The recent announcement of GAC Honda laying off 900 employees has captured significant media attentionWhile GAC Honda quickly clarified that this move only involved the termination of labor dispatch workers, the industry’s reaction to this news demonstrates an underlying sensitivity to the challenges currently faced by joint venture car manufacturers in China.

Over the past couple of years, many joint venture car companies have been grappling with a decline in sales, a sluggish shift to new energy vehicles (NEVs), and an increasingly competitive market environment, further squeezing their survival space.

Data from the China Association of Automobile Manufacturers reveals that in October 2023, sales of Chinese brand passenger vehicles reached 1.485 million, marking a remarkable 25.1% increase year-on-year and raising their market share to 59.7%, up by 6.6 percentage points

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For context, in 2022, Chinese brands had a mere 49.5% market share, and even back in 2019, joint venture brands occupied a staggering 60% of the marketThe tide has turned dramatically within just four short years, illustrating a significant shift in market dynamics.

The intense competition has driven several joint venture manufacturers to look for opportunities abroad as a strategy for survivalNotably, in the first eleven months of this year, exports accounted for a significant portion of their total sales, with some companies reporting that over 60% of their November sales stemmed from overseas markets.

According to an insider from a joint venture manufacturer, the combination of significant international cost advantages and a growing capability for localization has led many companies to establish their Chinese facilities as export basesThis not only opens up wider market opportunities but also signals a commitment to remain active in the Chinese market.

However, the challenges for these joint venture companies persist in the domestic market

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Historically, joint ventures have played a pivotal role in the evolution of China’s passenger vehicle market, often exemplifying technological advancement and a robust industrial chain, which has significantly supported the growth of domestic brands.

Yet, with the rapid transition towards electrification and intelligence within the automotive industry, the traditional advantages these joint ventures once enjoyed are waningCapacity pressures are mounting, causing a reevaluation of their development strategies.

It remains evident that many joint venture firms still operate under the strategic direction of foreign stakeholders focused on global markets, often leading to slower responses to local needsThe traditional vehicle development cycle for these companies averages about four years, in stark contrast to domestic NEV manufacturers, which typically operate within a two-year cycle.

The Chinese automotive market has swiftly pivoted towards electrification in recent years, with homegrown brands gaining market share at the expense of joint ventures, leading to an observable decline in the latter's market presence.

Amidst this contraction in the fuel vehicle market, joint ventures are visibly anxious; 2023 has proven particularly challenging for the overall automotive industry

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Instances of price wars and the surge of electric vehicle market shares have placed enormous pressure on traditional joint venture brandsQuoting Qixiaohui, the deputy general manager of Beijing Hyundai, “In 2023, the automotive market is generally quite tough, characterized by extreme competitionOur principal aim this year has been to stabilize our operations.”

Sales data indicates a trend of declining numbers for several mainstream joint venture car manufacturersFor instance, from January to November 2023, Changan Ford and Changan Mazda sold 205,038 and 77,634 vehicles respectively, representing year-on-year reductions of 11.6% and 20.51%. In November, SAIC-GM-Wuling’s total sales amounted to 160,000 units, a decline of 5.88%, and within the first 11 months, their cumulative sales fell by 14.58%. Honda’s China figures reflected a similar downturn, with total sales hitting 1,068,400 vehicles, down 13.5% year on year.

Surprisingly, among the joint ventures, FAW Toyota managed to show a slight year-on-year increase of 0.8% for the first ten months of 2023, although this growth was marginal and distinctive amidst the overall declines.

Industry experts assert that in the short term, joint venture manufacturers need to focus on cost reduction to remain competitive, while in the long run, aligning with the product development pace of domestic brands is crucial.

As stated by Wei Jianbin, senior vice president of Dongfeng Nissan Passenger Vehicle Company, “At auto exhibitions, we often feel anxious as no one pays attention to our booth compared to the bustling crowds around the new energy vehicle companies.” He emphasized the need for joint ventures to revitalize their market presence by ensuring rapid production of new models and technologies, enhancing localization efforts, and creating a more agile and intelligent supply chain.

Approaching the year-end, many joint venture companies are gearing up for a push in the market to counteract the increased competition

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Beijing Hyundai, for instance, has launched a significant marketing campaign highlighting its 21-year anniversary with eye-catching offers to attract buyers.

Regarding incentives, SAIC Volkswagen announced buying incentives trending up to 58,000 yuan for specific models until December 31, 2023, while FAW Toyota has kicked off a tax rebate and zero-interest offers for selected models including special battery warranties during their promotional period.

As fuel vehicle sales continue to dwindle, a pressing question remains: how can joint venture car companies move forward? Many are reassessing their strategies and adapting to leverage China’s production capabilities and cost advantages for global export.

For example, Yueda Kia recently announced that its facility in Yancheng would serve as a global export hubThey have set an ambitious export strategy targeting over 70 countries and regions, with plans to introduce additional models to their export lineup.

According to data from Yueda Group, in November, Yueda Kia sold 18,224 vehicles, which is an 88.9% year-on-year rise, with exports alone soaring by 185.6%. Their cumulative sales for the first eleven months hit 148,168 units, marking a 23.2% increase compared to last year, with exports accounting for a significant proportion of this number.

Beijing Hyundai’s ambition to double its export volume also signals a strong commitment to enhance its international presence

Plans are in place to escalate export metrics to yield significant outputs over the next couple of years.

Dongfeng Automobile Group has further outlined its export target of 100,000 units starting in 2025, focusing significantly on their electric vehicles, which will benefit from the global backing of both the parent company and Nissan.

As pointed out by industry analysts, joint ventures hold natural advantages in export capabilities and are positioned to leverage China’s substantial NEV market share globallyDespite their relatively weak performance in domestic competition, they still retain distinct advantages internationally.

Wang Xia, president of the China International Chamber of Commerce’s Automotive Industry Chamber, offers hope for the future of joint venture enterprises, stating that while their market share has dipped below 50%, it is premature to label them as failures