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Tencent Auto author Shi Xiaolong

Editor: Zheng Kejun

Declining sales, falling market share, layoffs, suspension of production and work, and even delisting and selling factories have become the multiple footnotes to the poor performance of joint venture automakers in China in the past three years.

With the rapid rise of domestic brands, coupled with the strong impact of electrification and intelligence, the strong position of joint venture cars, once the big brother in the Chinese automobile market, is gradually disappearing.

What caused the current predicament? Where should joint venture car companies go? What are their future prospects? Tencent Auto's Think Tank Column exclusively interviewed Bao Jiacheng, "Deputy Director of the Information and Industry Development Department of the National Information Center", to try to answer these questions.

Expert profile of Think Tank Column: Bao Jiacheng, Deputy Director of the Information and Industrial Development Department of the National Information Center, Senior Economist

Core Viewpoint

The following is a transcript of the conversation (abridged version)

Tencent Auto:In the past three years, the sales and market share of joint venture car companies in China have continued to decline, with market share falling from 59% to 38.1%. What are the reasons?

Bao Jiacheng:The competitive advantage of joint venture car companies' products has been greatly reduced compared with domestic brands, and they have even been overtaken by domestic brands in some areas.

There are three advantages of joint venture car products. First, joint venture car companies have a mature management system, including product research and development, production and manufacturing, procurement, channels and maintenance. After decades of learning, the independent automobile industry has greatly narrowed the gap. Second, the technical barriers of joint ventures, including engines, gearboxes and chassis, have led to the formation of a complete price system for joint venture cars and the ability to maintain a high premium for independent brands (the price of joint venture cars of the same level is at least 20% more expensive than that of independent brands). Independent brands have broken the core technical barriers of joint venture cars through electrification and intelligence, especially the use of motors and electronic controls including intelligent chassis to achieve better control experience, driving experience and acceleration performance. Third, the advantage of joint venture cars in brand power is still very obvious, but independent brands are also gradually narrowing the gap with joint ventures.

At present, the product definition of our joint venture car companies is mostly dominated by foreign parties, so they are slow to respond to the changes of Chinese consumers, electrification, and intelligent transformation, which is also an important reason for such a large decline;

Tencent Auto:Among Japanese, German and American brands, why did Japanese brands have the largest decline in sales and market share?

Bao Jiacheng:First, the product positioning of Japanese brands is quite similar to that of domestic brands. In 2023, the share of domestic brands with a price below RMB 150,000 will be 54.6%, which means that for every 100 cars sold, 54.6 will be priced below RMB 150,000. The corresponding share of Japanese brands is 46.6%, which means that for every 100 Japanese cars sold, 46.6 will be priced below RMB 150,000. The corresponding shares of American and German brands in the same period are 24.1% and 28.1% respectively. Therefore, the price ranges of Japanese brands and domestic brands overlap greatly.

Second, it is related to the economical selling point of Japanese cars in China. In recent years, electrification has emerged, plug-in technology has become more mature and perfect, and the selling point of related products is also economical, which is in direct competition with the economical selling point of Japanese cars.

Therefore, Japanese car companies have a high starting point (market share was 38.4% in 2021). With the rise of independent brands, their product selling points are similar and the overlap of consumer groups is high, which has caused the greatest impact on Japanese brands.

Tencent Auto:Why do German BBA’s sales and market share in China remain strong?

Bao Jiacheng:In the first half of this year, the German market share was 20.8%, and BBA accounted for about 7%. BBA's brand image or premium ability is still widely accepted by Chinese consumers, which means that BBA can achieve "price for volume".

From a regional perspective, BBA's brand image is deeply rooted in second- and third-tier cities. In recent years, BBA's sales in third-tier cities have continued to increase (by one percentage point each year); in the first half of this year, about one out of every four BBA vehicles sold was in a third-tier city.

BBA's transformation to electrification is faster than other joint ventures. In the first half of this year, new energy vehicles accounted for 8.8% of BBA's overall sales, that is, 8.8 out of every 100 vehicles sold by BBA were new energy vehicles, while the corresponding proportion of ordinary joint venture vehicles was 6.4%.

In addition, BBA continues to spend real money to subsidize downstream sales channels in the Chinese market.

Tencent Auto:How long can BBA's moat last? What is the gap between domestic luxury brands and BBA?

Bao Jiacheng:BBA has a deep understanding of luxury people and has been leading the concept of automotive luxury for many years. This is not achieved by simply piling up configurations or making a good interior. Many domestic brands are still chasing after them in terms of luxury, and are trying to imitate the ultra-luxury or luxury models. The core of the BBA brand is very strong and cannot be shaken in the short term.

BBA faces great challenges in the Chinese market, because the concept of luxury is changing rapidly in the Chinese market, and the people who buy luxury cars are changing rapidly. In the past, more people who bought luxury cars came from traditional industries, but in the future, more people who buy luxury cars will be so-called technology upstarts or engineers. Therefore, how to better combine technology and luxury is an urgent problem that BBA needs to solve in the Chinese market.

NIO, ideals andAsk the worldDomestic brands such as BBA have taken different luxury paths, but the main difference between them and BBA is brand accumulation, which cannot be achieved in a short period of time.

Domestic brands cannot create luxury by simply piling up configurations, because people who buy luxury cars care more about the expression of values. If a brand cannot provide such value, or cannot maintain its own values ​​for a certain period of time, then from the perspective of luxury, it is very fragile and can be easily replaced by other concepts.

Tencent Auto:Why is there a clear difference in the performance of Korean brands in the Chinese and global markets?

Bao Jiacheng:In recent years, the Chinese auto market has become very different from the global market. Korean cars not only have good sales but also very good profit performance in the world.

The domestic market has been in a state of oversupply in recent years, and the market competition is too fierce. Compared with Japanese cars, Korean cars are closer to domestic brands. They are lower than Japanese cars in terms of price and brand image, resulting in a higher overlap in product positioning between Korean and domestic brands. Therefore, when Japanese cars reduce prices and domestic products improve, Korean cars suffer a double squeeze.

Looking at the global market, in recent years, the supply has been in short supply, and the prices of new and even used cars overseas have risen sharply. Korean cars seized the opportunity in the overseas market, resulting in different performances in the domestic and international markets.

Tencent Auto:What impact does the price war have on joint venture car companies?

Bao Jiacheng:The operating pressure brought by the price war has made automakers very eager to reduce costs, which has had a chain reaction on the entire automaker, as well as the upstream and downstream of its industrial chain. Upstream suppliers are facing multiple rounds of cost reduction requirements, and downstream channel networks are under great pressure to survive. For example, several dealers have gone bankrupt this year.

The price system of joint ventures in China will be difficult to maintain, and price cuts are inevitable at a certain stage. The strength of new energy products of independent brands is rapidly improving, and the gap with joint ventures is rapidly narrowing. Joint ventures cannot change their products in the short term, and can only adjust prices to improve their market competitiveness.

Tencent Auto:Why have luxury and even joint venture brands such as BBA recently withdrawn from price wars?

Bao Jiacheng:The price of products is not endless. Most of the products of joint venture automakers are global cars, so they have to consider the entire global price system.CamryorCorollaPrices in the United States are lower than in China, but after the price war, terminal discounts are similar to those in the United States, or even lower.

BBA still needs to maintain the value of its brand after withdrawing from the price war. If it continues to cut prices, the value will be discounted. At the same time, joint venture car companies also need to consider the survival of their own terminal channels.

Tencent Auto:Why can joint venture car companies watch BYD's rapid rise but be unable to do anything about it?

Bao Jiacheng:BYD has accumulated a lot of experience and has long-term experience in electrification technology. At the same time, it has achieved vertical integration in the industrial chain, which gives BYD obvious advantages in the rapid development stage of electrification.

In terms of technology, DM5.0 was quickly launched based on the leading technology of DMI4.0. Other companies cannot catch up with this kind of technological advantage in a short time. "Vertical integration of the industrial chain" helps BYD adapt to the entire industry of vehicles, electronic control, batteries, motors, etc. very quickly.

Other companies are "horizontally integrated" and need to find suppliers everywhere to adapt, which is far behind BYD. BYD's market action speed, including the continuous launch of competitive products and the implementation of marketing strategies, are very fast. BYD's Wang Chuanfu once said that now it is not the big fish eating the small fish, but the fast fish eating the slow fish. Joint venture car companies lose because of their slow decision-making, especially in terms of products.

Not only in China, BYD also has factories overseas and is very competitive. Local companies don't have a good way to compete with BYD in the market.

Tencent Auto:Why are joint venture electric vehicles called "unique brands"? How can we get rid of this label?

Bao Jiacheng:In the minds of consumers, electric cars and gasoline cars are different consumer categories, and they are not in the same brand sequence. The ranking of electric car brands is determined by factors such as electric car market sales in the past few years, consumer driving experience, and word of mouth.

The intelligence of new energy vehicles of domestic brands brings a new experience that is different from gasoline vehicles, which is exactly what was missing in the electric vehicles of joint venture brands in the past. The latter only changed the power form from oil to electricity, so the reputation is naturally not as good as that of domestic brands.

In order to change the perception of the brand sequence in the electric car track, joint venture car companies need to launch products that are similar to what consumers expect, accumulate good reputation, and their brand image will rise quickly. At present, joint venture car companies are catching up very fast in the "electric" part, but in the "smart" part, joint venture car companies lack phenomenal products to compete with domestic brands.

Chinese consumers are the most picky group in the world, especially when it comes to electric vehicles, and have been spoiled by domestic brands. For example, they demand large space, good battery life, low price, rich intelligent configuration, etc. These requirements are also huge challenges for joint ventures.

Tencent Auto:Why are joint venture car companies also lagging behind domestic brands in the hybrid field?

Bao Jiacheng:The reasons why different hybrid technology routes lead to different market performances are different.

The hot sales of extended-range products like Ideal and Wenjie are not entirely dependent on the power of extended-range. For example, Ideal has a good grasp of family cars, and Wenjie has a smart experience with the support of Huawei. It is not difficult for joint venture car companies to implement this technical route of extended-range, but the barrier lies in whether they have the level of intelligence of Huawei Hongmeng and whether they have the ability to grasp family users of Ideal.

The battery capacity of domestic brands of plug-in hybrid products is getting bigger and bigger, and the cost can be controlled, so that electricity is the main fuel and oil is the auxiliary fuel.ToyotaIt is mainly oil-based, supplemented by electricity, includingNissanThe e-power of the car is very small, which is a big disadvantage. Many hybrid car owners prefer to use electricity as the main power source, and at the same time, they prefer high economy (such as BYD's P13 plug-in, which relies on high economy and a range of 2,000 kilometers with a full tank of gas or a full charge to impress consumers).

The survey found that owners of plug-in hybrid (including extended-range) vehicles prefer "electric power". On average, 80% of the mileage is driven by electricity alone, and 20% of the mileage is driven by a combination of oil and electricity.

Tencent Auto:Is oil-electric and intelligent technology a lifeline for joint venture automakers? How can joint venture automakers solve the problem of intelligentization?

Bao Jiacheng:Chinese consumers, especially the expanding middle class, have a very high preference for intelligence. Intelligence is also a development trend of the future automotive industry worldwide. China is at the forefront of intelligent development. Intelligent products that are successful in China will definitely be competitive globally.

From a technical perspective, the major changes in the electronic and electrical architecture that are not required for gasoline vehicles can be achieved by both Smart Cabin and Smart Park. Joint venture car companies should rely on existing product platforms and cooperate with local supply chains such as Huawei and DJI. Relatively speaking, based on gasoline vehicles, smart driving requires in-depth adjustments to the electronic and electrical architecture of the entire vehicle, which is very costly. Many joint venture car companies lack confidence in the performance of the gasoline vehicle market, resulting in little willingness to make corresponding adjustments, which has become a major shortcoming of joint venture gasoline vehicles.

At present, many joint venture car companies will introduce China's new energy pure electric or plug-in technology platforms. In the future, more and more joint ventures will realize intelligent cooperation with local suppliers, and oil-electric intelligence will also be an inevitable trend.

Tencent Auto:Will the market share of joint venture automakers in China continue to decline in the next 3-5 years?

Bao Jiacheng:Joint venture automakers are in a critical transition or difficult period in China. Their market share will continue to decline in the next 3-5 years, but the rate of decline will slow down.

In the past few years, the competitiveness of joint venture car products has been insufficient compared with domestic brands. With the development of new generation platforms by joint venture car companies, especially those based on Chinese technology (such as Volkswagen AnhuiXiaopengTechnology), the competitiveness of the products launched will be improved.

However, the market share of joint venture automakers is still facing downward pressure. The overall development trend in the next few years is that the share of electric vehicles will increase and the share of gasoline vehicles will decrease. Joint venture brands account for 70% of the total sales of gasoline vehicles and will continue to face the compression of the overall market capacity; in the electric vehicle track, joint ventures will expand their market share (currently 14%) through new technology platforms.

Tencent Auto:In the next 3-5 years, will there be more joint venture car companies withdrawing from the Chinese market?

Bao Jiacheng:Whether joint venture automakers will continue to exist in China depends on the strategic considerations of shareholders. The previous exit from the company was the result of differences between shareholders on the development of the Chinese market. Now the companies that remain are facing increasing operating pressure, and the differences between shareholders will become stronger. If the differences continue to be unreconciled, there will be a risk of delisting.

Currently, one-third of the world's automobile sales are in China, and the leading development of electrification and intelligence also represents an important direction for the transformation of the global automobile industry in the future. From a macro-policy perspective, China has always been particularly welcoming of foreign investment to expand and increase investment in emerging fields such as ours.

More importantly, Chinese consumers have not abandoned joint venture brands; the National Information Center conducts a survey of new car buyers with approximately 20,000 samples every year, and Chinese consumers' preference for joint venture brands is very obvious, even in the field of new energy vehicles. If a joint venture has good new energy products, many consumers are willing to choose a joint venture brand.

Currently, the mainstream automobile companies that remain in China are relatively strong, and most of them are ranked in the top ten in the world. Maintaining a certain sales volume in China or retaining the existence of joint ventures should be considered from a global strategic perspective rather than just considering the profits or losses of a single company.

Brief introduction of National Information Center: It is mainly responsible for the research of major issues such as macroeconomic monitoring and forecasting, national economy and social development; carries out information technology strategic planning, top-level design and decision-making consultation for industries such as manufacturing; carries out research on big data decision support, development strategy, overall planning and core algorithm models.