As we near the end of the year, still strong momentum in China catches the eye. China’s vehicle market and output both hit record highs in November according to data released by the China Association of Automobile Manufacturers (CAAM). LMC Automotive estimates that the November annual selling rate for light vehicles in China was in excess of 23m units a year. Quite staggering.
CHINA: Vehicle sales and output hit record highs
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And there is the news now that Renault has sorted out a JV with Dongfeng. Dongfeng, you may recall, already has three JV plants running with PSA Peugeot Citroën and could be about to take a stake in PSA, which would deepen that alliance further.
It raises a question: is the Renault venture just a little bit close for comfort, from a competitive point of view? Conventional logic would perhaps say so, but there again, Dongfeng is already working with Renault’s alliance partner Nissan, so it’s perhaps better viewed as an extension of that (with the usual scale economies and parts procurement benefits). The big domestic groups in China have many joint ventures with foreign partners and the rapidly growing market there has meant there has been ample room for all, thus far at least. The list of foreign joint ventures that the big groups have is a long one. FAW has VW Group, Toyota and Mazda. Dongfeng has Nissan, Honda, Kia, PSA and now Renault. SAIC has huge joint ventures with VW Group and General Motors. There are also other groups with Jvs. China’s big groups have also been busy developing their own brands for domestic customers, as their technical capabilities have increased. And we’ve also seen the rise of the smaller independents – Chery, BYD and Great Wall. In short, China has become a crowded market. Such a fragmented market has been permitted by phenomenal market growth.
The stampede by foreign manufacturers into China to set up joint ventures is probably a phase that is about to wane, given the now very established presences there. Renault is rather late to the game.
CHINA: Renault and Dongfeng kick off JV
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By GlobalDataOver the next five years the issue in China will increasingly be one of how the still fragmented auto industry reconfigures and consolidates, both domestic groups and joint ventures. I would not expect all the foreign makers to be shown the exit door, basic technology transfers largely complete, as was once widely forecast. The foreign brands and how they play in China are far too important for that. However, it seems inevitable that some joint ventures will become obviously weaker and less relevant in China’s shaken out industry, with the real possibility that they will cease operations. Those there now need to work harder than they have had to so far if they want to be left standing in China in 2020.
