Text: Rogie
The years when I joined the automotive media industry were the strongest period for the joint venture brand in China. At that time, the goal of the independent brand was to use a price of more than 100,000 yuan to compete directly with the joint venture brand. They have also created many new brands to hit the mid-to-high-end market of more than 150,000, but they have achieved little success.
During that time, many models and even brands fell on the road to the height.
And after a certain node that everyone knows, the development of events suddenly far exceeded expectations.
In just a few years, our topic has changed from "how to make independent brands bigger and stronger" to "what should joint venture brands do in order to slow down the decline in sales and shrinking share".
Indeed, in terms of share, the status of independent and joint venture manufacturers has been reversed. Another thing to be sure is that the trend of independent brands is still growing, while the share of joint venture brands that have been overtaken has obviously not bottomed out.
Therefore, the "disadvantaged groups" and new problems that everyone is increasingly concerned about now have completely become - what will be the outcome of joint ventures in the Chinese market in the next few years? Where do they go?
Discuss the way forward
First of all, we must face up to the reality of shrinking share
If they want to objectively discuss the way forward, joint ventures need to face up to one thing: the dominance of Chinese brands in the Chinese market is already an irreversible reality. Whether it is the sales volume of a single brand or the share of the overall joint venture camp, it is basically impossible to return to the previous peak period.
According to the data of the Passenger Association, in 2021, when the domestic new energy market began to explode, the overall share of independent brands has just exceeded 40%, and the market share of Japanese and German, which have the highest sales, is more than 20%, and other car companies such as the United States, South Korea, and France have added up to more than 10% of the share.
In just two years, the market share of independent brands has skyrocketed from 41.2% in 2021 to 51.9% in 2023, officially surpassing the joint venture camp and continuing to climb in 2024. In June this year, the independent share has reached 58.6%, and if nothing else, it is likely to exceed 60% by the end of this year.
In the joint venture camp, the share of Germany, Japan, the United States, South Korea and even other European brands has declined across the board.
The share of the Japanese system, which fell the most, in 2021 was half of that of the German system, and this year it has completely fallen below 15%. The German system fell from 22.3% in 2021 to 18.6% in June this year, which is also a tragic decline - but in the joint venture camp, the German system is already the undisputed first.
The decline in share is only the most basic manifestation of the overall decline of the joint venture camp, and in the process of counterattacking the sales of independent brands, many traditional car companies have broken through the previous ecological niche dominated by 150,000.
Brands such as Tank, ZEEKR, Deep Blue, and Denza have fully blossomed in the mid-to-high-end market; New forces such as Ideal, Hongmeng Zhixing, Xiaomi, and Weilai have had a strong impact on the core position of traditional luxury brands.
As for the joint venture camp, the decline in market share has been accompanied by the near collapse of the traditional pricing system.
The price increase of some Japanese models has completely disappeared, and everyone from mainstream brands to luxury car companies has used huge terminal discounts to retain customers. The premium ability of all levels has been greatly weakened, and in the field of new energy, they lack basic pricing power.
The above is the current situation faced by the joint venture manufacturer.
But the development has not stopped. Objectively speaking, the share of the joint venture camp this year is likely to fall below 40 percent, and then 30 percent, which may come faster than we imagined.
Many people may not be used to this trend, or even feel overly optimistic. However, at present, we have transformed from a big automobile country to an automobile power, and a horizontal comparison with other automobile powers in the world will find that local brands occupy the absolute dominance of the market - is the norm.
For example, and our two closest automotive powers, Japan and Korea.
The share of their respective local brands in 2023 will be 95% and 80%, respectively; Taking the European market as a whole (including EFTA and United Kingdom), the sales proportion of European brands in 2023 will reach 67%! The three major departments of Japan, South Korea and the United States together have a share of less than 30%.
Comparing these three regions, it can be seen that the current share of independent brands in the mainland is close to 60%, and there is still a lot of growth potential.
You might say that the share of local brands in the European market is less than 70%, but that is made up of dozens of countries. Looking at individual auto powerhouses such as Germany, France, and Italy, the share of local brands is actually higher.
In this way, is the joint venture going to become a niche brand in China?
Not necessarily. United States, another traditional automotive powerhouse, has a market size second only to China in a single country, and United States car companies (including Stellantis Group's Jeep, Chrysler, etc.) have a total local share of only 38%, only 1% higher than the Japanese automaker. Japanese, European and Korean brands have more than 60% of the market share in the United States.
In addition to United States relatively open market environment (excluding Chinese brands, of course), overseas brands, especially Japanese brands, have achieved results in the United States market that are worthy of consideration by Chinese joint venture brands.
In short, on a pessimistic basis, the share of joint ventures in the Chinese market is likely to continue to shrink. On the other hand, if they are optimistic about the trend and lower their expectations, they still have room to maintain a large sales scale and profits in China.
We can think of ways to do this from the perspective of Chinese consumers.
Option 1
Assemble a highly localized team in China
Lead product development and marketing from all fronts
When car companies explore overseas markets, they have two completely different solutions for developed and developing markets.
In the past few decades, the mainland was a typical developing market, and joint venture brands only needed to bring in existing products that met local needs, or launch special vehicles based on old platforms – as long as the selling point was put in the space that everyone was most concerned about.
In the face of developed markets, especially the United States and Europe, it is necessary to set up local design, R&D and marketing teams.
Japanese cars in the United States market are a typical example. The three major Japanese luxury brands, Lexus, Infiniti and Acura, were originally built almost exclusively for the United States market. Many of the Japanese models we see in China are also developed based on the needs of the United States market and then introduced to other regions, including China.
In the European market, the overall power of American brands is weak, but models such as Focus and Fiesta created by Ford's European department were once popular models in many European countries.
Looking at today's Chinese market, it has suddenly upgraded from a big automobile country to an automobile power, so that the main sales models of joint venture brands are suddenly outdated in terms of new energy, cockpit, and intelligent driving. Even some manufacturers are already changing this status quo – for example, BMW has set up a technical center in China and several R&D centers to completely localize.
But after all, it is a very small minority, and most car companies still insist on changing based on the existing management and R&D structure, and passively follow.
Only by building a highly localized design and R&D team can it be possible to truly capture the needs of Chinese consumers. Then, at the pace of the Chinese market, we will launch products that are truly upgraded from the underlying platform to the internal and external design, and then to the functional configuration, so as to impress Chinese consumers.
Method two
Try to establish a new energy brand
Actively participate in the competition of the new energy market
Geely has Extreme Krypton, Milky Way and Geometry, Chang'an has AVATAR, Deep Blue and Qiyuan, and Great Wall has Euler. In recent years, domestic traditional car companies have been continuously launching their own new energy brands, and even BYD, which has been fully transformed into new energy, has also added Yangwang and Equation Leopard.
It is not necessarily a good thing for car companies to launch too many sub-brands, but in the new energy era, it is the most direct and effective way to change the image of their traditional fuel car companies and launch new brands. However, the joint ventures, which have the heaviest traditional burden and need the most to change their image, are extremely conservative in this regard.
The electric series launched by many brands still hang the logo of the fuel era, and are sold on the same stage with a number of fuel vehicles in the same showroom.
If the company's new energy vehicles are growing steadily, then this approach is undoubtedly appropriate. However, China's new energy market is growing explosively, and compared with the investment of Chinese brands in the field of new energy, joint venture manufacturers are obviously reluctant.
One of the most typical and successful cases is Mercedes-Benz's smart brand.
Smart, which was fully electrified in the past two years, launched the Genie series with the help of Geely's architecture, three-electric and other technologies. Initially, there was a highlight moment when the monthly sales of a single car exceeded 5,000 units within half a year of its launch, far exceeding a series of pure electric models of other joint venture brands at that time (including Mercedes-Benz's own EQ series).
Although the follow-up sales are not as good as the original, this model of creating an independent new energy brand and developing products through in-depth cooperation with Chinese car companies is indeed worthy of more investment by Mercedes-Benz and other joint venture manufacturers.
Option 3
New energy and intelligence
Actively use Chinese technology
With the help of China's new energy technology, the smart brand is not alone.
In June, the Toyota bZ3, an electric sedan with BYD batteries and electric drive, has exceeded 5,000 units, far exceeding Toyota's self-developed bZ4 series.
With the help of Chinese technology, it is not necessarily successful, but it is certainly useful.
Moreover, compared with smart and Toyota bZ3, the joint venture brand still has great potential to be tapped with Chinese car companies, as well as Chinese battery and intelligent technology suppliers, in terms of cooperation methods and depth.
For example, in terms of intelligence, Volkswagen Magotan has adopted DJI's pure vision solution intelligent driving system, and Toyota has improved voice interaction and car machine with the help of Huawei technology......
In addition to this model of modification based on existing models, there are of course deeper collaborations, such as the joint office of Volkswagen and Xpeng, and the establishment of overseas joint ventures between Stellantis Group and Leapmotor...... As far as the current situation is concerned, they are indeed making great strides on the road of political communication and harmony, and we just need to wait and see.
summary
In a word: set up a Chinese team, launch an independent brand, and leverage Chinese technology.
If these can be realized, the Chinese team of the joint venture manufacturer will be able to carry out in-depth cooperation with outstanding Chinese companies in the initial research and development stage of the product, at least in the aspects of three electric vehicles, vehicle machine and intelligent driving, and gather the strengths of Chinese enterprises. Combined with its traditional strengths in the field of vehicle design, handling and manufacturing, it is relatively easy and enjoyable to create new products that are specially designed for the taste of Chinese consumers.
It is conceivable that if the joint venture manufacturer can really get through this car manufacturing model, the final product will be very different from the current joint venture model.
Unfortunately, these patterns themselves are a bit too idealistic. Both internal and external joint ventures will face various resistances, after all, it will never be easy to turn the tables against the wind. But as long as there is a clear way out, it is now up to each car company to be determined enough to give it a go