehicle field is risky and very unwise to buy only 50% more shares than the existing joint venture and far less than 50%.

Third, almost all automotive multinational companies have set up joint ventures in China. Under such a framework, they will start to face complicated adjustments to their interests. For example, how to deal with the existing joint venture Chinese partners and distributors to ensure that the market share of the old and new system switching period does not appear cliff-style decline, it is very difficult.

"China's auto market is not only the largest in the world, but also a highly open market," said Xu Changming, deputy director of the National Information Center. In 2016, Volkswagen's sales in China accounted for 39.9% of the world's total, and GM's sales in China accounted for 38.7% of the world's sales. The importance of the Chinese market to the global automotive multinationals is evident.

Then, after the stock ratio is released, will the foreign party seek to increase the stake in the joint venture company? Zhang Zhiyong, a senior analyst in the automotive industry, believes that in the short term, this possibility is not great. First of all, auto stocks are a gradual process than liberalization. According to the timetable proposed by the National Development and Reform Commission, the foreign share ratio of special vehicles and new energy vehicles will be abolished in 2018; the ratio of foreign capital shares in commercial vehicles will be abolished in 2020; and the foreign capital ratio limit for passenger cars will be lifted in 2022. Second, the joint venture company is a legal entity that is stipulated in the form of a joint venture contract. The contract execution period is two to three decades. Even if an automotive multinational company wants to increase its share ratio, it needs to obtain permission from its Chinese partner under the existing contractual framework. To re-negotiate the joint venture contract, the earliest to wait until 2027.

“The liberalization of the share ratio is a national strategy. This is the only way for the Chinese automobile industry to become stronger.” Fu Yuwu, Honorary Chairman of the China Society of Automotive Engineers believes that after the share ratio is released, Chinese auto companies will face the competition of multinational companies. Enterprises that do not have core technologies and do not have core competitiveness will certainly not be able to win.

In recent years, due to the consumer demand for SUV segmentation and smart grid-connected technologies, Geely, Great Wall, Changan and other Chinese brands have reached annual sales of millions of cars. At the same time, however, the development of the Chinese brand passenger vehicle business under the ownership of some state-owned auto groups with a number of joint ventures has been slow.

“In the long run, after the share ratio is released, those car companies that use joint ventures as 'profit milk cows' will experience greater pressure.” Zhang Zhiyong said that if during the transitional period, the investment and output of Chinese brands could not be realized, The positive cycle of R&D and market will face greater market difficulties in the future. The Geely, Great Wall and other companies that rely on their own accumulation and development in the market will be expected to become beneficiaries of the reshaping of the market pattern.

“The release of equity ratio is not the end of the world. There will not be any situation in other developing countries where foreign companies dominate the world.” Peng Bo, Global Partner, PricewaterhouseCoopers, China Opening will indeed increase the pressure for the growth of Chinese brands, but pressure will also force Chinese brands to become bigger and stronger.

With the stock ratio liberalized, foreign investors will leave their existing Chinese partners in the field of electric vehicles and go forward alone?

Zhao Changwen believes that this possibility is also relatively low. First of all, the ratio policy is only a micro-policy in the field of joint ventures, and industrial policy is the core policy affecting the auto industry. Withdrawing the restrictions on foreign-invested shares, foreign investors still need to comply with relevant investment management policies. For example, the “Regulations on the Management of Newly-built Pure Electric Passenger Cars” and “Opinions on the Improvement of the Management of Automobile Investment Projects” and the principle of the State Council will no longer approve new constructions. The decision of traditional fuel automobile manufacturers, etc. This means that foreign investment in the electric vehicle industry, either through the existing fuel truck joint venture to declare new products, or like Tesla to apply for a new wholly-owned pure electric vehicle, or to acquire other qualified pure electric vehicle prices. Under the background that dozens of domestic new energy start-ups are queuing up for production qualifications, it seems that it is not easy to get the qualifications of newly-built pure electric vehicle enterprises. After all, in order to regulate the above-mentioned industry threshold for domestic investment, foreign-funded enterprises also have to face it.

“The stock-to-share ratio policy of liberalizing and cancelling the number of joint ventures will promote the introduction of more models by foreign automakers into the Chinese market. In the future, the products in the Chinese auto market will become more abundant and the auto market competition will become increasingly fierce.” Senior Automotive Analysis Jia Xinguang believes that in the end, consumers will be the biggest beneficiaries.