Challenges and prospects for joint venture car brands in 2024.
Introduction. At the beginning of 2024, Wen Xi, a reporter from China's leading newspaper, attracted widespread attention, and he in-depth the sales performance of the joint venture car brand at the beginning of the new year. Despite the year-on-year growth, however, due to the "overdraft" in December last year, most joint venture brands experienced a significant month-on-month decline in January. In particular, in GAC's Japanese "two fields", GAC Toyota's sales not only fell by more than 30% year-on-year, but also almost "halved" month-on-month, casting a shadow on the joint venture brand at the beginning of the year.
Sales fluctuate. The joint venture brand made a strong effort at the end of 2023**, which led to an overdraft in sales, which made the month-on-month decline in January 2024 the main theme. Among them, GAC Toyota's performance was the most embarrassing, and the month-on-month decline in sales reached the "halved" level. The industry generally believes that in 2024, when the impact of new energy vehicles becomes more and more obvious, the living space of joint venture brands will be further squeezed, and some institutions even warn that it may usher in a "first-class war" and a large-scale liquidation of joint venture brands.
Reasons for the increase in sales.
However, it is undeniable that some joint venture brands saw double-digit year-on-year sales growth in January, or even doubled. The sales performance of Dongfeng Nissan, Dongfeng Honda, Changan Mazda and other brands is eye-catching, and Dongfeng Nissan's sales in January increased by 116 year-on-year75%。Experts pointed out that last year's Spring Festival holiday was in January, resulting in a low sales base in January of that year, and this year's January was less affected by the holiday, and the sales of joint venture brands increased year-on-year.
The impact of new energy vehicles.
As the impact of new energy vehicles continues to intensify, joint venture brands will face a more severe test in 2024. It is expected that the significant increase in battery-grade lithium carbonate will lead to a further decline in the manufacturing cost of new energy vehicles, providing more room for new energy vehicle companies to reduce prices. According to the China Electric Vehicle 100 Association, China's new energy vehicle sales are expected to exceed 13 million units in 2024, with a penetration rate of more than 40%, with huge market potential and fierce competition.
Joint venture brand pressure.
The joint venture brand focusing on fuel vehicles is facing huge market pressure under the impact of new energy vehicles. The vigorous efforts of the joint venture brand at the end of last year led to overdraft of sales, making "month-on-month decline" the main theme in January this year. According to the China Passenger Car Association, mainstream joint venture brands sold 670,000 units in January, up 43% year-on-year but down 15% month-on-month. More importantly, although the year-on-year sales of individual joint venture brands have "picked up", it has not changed the trend of declining market share.
Develop a way out. In the face of the impact of new energy vehicles, joint venture brands need to actively look for a way out. CICC's analysis pointed out that since the electric vehicle business is equivalent to a "cost center", some joint venture brands have differences on the transition to electrification. At the same time, joint venture brands are also limited by a long decision-making chain, which affects the launch progress of new models. In order to get out of the predicament, joint venture brands may choose to develop development paths such as electric intelligent transformation, cooperation with Chinese car companies, or even withdrawal from the Chinese market. CICC expects that if the new energy sales of the joint venture brand do not improve, it may gradually clear the joint venture brand from weak to strong in the order of "tail joint venture brand, second-tier joint venture brand, first-tier joint venture brand, second-tier luxury brand and first-tier luxury brand".
Declining market share.
As the joint venture brand faces the impact of new energy vehicles, its market share is also declining. According to the data of the Passenger Association, the retail share of German brands in January was 192%, and the share decreased by 3 percent year-on-year8 percentage points, and the retail share of Japanese brands was 167%, flat year-on-year. The retail share of the U.S. brand market was 65%, down 1 percent year-on-year3 percentage points. This shows that the joint venture brand has not only been affected in terms of sales, but also its market share has been challenged.
The pressure remained high during the year.
Joint venture brands focusing on fuel vehicles will face a more violent impact on new energy vehicles in 2024. According to **, China's new energy vehicle sales are expected to exceed 13 million units in 2024, with a penetration rate of more than 40%, with huge market potential and fierce competition. In this context, the joint venture brand will continue to face pressure, especially the continuation of the war, especially in the mainstream belt of 100,000 yuan and 200,000 yuan. Joint venture brands need to find a way to survive in this fierce market competition, otherwise they will face the possibility of further liquidation.
Joint venture brand or gradually cleared?
In recent years, the sales of some weak joint venture brands have continued to decline off a cliff, and industry insiders generally believe that the main reason is that the dividends of the domestic joint venture model are fading, and the technical barriers to the traditional powertrain established by joint venture car companies no longer exist, and electric intelligence has become the basis for differentiated competition among car companies. According to CICC's analysis, some joint venture brands are divided on the electrification route, and traditional car companies exaggerate the importance of short-term profits while ignoring the urgency of electrification transformation. Joint venture brands are reluctant to completely abandon the fuel vehicle platform when choosing the electrification technology route, which restricts their development pace to a certain extent. For example, Toyota adheres to the development path of electrification of oil hybrid, plug-in hybrid, pure electric and hydrogen fuel at the same time, and relies on mature and leading hybrid technology to establish long-term competitive advantages and form path dependence. However, this multi-line strategy also makes the joint venture brand affected by a long decision-making chain and a lag in market response.
Three ways out for the development of joint venture brands.
In the face of the impact of new energy vehicles and the rapid changes in the market, joint venture brands need to actively find a way out. CICC believes that the joint venture brand will face three ways out:
Resolutely accelerate the transformation of electric intelligence.
Joint venture brands need to accelerate the pace of electric intelligent transformation and formulate a development strategy to adapt to the Chinese market. Only by keeping up with the trend of science and technology and quickly launching more competitive new energy vehicles can we occupy a place in the fierce market competition.
Develop a new model of cooperation with Chinese car companies.
In terms of electric vehicle platforms, intelligent driving, and intelligent cockpits, joint venture brands need to carry out deeper cooperation with Chinese automakers to jointly promote the innovation and development of the industry. By making up for their respective shortcomings and realizing resource sharing, the joint venture brands are expected to better adapt to changes in the market.
Exit the Chinese market.
For some joint venture brands whose sales of new energy have not improved, CICC believes that they may choose to withdraw from the Chinese market. This decision needs to be carefully considered, but if the joint venture brand cannot adapt to market demand, it may be wise to withdraw.
The future development of the joint venture brand.
From a comprehensive analysis, joint venture auto brands will face unprecedented challenges in 2024, but they also contain opportunities for development. In the fierce competition of new energy vehicles, joint venture brands need to have a keen insight into market dynamics, flexibly adjust strategies, and quickly adapt to technological changes. The transformation of electric intelligence is the key for joint venture brands to get out of the predicament, and at the same time, it is also indispensable to cooperate deeply with Chinese car companies and find new growth points. In the future market structure, joint venture brands will face elimination and reshuffle, but only through active transformation and find an innovative way to meet market demand can they be invincible in the fierce competition. In this era full of uncertainties, joint venture brands need to work closely together and bravely climb the peak of science and technology in order to grasp the initiative in the future market.