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joint venture car companies are experiencing an unprecedented dark moment.

half a year ago, when byd chairman wang chuanfu said at the financial report meeting that "in the next three to five years, the market share of joint venture car companies will be drastically reduced from 40% to 10%", many people thought it was just a marketing rhetoric or a move to boost confidence in the capital market and industrial chain.

but now, as the monthly sales of volkswagen, general motors, toyota and honda continue to fall at a seemingly unstoppable rate, more and more people are beginning to accept this view - with mercedes-benz, bmw and audi included, the overall share of foreign brands in china will be reduced to about 20%.

during the 2024 chengdu auto show, fu qiang, executive vice president of sales and marketing of saic volkswagen and general manager of shanghai saic volkswagen sales co., ltd., stated that chinese and foreign members of the executive committee have a consensus that saic volkswagen must remain in the "million club" during the two years of transformation.

"this is a strategic position, you must take it at all costs. i only want tashan, i don't want casualties (numbers). only by keeping the million club members in place in the next two years, will we usher in a completely different saic volkswagen in the second half of 2025 and 2026." fu qiang said.

against the backdrop of the joint venture brands’ mourning, fu qiang’s speech was as shocking as thunder in a dry land. however, it should be noted that the annual sales of saic volkswagen, faw volkswagen, and saic gm all exceeded 2 million vehicles at their peak, making them giants in the chinese auto market. this also means that even if saic volkswagen maintains a scale of one million vehicles, it is still far from its peak.

in fact, the most prominent change in the market this year is the cliff-like drop in sales that once occurred in second-tier joint venture brands such as ford, hyundai, and psa, but is now happening to leading automakers such as volkswagen, gm, and toyota.

joint venture car companies, sandwiched between chinese and foreign shareholders, also bear different trusts from foreign shareholders, chinese shareholders, and local governments. the chinese parent company's transformation to new energy and intelligence requires a lot of capital. although the milk is becoming increasingly dry, the joint venture cows still have to strive to contribute profits to shareholders.

joint venture auto companies in first-tier cities have seen a large number of resignations, while employees of joint venture auto companies in second-tier cities are somewhat confused. many of them originally planned to work in the company until retirement, but with factory closures and layoffs happening continuously, they can't decide whether to stay or leave their hometowns to find a new job.

from august to date, yicai global reporters have interviewed a number of employees from leading german, japanese and american joint venture automakers, trying to write a footnote for this round of major changes in the industry through their experiences and thoughts.

japanese shareholders want profits, chinese shareholders want both

since may, the "warm and decent" layoffs at honda's two joint ventures have become an industry legend, but within the company, pessimism is spreading.

cao ke, an employee of a honda joint venture, told the first financial daily that sales staff are reluctant to visit dealers because most of what they hear at the terminal are complaints, grievances, and withdrawals from the network, and the company does not have more policies to provide dealers with to help them sell more cars or increase profits.

on the other hand, employees also don’t know what products and technologies the company will have in the future to support its continued development, and whether these products and technologies are competitive. the lack of transparency in information has exacerbated internal concerns.

so far, the company has continued the previous product import method - foreign parties dominate the products, and china does not have much say. before the rise of new energy vehicles, honda's products were generally popular, and china did not interfere too much in product imports and could make a lot of money with honda. even if the japanese side forced the import of some models that were obviously not going to be popular, considering that there were already several core models with good profits, they would turn a blind eye to it.

but now, this approach is obviously no longer applicable. honda's products are not as competitive as those of its chinese rivals, and honda still maintains a long-term product rhythm. compared with the high-density, fast-iteration play of chinese automakers, it is completely unable to keep up. cao ke and his colleagues are aware that if they want to defeat chinese rivals, they must increase localized r&d investment. but this has created several new problems:

first, there is a conflict between honda's global strategy and regional market strategy. for honda, developing a car to sell globally is the most cost-effective way. it is not impossible to develop a car model for a certain regional market, but the return on investment and investment risk must be carefully calculated. although the chinese market is large, compared with other markets, the return on investment is much less under the same investment. honda will consider which market is more cost-effective to invest its own funds in. especially in the current chinese market, where gasoline and electric vehicles have high differences in rights and emission regulations are extremely strict, how much resources should be poured into the chinese market?

second, if honda is unwilling to develop exclusive products for china, does the joint venture have the ability to develop them on its own? in fact, except for saic-gm and dongfeng nissan, most joint ventures in china are closer to "oem" status, with very little say in product planning and r&d departments, and more work is "patching up" product localization and cost reduction. in other words, the joint venture itself does not have strong product development capabilities.

third, rely on the technical capabilities of chinese shareholders or partners to import products for the joint venture. ford, mazda and toyota have all adopted this strategy, but honda is more conservative than the above companies.

as they deepened their research on chinese competitors, cao ke and his colleagues increasingly felt the disconnect between honda's conservatism and the chinese market. however, under honda's conservative system, it was extremely difficult to make changes.

for example, one of the reasons why honda was so popular in the past was that it attached great importance to quality control and quality management. the japanese side had a position specifically responsible for product testing. if a product wanted to be offline, it had to get the consent of the person in charge of this position, and the general manager of the company had no right to interfere. in the past, this conservative system was one of the guarantees of honda's high quality and commercial success, but at present, this system will make honda lose flexibility and speed.

"the japanese management sent by japanese shareholders also want to adapt to china's speed and rhythm, but the company's system itself is not suitable for this environment. the japanese management is also very painful. they find that their efforts are of no avail. they don't know how to turn the situation around, and finally can only choose to lie down painfully." cao ke said.

many employees of the honda joint venture believe that honda has given up the goal of market share in china and is more concerned about profits, making a profit from every car sold. but on the other hand, when the company is already in a difficult situation and has to close factories and lay off employees, the local government still hopes that the company can start the machines to solve the employment pressure in the local area. in addition, the chinese shareholders also hope that the joint venture can stick to the sales and profit targets set at the beginning of the year and contribute to the group's growth and the funds needed.

"we are in a difficult situation ourselves. we also need to transform, and transformation requires capital investment. when we are doing well, the group takes away our profits. when we are not doing well, the group does not support us, but instead asks us to support us. how should we develop to have a future?" a former employee of a honda joint venture told reporters.

according to the "2030" strategy, honda will launch a new electric vehicle product in 2026. the global strategy is aggressively leaning towards pure electric vehicles, which means that honda's previous advantages in fuel vehicles may no longer exist. but on the other hand, whether honda's electric vehicles developed globally will have strong competitiveness in china is a question mark.

it cannot be said that joint ventures are useless, but the era of joint ventures is over.

chen shan is the director of the middle office department of a joint venture company of gm in china. at its peak, gm's sales in china (excluding wuling) once exceeded 2 million vehicles, and it has long been one of the top three in the chinese auto market. however, in the past few years, gm's sales in china have continued to fall sharply. the sales of gm's passenger car joint venture last month were only more than 10,000 vehicles, a year-on-year decline of more than 80%.

at some seminars, gm executives emphasized that product quality, control, chassis and safety are better than competitors. chen bin believes that the company's leaders are right, but on the other hand, chinese brands such as geely and changan are also making rapid progress in these areas. in addition, the rules of the game have changed after the rise of electric vehicles.

for example, the chassis of fuel vehicles is closer to a pure mechanical structure, and the tuning ability of car companies, the experience and data accumulated over the past decades or even hundreds of years are very important. these accumulations have created the performance advantages of foreign brands in chassis and handling. however, many new energy vehicles now use intelligent chassis, using cdc electromagnetic suspension, air suspension, wire-controlled steering, motors and other more sophisticated electronic components that can be controlled and managed by software to gradually replace traditional mechanical components. with the help of the camera, the road conditions ahead are transmitted to the controller, and the controller quickly adjusts the parameters of the vehicle's chassis components, thereby achieving dynamic adjustment of handling and stability.

chen bin believes that in this case, new energy vehicles have a chance to overtake fuel vehicles in the traditional advantages. just like one of the updates of the new m9 that huawei will launch on september 10, it will solve the problems of braking nodding and starting head lifting through electronic means. in the past, traditional car companies could only solve the problems through the coordination of the engine and gearbox, the response of the brake to the throttle, and then the steering force and the hardness of the suspension. new car companies can solve them with software, which is equivalent to changing the rules of the game.

"two years ago, we felt confident that we could handle electrification and intelligence. now we are in a state of admitting failure. i believe that all joint venture car companies have admitted that they are still lacking in intelligence and electrification, and are now in a painful stage of transformation and catching up," said chen bin.

gm's joint venture in china has made major personnel adjustments since last year. chen bin believes that the company is on the right track. the planned new products are much better than before, more focused on the needs of chinese users, and will be no less competitive than any car of the same level on the market. due to the existence of pan asia, the company moves faster than other joint ventures. the only uncertainty is that if the competitors make faster progress and change faster, this may lead to a decline in competitiveness when the planned products are launched.

however, as for the company's future, chen bin believes that it will not return to the scale of 2 million vehicles - he is more inclined to believe that the glorious era of the joint venture is over.

from a macro perspective, he believes that the core reason why joint ventures were able to occupy more than half of the market and dominate almost all high-value markets in china was the dividend of the times; secondly, looking around the world, except for the united states, in countries with relatively strong domestic automobile industries, the share of foreign brands is not too large, including japan, germany, south korea, and france.

"i think that starting from our generation, we no longer have the same feeling towards joint venture brands as our parents did, which means that joint venture brands no longer have a broad mass base. finally, in the first half, joint venture brands basically did not keep up with the electrification, and in the second half, with intelligence, except for american companies, most foreign companies could not keep up." said chen bin.

however, as a practitioner, chen bin is more optimistic. the strong rise of local automakers has created a lot of demand for r&d and high-level management positions in the industry. in order to cope with the competition, joint venture automakers have also increased their investment in localized r&d in china and the absorption of local talents.

"if joint venture brands still have the advantage and dominate like before, it will be more disadvantageous for us practitioners or the entire industry, because they will not provide so many r&d positions and such high-level positions in china. our generation of people working in the automobile industry is generally lucky," said chen bin.

the biggest challenge is to transform while laying off employees

tian jianghe is an "old employee" of the volkswagen joint venture. in fact, he is not very old, just over 40 years old. however, due to the company's recent "one-size-fits-all" layoffs of some employees over 50 years old, he has become the oldest person in the department.

over the past 20 years, volkswagen has always been a "shaolin and wudang" presence in the chinese auto market, with a peak market share of about 20%, annual sales of more than 4 million vehicles, firmly occupying the top spot in market share. this history was rewritten in 2023 - byd alone exceeded the combined sales of the two volkswagen joint ventures in the north and south.

in terms of scale, the volkswagen joint venture is expected to sell 1 million vehicles this year, which is much better than gm and honda, but the company is in a very serious crisis. as fu qiang, the new general manager of saic volkswagen's sales company, said, once a joint venture falls flat, it will never stand up again, and the price it will pay to get back on its feet will be much higher than the price it would have paid to stand up in the first place. the market has already forgotten this brand.

"we must sit at the dinner table and eat the food instead of becoming the food on the table. this is the consensus of the mass marketing team including the executive committee members," said fu qiang.

chen yudong, former president of bosch china, also has a similar view. he once told a reporter from china business network that if foreign-funded enterprises cannot succeed in this round of competition in china, when chinese competitors enter overseas markets in the future, it will cause great trouble to foreign-funded enterprises.

tian jianghe defines the stage the company is in as crossing the line of fire. "german shareholders believe that although the fire of intelligent electrification is currently only burning in china, it will definitely burn all over the world. volkswagen must be in it and cannot be burned to death. therefore, volkswagen's two joint ventures have formulated very resolute strategies."

the biggest challenge now is that the company's production capacity is nearly half in excess, and it needs to optimize its production capacity and personnel. at the same time, the company has to shoulder social responsibilities and recruit some graduates every year. this has led to the loss of some high-quality old employees, and the newly recruited college students are not yet fully competent.

"in fact, there is a paradox in personnel optimization itself, because those who can leave are often competitive, and those who are not competitive will not leave voluntarily. this is the first point. second, many of the old volkswagen employees over the age of 50 are actually very capable, which is completely incomparable to new employees. this is a risk in our personnel optimization process, and during the transformation period, this risk is greater than usual." tian jianghe said.

some non-market factors seem even more helpless at this time. for example, some places still hope that volkswagen will produce more cars in their local area. even if it is only 100,000 cars, the output value will reach 10 billion. in addition, the output value of the industrial chain driven by integration can actually reach 100 billion. in addition, although the company is not short of money, some banks "beg to lend you money" in order to complete the loan task, and the company has to bear several percentage points of interest.

if we only look at the company's internal affairs, tian jianghe is very confident about the success rate of "crossfire". on the one hand, volkswagen has a deep-rooted user and channel base in china, and on the other hand, volkswagen's determination and investment in this round of transformation. tian jianghe did not use volkswagen's investment in xiaopeng and the establishment of a joint venture with horizon robotics as an example, but instead mentioned a much smaller thing.

in the middle of last year, volkswagen of germany agreed that the joint venture company would develop plug-in hybrid vehicles on its own. "you outsiders may not feel much, but we who deal with germans all day know what this means: germans admit that they are not good enough and admit that they have failed." tian jianghe believes that the change in the foreign party's cognition is the key to volkswagen's future success.

in a previous interview, fu qiang also revealed the reasons behind saic volkswagen's active participation in the price war. he said that the market predicts that in the future, only less than 10 car brands may survive in the chinese market. if this prediction is true, then offense is saic volkswagen's only strategy, and only offense is the best defense.

in fu qiang's view, saic volkswagen is in the most critical period of transformation, and sales are needed to support the entire sales network and volkswagen's brand positioning. therefore, the company does not use the profit gains and losses of one or two years as the main criterion, but must stay in the million club in these two years.

"china's development is uneven. users in some regional markets still recognize joint venture brands, which is equivalent to a strategic buffer period for us. some car companies and brands in the market are also clearing out quickly, which is equivalent to freeing up a market and giving all joint ventures a strategic buffer zone. it depends on who can eat it up and who kills whom first. for volkswagen, we must try our best to eat up the market share of japanese cars. if we can take up more of the japanese market share, we can at least maintain a volume of 1 million vehicles. as long as we can maintain a scale of 1 million vehicles, our channels will not be broken up and we will have a chance to make a comeback." tian jianghe said.

because of this, in addition to adopting active marketing strategies, saic volkswagen is also accelerating cost reduction and efficiency improvement, including optimizing production capacity and personnel, and stabilizing the dealer team.

it is worth noting that when asked whether a volkswagen electric car would be imported into china, fu qiang said that a lot of user research is needed to decide whether the car will be introduced and at what price. this shows that the joint venture is more pragmatic in product introduction and is no longer a simple copycat.