Thoughts on Developing China's Auto Brands

The Status Quo of the Development of Auto Brands in China

China's automobile industry was established and grew up under the planned economy system. Under the influence of the country’s priority strategy for the development of heavy industry, it began to show symptoms of “congenital deficiency”. This is because our country was a large country with a large population that was mainly composed of agricultural economy. The development of the automobile industry obviously violated the comparative advantage determined by the abundant resources of China’s labor force and the scarcity of capital and technology. In order to circumvent this contradiction, the development of the national automobile industry will not hesitate to make great efforts to introduce the automobile production line and use other people's machinery and technology to manufacture its own car. The second feature of China's auto industry is "acquired disorder." This is reflected in the product structure of the car, that is, the emphasis on the manufacture of trucks for quite a long period of history and despising and even suppressing the manufacture of cars. Second, due to the impact of historical conditions, the management and technology of our automobile industry have been stagnating for a long period of time, closed doors behind closed doors, and widened the gap with the automobile manufacturing industry in developed countries. The third manifestation of “acquired disorder” is that after the reform and opening up, China’s major automobile manufacturers have jointly ventured with foreign companies in an attempt to realize the leap-forward development of the domestic automobile industry through the “market-for-technology” approach, but this desire remains until today. Still a dream. The “congenital deficiency and acquired disorders” of the Chinese auto industry determines the following status quo of the development of auto brands. First, there are relatively many foreign brands of automobiles and relatively few independent brands. In 2004, the proportion of all auto brands in China accounted for 59%, and the proportion of foreign brands accounted for 41%. It seems that China's auto brands are 18% more than foreign brands, but this is mainly due to the product structure of the Chinese auto industry, which relies on light weight cars. Second, there are more and more foreign brands of cars and fewer and fewer independent brands. In 2000, the proportion of self-owned brands in all automobiles was 72%. In 2004, this proportion fell to 28%, while foreign brands increased from 26% in 2000 to 41% in 2004. Third, China's commercial vehicles have more independent brands, and their own brand of passenger cars is pitifully low. In 2004, the proportion of self-owned brands of trucks reached 94%, which has an absolute advantage, while the self-owned brands of cars accounted for only 18%. Fourth, under the current “3+6” automobile enterprise pattern in China, private enterprises have more self-owned brands of passenger cars (mainly cars), and there are fewer self-owned brands of passenger cars of the three major groups (mainly cars). Fifth, the independent research and development capabilities that support the development of self-owned brands of Chinese companies are weak. In general, they are still in the stage of learning and digesting foreign advanced technologies and lack a systematic research and development system.

The Necessity and Possibility of Developing Auto Brands

(I) The Necessity of Developing Auto Brands
When we talked about the necessity of developing auto brands, we must mention all the lasting debates surrounding whether or not Chinese autos should develop their own brands in 2004. This event has attracted people from all walks of life in the world, including experts, scholars and government officials. It has not been resolved yet. Although we agree to the basic point of view of developing our own brands, we also oppose blindly, “one size fits all” and unrealistic development of independent brands for the development of independent brands. The discussion of necessity must take into account the long-term interests of the entire automotive industry and enterprises, as well as other constraints such as technology, capital, and systems. The reason why the voice of developing an independent brand is so strong today is roughly the following three factors. First, profound changes have taken place in the external macro environment of the enterprise, and the competitive situation of enterprises is unprecedentedly severe. The advancement of the reform of the domestic market economic system and the challenges of accession to the WTO have led to increasingly fierce competition among enterprises. It is manifested in the competition between local companies (including joint ventures) and competition between this enterprise and foreign companies. In the final analysis, this kind of competition is the competition of products, that is, providing high-quality products and creating value-added services for customers. It wins the trust of customers with reputation. This is the brand competition. Whoever has a brand, who has a large number of brands, who have high value-added products, who have more customers, and who have large profits, will win in the competition. The second reason for the development of independent brands is the predicament of the marginalization of domestic cars and the marginalization of the market. Taking the passenger car market in 2004 as an example, the sales of automobiles imported with foreign technologies reached 2.226 million units, which accounted for 89.4% of the total sales, and the sales volume of self-developed vehicles reached 265,000, which only accounted for the total sales volume. 10.6%. The original intention of the introduction of foreign investment was to "change the market for technology," but did not expect that after the joint venture, not only the technology did not change hands, the spillover effect of technology was not obvious, but it also lost the huge Chinese market. Soldier." Although China's vehicle production capacity ranks third in the world at present, in a significant sense we are still manufacturing rather than creating automobiles. Local companies are just foreign companies in China, CKD (all parts assembly), SKD (half-part assembly ) and OEM (Original Equipment Manufacturer). Local companies are eager to introduce foreign advanced technology, but the advanced technology is still advanced. Compared with the technological level of developed countries, the overall level is still a big gap. The technical content of products is still lower than that of developed countries. In order to rush to catch up, he has to spend heavily to introduce new technologies. This falls into the trap of "introduction-backward-introduction", which eventually led to the stagnation of the level of R&D capabilities of local companies and the siting of foreign auto brands to occupy the Chinese market. We said that there is nothing wrong with the introduction of foreign investment. The mistake is that we did not develop our own learning ability, absorptive capacity, and innovation ability in joint ventures. The third reason for the development of self-owned brands is that companies have their own brands and they have the autonomy to control their survival and development. They are no longer subject to human control. The independent brands have independent intellectual property rights, which is a huge intangible asset and enriches the foundation for the development and growth of the company. If there is no independent brand, something produced is linked to the brand of another manufacturer, then the company’s production plans, technology choices, and profit distribution will always obey the decisions of others. More importantly, companies that do not have their own brands can only be in a low-end position in the industry chain and receive far less returns than companies with high-end brands.

(B) The possibility of developing auto brands
China is the world’s largest developing country. Its population is 1.3 billion. Currently only a very small number of people in such a large population can afford to use a car. With the development of the economy, her market demand can be said to be continuous in a predictable number of years. This is one of them. Second, China’s per capita GDP has exceeded US$1,000. According to Rostow’s classic economic development stage theory, China is currently in the stage of accelerated industrialization. If we don’t change things, our per capita GDP will exceed 3,000 U.S. dollars by 2020, and we’ll reach 8,000 U.S. dollars by 2030. This is a country that is developing at a high speed, that is, this country’s modernization with industrialization is completed. The entire half-century is a historical period in which China’s industrialization has accelerated and industrialization has been achieved. Such a historical period is a golden age for the development of the car industry. The period of accelerated industrialization must be the best, last and fastest development of the car manufacturing industry. period. During this period, people’s consumption structure has undergone tremendous changes. Automobile consumption has become an inevitable choice for people to increase consumption. Moreover, at present, China has entered the stage of heavy chemical industry development. As a pillar industry of heavy industry, automobiles have an irreplaceable role in accelerating the industrialization process. Thirdly, after many years of hard work, China’s automobile industry has already possessed a certain amount of technological development capabilities. Commercial vehicles are self-evident, and they are not far from the international advanced technology level. They have absolute advantages in China. In the field of passenger vehicles, after many years of joint ventures, local companies can accumulate technological capabilities that support independent research and development by copying and absorbing foreign advanced technologies. There is no major technical problem in the development of independent brands. Fourth, the establishment of a market-oriented economic system reform and a sound socialist market economic system for the past few years has created a level playing field for auto companies. Survival of the fittest, mergers and acquisitions have become common economic phenomena. In addition, the level of internationalization of local auto companies is also increasing. Especially after the joint venture, the endowment of Chinese enterprises' technological backwardness and capital scarcity can be greatly changed. The unprecedented increase in investment in key factors provides favorable conditions for local companies to participate in the division of labor in the international automobile industry. Under the influence of these factors, China's automobile manufacturing companies have been relatively dispersed and relatively concentrated, which has greatly expanded the scale of automobile production. As the scale has been expanded, it also resolves the risks of auto R&D to a certain extent, and has a strong production scale as its backing. The independent research and development of the company will provide capital protection. Fifth, from the reality, Chinese companies are fully capable of developing their own brands. Private auto companies represented by Chery, Geely, etc., initially struggled to explore the creation of independent brands. They overcome various difficulties and finally developed a series of self-brands. They bid farewell to the history of passenger cars not having independent brands for several years, and proved that even if local companies do not join joint ventures, they can create brand truths, which greatly increases the confidence of automakers in China. And ambition.

Development of Independent Brand Path Selection

(I) Selection of Independent R&D Models for Developing Independent Brands
The cultivation and development of self-owned brands is inseparable from independent research and development (R&D). It can be said that independent research and development is the lifeline of independent brands. Looking at the world's first-class automobile manufacturing companies, behind their own brands are supported by its strong independent research and development capabilities. Independent R&D is a capability that is not easily imitated by competitors and therefore has the connotation of core competitiveness. If an enterprise wants to develop its own brand, independent research and development capability is a threshold that will not pass through. However, enterprises have different scales, different ownership systems, different endowments, different stages of development, and different ways to achieve plans. Therefore, the mode of independent research and development of enterprises should also be varied. And the cultivation of independent research and development capabilities is a gradual process that cannot be accomplished overnight. In general, there are five models for independent research and development. The first is a model that is approximately completely autonomous. This model is relatively rare in China, and its performance is relatively prominent BYD Auto. BYD began its independent self-investment and independent development process. At the beginning of its establishment, it established the Automotive Research Center in Shanghai and developed the ABS system in a relatively short period of time. The BYD 316 sedan is currently in the final preparation phase before entering the downline. The second is an outsourced independent research and development model. Modern automobile manufacturing is no longer a "big and full" and "small and complete" manufacturing, but a highly specialized product division. Manufacturers choose one or several products in the production chain for production according to their own advantages. The advantage of this model is that it makes full use of external resources, outsources its own production projects without comparative advantages, and uses external forces to engage in independent research and development. This model of Chinese cars is more typical and is being adopted by more and more companies. Under the background of economic globalization, they have used some foreign R&D institutions or industrial design institutions, such as those specialized in product development for auto companies, to achieve auto innovation through the outsourcing of structural components and business of cars, in order to improve their R&D capabilities. . The third model is to achieve self-development through mergers and acquisitions. This is the most direct and simple mode. This model is typically used in SAIC shares. On October 28, 2004, China Shanghai Automotive Industry Corporation (Group) Corporation and Korea Ssangyong Motor Company's creditor group signed a partial sale and purchase agreement for Ssangyong Motor Company in Seoul. SAIC Motor’s $500 million acquisition of a 48.9% stake in Ssangyong Motor Co., Ltd. and the completion of mergers and acquisitions brought the original R&D capabilities of the company to use for me, which greatly enhanced the R&D level of the company. The fourth model is the “dry school” model represented by private enterprises such as Geely and Chery. These companies have the ambition to build their own brand cars at the beginning, and they are pushing it with all their heart and soul. However, they are taking a relatively stable road, recruiting troops, learning by doing, learning to do things first, making things easier after the first time, and then improving the self by accumulating experience. That is, they have taken a path of “imitation-innovation”. The fifth model is the “two-legged walk” model represented by the three major automobile groups. Such companies have strengthened their car R&D efforts through joint ventures with world-class car manufacturers abroad. They have gradually established their own brands in their ongoing participation in R&D. Although the joint ventures represented by the three major automobile groups have only just started in independent brand R&D, the leaders of these companies have realized the importance of independent research and development and creation of independent brands and put the development of independent brands on the agenda. In 2004, FAW Group’s own brands accounted for 50% of its products. Since 2000, FAW R&D has invested 700 million yuan, and has successively developed 920 models of 17 systems and 58 systems, and invested 1.2 billion yuan to develop Aowei engines. SAIC said it will produce 50,000 cars with its own brand by 2007. After the joint venture between Dongfeng and Nissan, commercial vehicles retain their original R&D centers. Commercial vehicles continue to use Dongfeng's brand as their counterparts, and they combine multiple international cooperation, joint development, and fully independent development in this field. In the field of passenger vehicles in Dongfeng, another R&D center for passenger cars was established in 2005 to strive to create a Chinese-foreign joint car brand. In Dongfeng's new energy clean car field, I developed and developed the Dongfeng brand car with its own independent intellectual property rights.

(II) Selection of Product Structure for Developing Independent Brands
The product structure has an essential relationship with the factor endowments of a country and a company. In a country with abundant labor resources, scarce capital and technological backwardness, the development of labor-intensive industries is its comparative advantage. In today's economic globalization, although the transnational flows of capital and technology can partially change the factor endowments of a company or an industry, it is a relatively spontaneous and long-term process. If you want to “completely contribute to a battle,” you will only lose interest. . For autos, a capital, technology, and labor-intensive industry, it is inevitable that the development of independent brands will begin with low-end products, gradually accumulate capital and technology, gradually cultivate innovation capabilities, and gradually transform comparative advantages into competition. Advantages, and finally compete with foreign brands in the high-end market. Moreover, our country is a country with low energy resources per capita, which determines that the development of heavy chemical industry must take a new road to industrialization and focus on conservation. Choosing a product structure that meets comparative advantages is a reflection of savings. Specifically, the products of the self-owned brands are based on economical, small-displacement, mid- to low-grade cars as the main structure for a long period of time.

(III) Selection of Technical Indexes for Developing Independent Brands
The development of indigenous companies' own brands, from scratch, from weak to strong, from small to large, is in itself a process of overtaking. In order to achieve catch-up, it is necessary to shorten the gap between technology and developed countries. There are two ways to catch up with technology: one is the introduction of advanced technology, and the other is independent technological innovation and invention. On the one hand, independent technological innovation and inventions require enormous capital investment, and must be supported by the scale of production of enterprises. In addition, independent technological innovation and inventions are risky. Local companies generally lack huge amounts of R&D funds, and they also like to avoid risks. In order to achieve technological catch-up in the short term, it is possible to blindly choose the most advanced technology. Blindly selecting the most advanced technologies has the following problems: First, the most advanced technology is not necessarily the most suitable technology for the enterprise. The most advanced technology is often not compatible with other factors of production, and cannot play a role, thereby weakening its pulling effect on other related industries. Second, the most advanced technology is not necessarily the most acceptable technology for the enterprise. The most acceptable technology must be the easiest to learn, the most easily digested and absorbed the technology that I can use most quickly to improve the overall level of technology, but the most advanced technology for the enterprise may not necessarily have these characteristics; the third is the most advanced Technology will not necessarily enhance the company's ability to self-develop. Innovating and inventing on the basis of the most advanced technology is a very large investment with a very small probability of profit, which often distort the rational allocation of corporate resources. Smart decision makers will not do this. Therefore, the technology selected for the development of independent brands must be the most suitable and most acceptable technology.

Develop supporting reforms for independent brands

(I) Macroeconomic policy environment
The reason why the development of auto-owned brands involves the reform of the macro-policy environment is mainly due to the institutional obstacles in the transition period from planned economy to market economy and the pillar position of the auto industry in the national economy. First, to continue to promote market-oriented reforms, change the traditional development strategy of giving priority to the development of national heavy industries, implement the development strategy of comparative advantages, continue to divorce the original state-owned auto companies from the burden of strategic policies and social policies, deepen the reform of state-owned enterprises, and create A fair market environment; breaking monopolies and encouraging mergers, bankruptcies, acquisitions, and restructuring to achieve the optimal combination of automotive companies. The second is to deepen social reform, adhere to the guidance of the scientific development concept, do a good job of “five overall plans,” narrow the gap between the rich and the poor, and cultivate a large middle class, so as to stimulate potential car purchase capabilities and achieve social harmony. Third, the government should use the new “Auto Industry Development Policy” as a guide, through various methods such as setting up an independent research and development incentive fund, perfecting automobile intellectual property laws and regulations, introducing relevant fiscal and taxation preferential policies, and encouraging enterprises to independently research and develop and develop their own brands.

(B) Micro-management mechanism
The development of independent brands is not only affected by the macro-policy environment, but also closely related to the company's micro-management mechanism. Why do some companies have the incentive to carry out independent research and development under the same conditions, but some companies are still hesitant? This involves the issue of whether the company's micro-management mechanism has incentive functions. We can see that the motivation for the development of independent brands of private enterprises is greater than that of state-owned joint ventures, because the managers of state-owned joint ventures lack sufficient incentives to develop their own brands. In their view, as long as the joint venture guarantees the profitability of the company, it is okay to develop a self-brand and will not affect the personal reputation and political future. To change this passive situation, it is necessary to deepen the corporate governance reform of state-owned joint ventures and truly establish a modern enterprise system and a standardized corporate governance structure. This requires solving the problem of long-term incentives for the managers of state-owned joint ventures, and tying the long-term interests of the company and the long-term interests of the operators tightly together to make it a community of interests. The property rights reform of state-owned joint ventures is an important measure to ensure the achievement of this goal. Its role is to make managers form a stable long-term expectation, care about the long-term development of the company, and encourage business operators to make more efforts in developing their own brands of local enterprises. . (Zhang Haoliang Xia Xiangyang)
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