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Today, Dong Yang, executive vice president and secretary-general of the China Association of Automobile Manufacturers, wrote an article “This joint venture is not a joint venture†in the China Automobile Association’s blog. He is optimistic that the joint venture of Dongfeng Commercial Vehicles is beneficial to the Chinese side.
The following is the full text of the blog:
Recently, it attended the founding ceremony of the new Dongfeng Commercial Vehicle Co., Ltd., a joint venture between Dongfeng Motor Corporation and Volvo Cars (a commercial vehicle part, not a car purchased by Geely). Apart from congratulations, I also heard some concerns and doubts. Mainly: China's commercial vehicles have a certain advantage, why should also be a joint venture? Will the joint venture lose our company's dominance in technological development?
I think these concerns are unnecessary. Because the joint venture of a commercial vehicle and the joint venture of passenger vehicles is different, this joint venture is not a joint venture.
First, the contents of the joint venture are different. Take Dongfeng Commercial Vehicle as an example: First of all, in terms of stocks ratio is our holding, 55:45; product brand, only produce Dongfeng brand products; technically, introduce some of Volvo's key technologies such as engine and gearbox by way of digestion and absorption. At the same time, China will use its low-cost advantage to provide Volvo with parts of its assembly and components. This is obviously different from the usual joint ventures for passenger vehicles: First, the Chinese party holds a controlling stake; second, it produces Chinese branded products; thirdly, the two parties have a balanced and controlled contribution to the joint venture. There is no case where the foreign party takes a big lead.
Second, the conditions are different from the environment. As far as the terms of the joint venture are concerned, commercial vehicle joint ventures are different from passenger vehicles. Dongfeng Motor Corporation, including the former joint venture with Mercedes-Benz Foton and the joint venture with FAW, has already ranked among the top in the world. The brand also has a certain reputation. It is weaker than the other party in technical level and technical reserves, but has advantages in cost control. Then there is a different market environment: Passenger cars are B2C, and users place great emphasis on brand requirements. The commercial vehicle is B2B. The user's demand for the product is price-performance ratio, the brand is not so important, and the price is the most important. This is the main reason why the newly established Dongfeng Commercial Vehicle dared to produce only the Dongfeng brand. By the way, at the initial stage of reform and opening up, both passenger cars and commercial vehicles were joint ventures, and there were only joint ventures that only introduced technology. The results were very different: the success of the joint venture of passenger vehicles was only successful, but the joint venture of commercial vehicles was A lot of failures. The fundamental reason lies in the difference between conditions and the environment.
Third, the need for joint ventures in commercial vehicles. It is mainly hoped that joint ventures will make up for the shortcomings of China's low-level technology and weak technology reserves. According to Huang Gang, general manager of Dongfeng Commercial Vehicles, we have to use a joint venture for time. Due to the late start of our country and the serious environmental problems, our country's emission standards have implemented a catch-up strategy. The time interval for each European generation emission regulation is five to eight years, and China is three to four years. Therefore, it is difficult to keep up with the requirements of the country alone. What's more, we must go to the world. This also requires that our technological development must be synchronized with the world's advanced level.
Fourth, commercial vehicle joint ventures will not have technological dependence and will affect the growth of our technological capabilities. Take Dongfeng Commercial Vehicle as an example. Although the joint venture will introduce Volvo's engine and gearbox technology, it will not introduce the product and stop its own research and development work. The reason is simple. A full set of imported products will significantly increase costs and reduce product competitiveness. And we have the ability to digest and absorb. Therefore, it is not as good as digesting and absorbing.
Of course, the joint venture is also beneficial to Volvo. On the one hand, as mentioned earlier, joint ventures and Chinese partners can provide Volvo with low-cost spare parts and can provide experience in developing markets. On the other hand, joint ventures also have good returns. In short, a joint venture with Dongfeng can make Volvo in a competitive position with companies like Scania.
All in all, I am very optimistic about the joint venture of commercial vehicles such as Dongfeng Commercial Vehicles.