With the development of the new energy market, consumers’ acceptance of electric vehicles is increasing. In October 2020, the penetration rate of new energy vehicles has exceeded 30%, which means that 3 out of every 10 cars sold are electric cars. Although the sales of electric cars are increasing, the presence of joint venture brands in the new energy market is getting lower, which is in stark contrast to the traditional fuel car era. As joint venture brands played a significant role in the sales of traditional fuel cars, Japanese brands also faced the same problem. The new bZ4X, e: ES1/e: NP1 and ARIYA, launched by the “Japanese Three Strongest,” have not received a strong market response, which is a pity that “joint venture brands cannot play electric cars well.” In order to explore why joint venture electric vehicles are in a relatively weak position, and whether joint venture brands still have development opportunities in the new energy market, Autohome has planned a special feature on “New Energy Vehicles of Japanese Joint Venture Brands,” taking Japanese brands as an example to discuss the road of joint venture brands’ electrification.
Although independent brands have already achieved significant advantages in intelligence and electrification aspects. This does not mean that the “dream of overtaking on a bend” has been fulfilled. The following market competition is the key to determine the future market pattern.
In terms of the Chinese market alone, 2022 is the most memorable year for the rising of independent brands. In this year, the electrification of independent brands has achieved rapid development, and the market share reached 30% in October. As the process of electrification continues to accelerate, the market share of independent brands is also rapidly rising. In October, the market share of independent brands exceeded 50%, and the world’s largest automobile consumption market has officially become the stage for independent brands to shine.
In addition, as the export of new energy vehicles accelerates, news of NIO, Naza, BYD, and others entering the European, Southeast Asian, and South American markets are frequent. A situation where domestic electric vehicles compete globally is forming. However, from a global perspective, the development of new energy vehicles has just begun, and fuel cars still have the dominant advantage, which is the main reason why many joint venture brands have developed slowly in the new energy field.
Slow start does not necessarily mean no chance for future development. Making cars is a marathon, and who is better and who is worse can only be seen when the market is mature. Before dawn arrives, we must strive to run, and Chinese domestic brands can only stand firmly in the new era of intelligent electric vehicles, and have the opportunity to achieve overtaking on the bends.
From “Three Strong” to “Three Weak”, what do Japanese brands worry about?
Joint venture brands in the Chinese market are experiencing an unprecedented “crisis”.
From Volkswagen’s massive software problems with ID, to Ford’s electric horse being ridiculed as the “Seven Wolves Making Cars”, to the successive launch of pure electric products by the Japanese “Three Strong” brands but without any ripples, the industry is increasingly skeptical about the electrification of joint venture brands. It is an undisputed fact that joint venture brand electric vehicles have a disadvantage in the public opinion field.
Joint venture brands cannot make electric cars?
On the contrary, many brands have already begun to try on the road to electrification. Taking the Japanese “Three Strong” brands that dominate the gasoline-powered market as an example, they have long established a layout for the electric car market.
In 1947, Nissan released the Tama pure electric car with replaceable lead-acid batteries.
Toyota had already launched a small pure electric vehicle series named EV-10 to EV-40 in the 1980s.
Honda produced 340 units of the EV Plus electric car in 1997 and pushed it to the market through leasing.
Having got up early but arrived late, the Japanese “Three Strong” brand’s “unproactive” approach to the electric vehicle market has created the embarrassing situation of relative backwardness in the Chinese market.
The reason why the Japanese brands are not enthusiastic enough about electrification is, on the one hand, due to considerations for the development of the industry. The replacement of gasoline-powered vehicles by electric vehicles will not be achieved in the short term. In addition, electrification will bring about huge industrial changes, and reshaping the industrial chain will also have a considerable impact on the social environment. Such comprehensive considerations are the fundamental “restrictions” on the Japanese brands’ layout of electrification, as can be seen from the previous actions of Akio Toyoda’s “bombing of electric vehicles”.
On the other hand, for enterprises like the Japanese “Three Strong” brands that seek global development, weighing the pros and cons is the foundation of their future development. From the perspective of the global market, China is the most aggressive market for electrification. Whether to follow the trend of the Chinese market is a dilemma for many joint venture brands.“`markdown
Using Toyota as an example, the overall global sales of Toyota (including Hino and Daihatsu) last year was 10.5 million vehicles, among which the sales in the US market was 2.33 million and the sales in the Chinese market was 1.944 million. In terms of sales ratio, the US market is more important than the Chinese market, which is easy to understand.
However, in the US market, the development of electrification is not as fast as the Chinese market.
According to some analysts, the overall sales of US cars this year is expected to be around 14 million, of which electric vehicles account for about 1 million. Therefore, the penetration rate of new energy vehicles in the US is only 7.1%, which cannot be compared with the Chinese market.
It is worth mentioning that the advantage of buying new energy vehicles in the Chinese market lies in lower usage costs than in other countries, mainly due to different electricity prices.
According to statistical data, the global average electricity price is 1.33 yuan/kWh, and the electricity price in China is 0.54 yuan/kWh, which largely explains that promoting electric vehicles with cheap charging and low usage costs will be hindered in many other countries.
Of course, whether new energy vehicles are affordable depends on the ratio of electricity price to oil price, as well as the overall income level of local people. This needs to be analyzed specifically. However, it is an undisputed fact that promoting electric vehicles in other global markets is more challenging than in China, which has made global automakers such as Toyota slow to layout the electrification.
Advantages of Joint Venture Electrification
Electrification and intelligence are typical features of the current Chinese market, but fuel cars still dominate the global market. This provides opportunities for many global brands.
Using existing stock advantages of fuel cars to gradually penetrate and develop new energy markets has become the first choice for many joint venture brands.
In addition to providing relatively stable cash flow for the development of new energy, low-cost scale production will also provide opportunities for joint venture brands in the field of electric vehicles.
In recent years, the news of Tesla's price reduction has been frequent, but it is important to note that reducing prices to enhance market competition is not exclusive to Tesla. In the development history of joint venture brands, lowering prices for sales has been the main theme of the industry's development.
Take the Honda Hybrid Accord as an example. In the initial stage of import sales, the selling price of the Hybrid Accord remained above 300,000 yuan. When the domestically produced Hybrid Accord was launched in 2016, the selling price was set at a range of 239,800 to 279,800 yuan. As the hybrid system was localized, the price of the Hybrid Accord has been continuously declining. Nowadays, the entry-level Hybrid Accord's official guide price has been reduced to less than 200,000 yuan.
Such moves that lower prices by remodeling and upgrading models are ubiquitous in the development history of joint venture brands, and such a strategy will obviously continue to be used in the era of new energy vehicles.
With the increase in the recognition of joint venture brand electric vehicles, they will take the initiative and engage in more intense competition in the new energy market.
In addition to such long-term operating plans, joint venture brands also have richer accumulations in the driving quality of vehicles. Leaving aside the similar acceleration experience of the three-electric systems, in terms of chassis tuning, joint venture brands have a clear advantage over independent brands and the many new car-making forces.
Honda is a model for doing so in this aspect.
Different from many electric vehicle companies pursuing a faster acceleration experience, Honda's e:ES1 e:
NP1 is promoted with "Honda-style" driving experience. And both of these models are sold in Honda's traditional 4S stores. This target also appears to be quite clear. The mission of Honda's electric vehicle is to take over Honda's fuel vehicle owners and maintain consistency in driving experience. This is where the competitiveness of Honda's electric vehicles lies.
This approach has largely created the lukewarm status of Honda's new energy at present. Unlike the competition of traditional fuel vehicle driving quality, the current new energy market places more emphasis on intelligent experiences. From the interaction of the vehicle's multimedia system to the performance of the advanced driving assistance system, it largely determines the consumer's satisfaction with this new energy vehicle.
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While new car brands led by WmAuto Li have taken the lead in the field of intelligentization, they have also established the selection criteria for intelligent electric vehicle era with a higher weight of intelligentization. This is also the main reason why many joint venture brands do not have an advantage in the new energy market.
Although such a "vehicle selection system" has been established, the application of numerous sensors has also led to higher maintenance prices for vehicles. With the development of the new energy market, more consumers will still choose models with low failure rates and convenient and affordable maintenance.
As these consumers who pursue "economy" gradually become the main consumers in the new energy vehicle market, joint venture brands' electric vehicle models will also receive more attention.
## What Should Joint Ventures Learn from Independent Brands?
Whether from the perspective of future development strategy or the discourse system of intelligent electric era, the current joint venture electric vehicles are in a relatively "primary" stage, and they need to learn and draw lessons from the first-movers advantage of independent brands.
First of all, from the perspective of intelligentization development, joint venture brands are clearly lagging behind.
This is due to the fact that joint venture brands are generally cautious about vehicle changes, and more thinking and frequent verification have become the main reasons for delaying the breakthrough of joint venture brands' intelligentization.
Taking the center console screen as an example, while many new brands are trending towards installing large screens in cars, joint venture brands still focus on "small screens". Whether the screen utilization rate, or whether there is a screen reflection affecting driving safety, have become their main focus. Little did they know that while verifying the characteristics of the screen, independent brands have already occupied consumers' minds with large screen technology.
Second, traditional fuel vehicles cover a heavy industrial color, while intelligent electric vehicles tend to be more internet-based with a faster pace. They have a complete set of operating procedures in the traditional automobile industry, which cannot be lost.
In the era of intelligent electric vehicles with more internet-based colors, being result-oriented and solving problems more quickly and effectively is the fundamental way for rapid development. Such a more flexible mechanism not only speeds up the iteration of intelligent electric vehicles, but also widens the gap between independent brands and joint venture brands.
Next, in terms of the service system, the direct sales model advocated by the new forces also has reference significance.
In the era of traditional fuel vehicles, the sales channel of the main factory + 4S store linkage was the main development mode. Although this method can alleviate the pressure on car companies, it is not conducive to establishing direct communication between enterprises and consumers. To a certain extent, it affects car companies’ judgment of market trends.
In the era of intelligent electric vehicles, new forces generally seek development through direct sales models. Although the operating pressure is greater, the method of direct communication with consumers can enable them to adjust their business more quickly and respond to consumers’ needs. This is particularly important in a market environment where competition is becoming increasingly fierce.
Most notably, according to the “2022 China Automobile Dealers Survival Survey Report for the First Half of the Year” released by the China Automobile Dealers Association, only 18.1% of dealers completed their semi-annual sales targets in the first half of this year; in the first half of the year, 72.7% of dealers did not make money or lost money.
This reality largely indicates that the traditional dealer model urgently needs to be reformed, and the direct or semi-direct mode is one way to solve this situation.
Although the global new energy market is currently unevenly developed, achieving green travel has always been a common goal of mankind. In such an idealized future of travel, pure electric vehicles will play an important role, and with the development of the Internet industry, the degree of automotive intelligence will also become higher and higher. Smart electric vehicles will inevitably become the main force in the future automotive industry.
In this industry background, joint venture brands should accelerate their layout in the field of intelligent electric vehicles, and the leading Chinese market is a good model to learn from.
From a global perspective, learning to compete head-on with independent brands is the first lesson for joint venture brands to enter the era of intelligent electric vehicles, after all, the outbound plans of independent brands are accelerating, and the story of independent brands seizing overseas markets as “outsiders” is unfolding.
Making a car is a marathon, and the second half, led by intelligent electric vehicles, has already begun. The more active “newcomers of independent brands” are at the forefront, while the “veterans of joint ventures” with better stamina are adjusting their pace. Who will rush to the finish line is still unknown, but the state of joint venture brands being as if facing a formidable enemy has already emerged.
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This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.