The “elimination competition” in the auto market continues.
After the layoff crisis, new news came out from GAC Mitsubishi, which has been suspended for seven months.
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According to the Nikkei Shimbun, Mitsubishi Motors decided to stop producing cars in China. The main reason is that the popularity of electric vehicles and the rise of local Chinese brands have caused continued sluggish sales in China. Currently, Mitsubishi Motors has begun negotiations with its partner company in China, Guangzhou Automobile Group, for its eventual exit.
Joint venture brands are facing comprehensive challenges caused by the rise of China’s independent brands.
In 2022, the share of independent brands in the gasoline vehicle market will remain at 30%, basically close to previous years, but the share of independent brands of electric vehicles will reach 84.7%.according toChebai OnlineThe latest data shows that in September 2023, the share of independent brands of electric vehicles reached 85.7%.
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Overall, from 33% in 2020 to 39% in 2021, the overall share of independent brands in 2022 has reached 45.3%. At the China Electric Vehicles 100 People Forum (2023) held this year,Xu Changming, deputy director of the National Information CenterIt is expected that independent brands will usher in a “qualitative change” this year or next year, that is, the overall market share will exceed 50%.
Focusing on this phenomenon, this article mainly answers three questions:
1. Why did Mitsubishi lose to China?
2. What changes do joint venture car companies face in China?
3. How should we view the current market difficulties faced by joint venture cars?
1,“Domestic Godfather” defeated
Mitsubishi is one of the largest engine suppliers in China. Early brands and products such as Brilliance China, Chery Oriental Son, Chery Tiggo series, Great Wall Haval series, and BYD F3 were all equipped with Mitsubishi engines. To a certain extent, Mitsubishi contributed to the early development of Chinese brands.
Mitsubishi’s technological strengths have made it a favorite. As the first foreign automobile company to enter China, Mitsubishi began cooperating with many companies in China 27 years ago to build vehicle plants and supporting factories for producing engines and gearboxes.
In 1996, Mitsubishi cooperated with Hunan Changfeng Automobile. Based on Changfeng’s military background, the joint venture introduced Pajero V31 technology in the early stages and gave birth to the Cheetah SUV.
In 2012, Mitsubishi and the domestic Guangzhou Automobile Group established a joint venture called GAC Mitsubishi, with GAC Group and Mitsubishi Motors each holding 50% of the shares. In 2016, GAC Mitsubishi’s domestically produced third-generation Outlander achieved good market sales. In 2018, the annual sales of Mitsubishi Outlander exceeded 100,000 units, and almost one car supported GAC Mitsubishi’s annual sales.
However, by 2022, GAC Mitsubishi will only have the Outlander as a fuel vehicle.
Official data shows that from 2020 to 2022, GAC Mitsubishi’s sales were 75,000 vehicles, 66,000 vehicles, and 33,600 vehicles respectively. At the same time, the monthly sales of a single model of some local Chinese brands have exceeded the annual sales of GAC Mitsubishi. One can imagine the dilemma Mitsubishi faces.
Entering 2023, GAC Mitsubishi’s sales performance will be even more dismal. From January to February, cumulative sales were only 1,498 vehicles.
Cui Dongshu, secretary-general of the Passenger Car Market Information Joint Association, said that Mitsubishi Motors has a good reputation and strength in overseas markets, but its performance in the Chinese market has been poor in recent years, mainly due to insufficient investment in technology and products.
GAC Mitsubishi has launched two new energy models, both of which are rebranded vehicles from GAC Trumpchi and GAC Aian. In 2018, GAC Mitsubishi launched the Qizhi PHEV, which is actually a facelift of the GAC Trumpchi GS4; in 2022, GAC Mitsubishi launches its first pure electric model, the Atuko, which is a reshape of the GAC Aion V.
Mitsubishi’s determination to transform into electrification only started this year.
In March this year, Mitsubishi Motors announced that it would invest 1.4 trillion yen in the research and development of plug-in hybrid and pure electric vehicles by 2030. It is expected to launch nearly 10 new electric vehicles in the next five years and will invest approximately 2,000 yen. billion yen to step up efforts to secure vehicle batteries.
However, in the difficult situation in the Chinese market, Mitsubishi Motors began to turn its attention to Southeast Asia and planned to produce small pure electric vehicles in Indonesia.
2,Why is it “acclimated to the local environment”?
“The waves rushing through the sand reveal ups and downs, and the waves rushing into the sky reveal life and death” has become a portrayal of the new era of automobiles. Mitsubishi’s decline is just a microcosm of the plight of many joint venture car companies.
According to data from the Passenger Car Association, the total retail sales of joint venture brands in the first half of the year were 4.8 million units, a year-on-year decrease of 4%. The performance of Japanese cars was particularly weak. From January to July this year, Japanese cars had a cumulative retail sales of 1.9543 million units, accounting for 17.3% of the Chinese market, a year-on-year decline of 17.1%, and the decline was second only to French cars.
German, American, and Korean car companies are not immune. According to data from the Passenger Car Association, the retail sales share of German brands was 20.2% in September, while the market share of American brands fell by 3.3%. SAIC-GM, which once dominated the country, has also continued to decline. As an American joint venture car company that owns three major brands: Chevrolet, Buick, and Cadillac, its cumulative sales in the first half of this year were only 412,800 units, a year-on-year decline of 11.8%, ranking seventh.
Beijing Hyundai was exposed to the news of selling its Chongqing factory due to plummeting sales. Hyundai Motor’s sales in China have shrunk by 77% in 6 years. Similarly, Kia’s sales in China from January to August 2023 are also difficult to improve, with only 36,500 vehicles.
People often compare the Chinese automobile market structure to such a “pagoda” shape. The ones at the bottom are Korean cars, and the ones above are French cars, American cars, German cars, and Japanese cars. Although German and Japanese cars were once considered unshakable, they are now facing challenges, which reflects the profound changes the world’s automotive industry is undergoing.
This year marks the 40th anniversary of the Sino-foreign automobile joint venture model. Why did the joint venture automobile companies become acclimatized?
First of all, it is mainly due to the rise of fierce market competition.
For a long time, the Chinese automobile market has been regarded as a hotbed for global automobile manufacturers. They only need to introduce globally successful models into China to achieve “win-win”.
But after 2018, with the development of the market and the rise of new energy vehicles, problems with joint venture vehicles began to emerge. On the one hand, the independent innovation capabilities of joint venture car companies are relatively weak, and most of their technologies are obtained through introduction. In the field of new energy vehicles, domestic companies have made many major breakthroughs and innovations, forming a series of independent technologies and core competitiveness. However, the technological innovation of joint venture car companies in the new energy field lags behind, and thus they gradually lose their market competitiveness.
Secondly, joint venture car companies are also relatively conservative in market expansion.In contrast, domestic new energy vehicle companies have actively explored the market, quickly gained market share with more competitive products and services, and achieved rapid growth. Joint venture car companies lack the ability to fight back when faced with the comprehensive expansion and market impact of new energy car companies.
Under fierce competition, in the field of electric vehicles, the offensive and defensive postures of joint venture car companies and independent car companies are changing. According toChebai OnlineData shows that in the past September, among the top nine new energy vehicle sales in China, except for Tesla, all other models were domestic brands. In addition, BYD’s single-month sales have surpassed Volkswagen in the north and south for many consecutive months, which was unimaginable two years ago.
3.The post-joint venture era is coming
Recently,An Qingheng, Director of China Automotive Industry Advisory CommitteeAt the first Global Automotive New Ecological Development Conference held by the China Electric Vehicles Association of 100, he said: “The development of electrification and intelligence has ended the automobile development model of market-for-technology that has lasted for many years. Various forms of Sino-foreign joint ventures and cooperation have emerged. The status of China’s automobile industry has also improved significantly. Recently, many Sino-foreign joint ventures have emerged in new ways, including the cooperation between Volkswagen and Horizon, and other companies are also exploring similar joint ventures. These new situations are not about China exchanging the market for its technology in the past. When it comes to joint ventures, foreign investors are now interested in the Chinese market and Chinese technology. This is a big change.”
At present, joint venture car companies are ushering in an era of polarization. On the one hand, foreign car companies such as Volkswagen, BMW, and Mercedes-Benz continue to increase their investment in China; on the other hand, a number of joint ventures have already or are about to leave China.
Of course, the joint venture car companies are not without their efforts. At the beginning of 2023, joint venture brands engaged in price wars and accelerated the launch of new energy models, but judging from the market response, they seemed to have had little effect.
Against this background, Chinese car companies have begun to export reverse technology, and new joint venture and cooperation models are constantly emerging.
Volkswagen Group CEO Oliver Blume admitted Audi was lagging behind rivals and software was to blame. In October 2022, the Volkswagen Group announced that it would establish a joint venture with Horizon through its CARIAD company to develop autonomous driving assistance systems and autonomous driving solutions. In July 2023, SAIC Motor and Audi signed a memorandum of understanding. The two parties will combine their respective advantages to accelerate the development of SAIC Audi’s new electric models to meet the needs of Chinese customers for high-end electric intelligent connected vehicles.
On July 26 this year, Volkswagen Group and Xpeng Motors reached a technical cooperation agreement. Volkswagen will invest US$700 million in Xpeng to jointly develop electric vehicles. In the future, the two parties plan to jointly develop two electric models of the Volkswagen brand for China’s mid-size car market. These two new cars exclusive to the Chinese market will complement the product portfolio based on the MEB platform and are planned to be launched on the market in 2026.
In the context of electrification, intelligence and digitalization, joint venture car companies are generally facing the pain of transformation and change. In the future, differentiation will intensify and the post-joint venture era is coming.
Zhang Yongwei, Vice Chairman and Secretary-General of China Electric Vehicles Association of 100It was also pointed out that in the era of traditional fuel vehicles, the supply chain established by joint ventures in China was relatively closed. Among the first-tier suppliers of some joint ventures, foreign parts and components companies accounted for more than 80%. However, as the electrification and intelligent transformation accelerates, China’s supply chain is rising in the industrial chain, and it is also accelerating the construction of a dual-circulation pattern for domestic and foreign countries.
It has become a consensus in the industry that there is not much time left for joint venture cars. Jia Jianxu, general manager of SAIC Volkswagen, judged that only two years are left for the joint venture car company.
CICC’s research report believes that the technical barriers established by joint venture car companies in the field of fuel vehicles are gradually weakened, the technical capabilities, product strength and brand recognition in the field of electric vehicles have not yet been formed, and the best window period for electrification transformation is gradually narrowing. . In the future, Chinese joint venture car companies will face three solutions:
The first is to resolutely transform and localize; the second is to cooperate with Chinese car companies like Volkswagen to make up for shortcomings; the third is to withdraw from the Chinese market.
However, the overall strength of joint venture car companies cannot be underestimated, and independent brands still need to work hard to catch up or surpass joint venture brands.
“After more joint venture brands launch pure electric models, competition in the new energy vehicle market will become more intense, which is inevitable.” An Qingheng, director of the China Automobile Industry Advisory Committee, said that while China’s new energy vehicle market is currently growing rapidly, The market competition is also more intense, and the entry of more joint venture brands will undoubtedly intensify the market competition. Especially for traditional car companies such as Toyota and Nissan, represented by Japanese brands, An Qingheng pointed out: “These traditional car companies have a foundation and strength. Once they fully exert their efforts, they will become a force that cannot be underestimated.”
4.end
Nowadays, it is a foregone conclusion that GAC Mitsubishi will be “stranded”, and it is difficult to predict the next car company to exit. But a cruel fact is that the new energy war between car companies in the Chinese market is not just a matter of winning or losing sales, but also directly affects the survival destiny of the brand. As long as car companies still compete in the Chinese market, the battle for survival will continue. The situation is getting more intense, and the exit of weak joint ventures is a foregone conclusion.
In this regard,Zhang Yongwei, Vice Chairman and Secretary-General of China Electric Vehicles Association of 100It is believed that automobile intelligence is the key to determining the outcome of competition. “Without the development of intelligence, the first-mover advantage of electrification may not be maintained. The ‘two informatizations’ are synchronized, and the shift to intelligence must even be accelerated to continue to maintain the lead.”
【Full text reference】
[1]”GAC Mitsubishi suspends production? Big price cuts but poor results, where should joint venture cars go? 》, Jiang Han’s vision
[2]”GAC Mitsubishi announced that it would reorganize the once glorious Mitsubishi Motors and no longer make domestic products,” Qianjiang Evening News
[3] Depth of the automobile industry: Independent leadership in electrification and intelligence, joint venture automobile brands face many challenges in the new development stage, Deppon Securities