Original title: Can Chinese auto companies withstand the impact when the auto stock ratio is fully opened?
The National Development and Reform Commission and the Ministry of Commerce issued the “Special Administrative Measures for Foreign Investment Access (Negative List) (2021 Edition)”. Starting from January 1, 2022, in the field of automobile manufacturing, the restriction on foreign shareholding in passenger car manufacturing will be removed, and the same foreign company will no longer be subject to the restriction of establishing two or less joint ventures in the country that produce similar vehicle products. . Prior to this, my country has successively liberalized the share ratio of special vehicles, new energy vehicles and commercial vehicles, which means that my country’s auto industry will be completely open to the outside world.
The auto stock ratio restriction policy was formulated in the early years in my country based on the low level of development of the domestic auto industry, the small market size, and the need for mutual risk sharing between domestic and foreign companies. It has played an important role in the introduction of foreign capital, technology and talents, balancing the relationship and interests of domestic and foreign enterprises, promoting my country’s automobile industry from small to large, cultivating a mature supply chain and a modern vehicle manufacturing system, and it has also strongly promoted multinational automobile companies. Development in China and a substantial increase in the scale of the global automotive industry.
However, any policy has its limitations. With China’s leap to become the world‘s largest auto market, the rapid rise of private auto companies, and the deepening of opening up, this policy has also become incompatible. Especially when my country’s economy has shifted from a stage of high-speed growth to a stage of high-quality development, many domestic automobile groups mainly rely on joint ventures to obtain profits, and lack of innovation motivation has been criticized. Although the state made clear the timetable for the opening up of the share ratio five years ago, many people still worry about whether my country’s auto companies can withstand the impact by completely liberalizing the share ratio and the restriction of no more than two joint ventures.
These can of course be understood, but there is no need to worry too much. The reason is that the liberalization of the shareholding ratio does open the door for foreign companies to be wholly-owned in China or for joint ventures to occupy an absolute controlling position. However, whether foreign companies will develop independently of Chinese companies has to consider many factors. Excluding the impact of policy restrictions, the structure of the joint venture equity ratio is essentially a measure of the irreplaceable value added by the Chinese and foreign parties in the joint venture. It is undeniable that most of the new models and core technologies of the current joint ventures come from foreign parties, but the role of China cannot be ignored either. Moreover, under the well-established and mature Sino-foreign joint venture model, restructuring and renegotiating are not entirely without costs and risks. Therefore, the vast majority of foreign auto companies will not blindly adjust the proportion of equity in joint ventures within a short period of time.
We must also see that after more than 20 years of innovation and development, the strength of many Chinese auto companies has long been different from what they used to be. The latest data shows that in the first 11 months of this year, the market share of self-owned brand passenger vehicles has reached 44.1%, an increase of 6.4% year-on-year, which is a remarkable progress. Although our own brands still have a big gap with foreign advanced car companies in terms of bicycle premiums, brand recognition, and degree of globalization, compared with Korean and French cars, we actually have a slight upper hand. Not long ago, Dongfeng Motor Group Co., Ltd. took the initiative to withdraw its shares from its joint venture with Kia, South Korea, which can explain the problem. In the field of new energy vehicles, in addition to the wholly-owned Tesla, new car-making forces represented by “Wei Xiaoli” and traditional car companies represented by BYD and GAC E’an are in the process of transforming to electric vehicles. More competitive advantages in the market.
The automobile is a highly globalized industry. Without full competition with international experts, it will be difficult for companies and industries to be truly strong. Based on a good investment environment and huge market potential, the liberalization of the stock ratio will undoubtedly attract multinational auto companies to increase investment and cooperation in China, introduce more competitive products, technologies and services, and promote the development of my country’s auto industry chain. Enrichment and promotion. At the same time, it will also force local Chinese companies to accelerate the pace of deepening reforms, strengthen innovation drives, promote industrial reforms in a higher level of competition, participate in globalization, and build a new development pattern. (Economic Daily)
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