The Chinese automobile market is maturing with growing competition and emerging new market segments, as well as new consumer groups (Kasperk et al. 2011, Gadiesh, Leung & Vestring 2007). The automobile companies present on the Chinese market cope with the upcoming changes in combined efforts of their established joint ventures. Those have been the premise for foreign carmakers to participate in the market, while at the same time supporting Chinese companies with technology and process-knowledge transfer (Kasperk et al. 2011, Deng & Ma 2010). Now these joint ventures are being carried to a new level in developing automobile brands together. Regulations of the Chinese government for building new plants and its goal of building global brands drive companies to encourage in such a joint venture brand development.
In 2010 and 2011, several major carmakers, have announced cooperations with a joint venture partner in establishing a new brand for the Chinese market. Already existing brands stemming from such efforts are Shou Wang (BAIC and Hyundai) and Wuling (GM, Liuzhou Wuling Motors, and SAIC). The confirmed announcements of new joint venture brands are aggregated in the following overview. Rumors furthermore suggest a joint venture of Chery and Jaguar.
All of the joint venture brands announced include manufacturing in China. In case of Chana and PSA Peugeot Citroen the two companies are going to develop joint R&D centers which are aimed at potentially providing saving potentials. Chinese companies in addition have the advantage in creating a joint venture brand to learn from foreign car makers in this field, also thinking of Chinese car makersâ€™ strive for internationalization. Developing a new brand might be even harder and more time-intensive, than developing a new technology (thinking of the example of Volkswagenâ€™s Audi). Risks and resource inputs in developing a new brand are reduced in doing so within a joint venture.
For many foreign companies still struggling with manufacturing low-priced cars, this is a major goal of the new brand development. With a new brand, the own brand of a foreign car maker is not impacted by brand value erosion when aiming at a lower segment, at the same time the cars in the new brand still can be sold to the Chinese middle class market (about 40% of the total market) with regard to a famous mother companyâ€™s brand. The German car makers focus on electric cars, to learn from their Chinese counterparts (BYD and Daimler) and to test concepts in a market that is relatively responsive to the concept of E-Vehicles.
Therewith a bridge might be built over those conflicting tendencies, also adhering to individual characteristics and the price sensitivity of consumers in rural areas. High-priced cars in the near future are likely to continue to be in the hand of foreign brands. Dongfeng and Hondaâ€™s car specifics of creating a brand to target low- and high-priced markets seem to not fit, still more Chinese brands and joint venture brands might target the luxury markets for its growth potential.
The wave of new joint venture brands will help the Chinese market to become more mature and make use of synergy effects and knowledge transfer on a process level above technology and manufacturing. 2012 and 2013 will reveal to what extent Chinese and foreign car makers will utilize the potentials of new brands and how their competitiveness in the Chinese market will be strengthened.
Chan, T.-S., Cui, G. & Zhou, N. 2009, â€œCompetition Between Foreign and Domestic Brands: A Study of Consumer Purchases in Chinaâ€, Journal of Global Marketing, vol. 22, no. 3, pp. 181-197.
Deng, H. & Ma, A. 2010, “Market Structure and Pricing Strategy of Chinaâ€™s Automobile Industryâ€, The Journal of Industrial Economics, vol. 58, no. 4, pp. 818-845.
Gadiesh, O., Leung, P. & Vestring, T. 2007, “The Battle for Chinaâ€™s Good-Enough Market”, Harvard Business Review, vol. 85, no. 9, pp. 80-89.
Kasperk, G., Drauz, R., Wilhelm, J. & Laeuppi, U. 2011, “Internationalization of Chinese Automobile Companies”, Lulu, Raleigh.