Can independent innovation be achieved through purchase? Can the lack of core competencies of Chinese companies be obtained through a short cut called the "third road"?
Can independent innovation be achieved through purchase? Can the lack of core competencies of Chinese companies be obtained through a short cut called the "third road"? Due to a special proposal, this topic was submitted to the ongoing "two sessions."
This proposal was submitted as the representative of Wang Haoliang, chairman of the Nanjing Automobile Group, “Proposal on the National Policy Support for the Nanjing MG Projectâ€.
“The Chinese auto industry can use its international M&A methods to acquire prestigious internationally renowned brands, start from the high end, greatly accelerate the internationalization of Chinese cars, and gain time and effectiveness for the implementation of the 'go global' strategy.†said Wang Haoliang. .
In 2005, Nan Hao, led by Wang Haoliang, obtained British Rover, an internationally renowned car dealer, for £55 million. The Muggier project is based on this acquisition.
“While it was finished (brand internationalization), it took 30 years for Japan and 20 years for South Korea. When we acquired the international brand, it meant that we could have achieved the goal of shortening the process.†Therefore, Wang Haoliang proposed to include the Nanchang MG project as a key project of the national "independent innovation" and "going out" strategy, providing effective support in terms of policies, funds, talents, etc., and supporting the "third road" for the Chinese automobile industry. .
Wang Haoliang firmly believes that the "third road" advocated by him is beneficial to the country and beneficial to the industry. "Some representatives have signed up to support this proposal."
However, there are also many doubts about the “third way†in the meeting.
South Slope and North Slope
In the 1950s, the Chinese auto industry began with brands such as "liberation," "Dongfeng," and "Red Flag." Thirty years later, in the 1980s, in order to shorten the gap between China’s auto industry and the world’s advanced level, the country implemented the “market-for-tech†industrial policy and the wave of joint-venture vehicles has risen. To this day, major Chinese auto makers have launched joint venture projects. The pattern of the two roads of joint venture cooperation and self-owned brands was established.
However, after 25 years of development, the success or failure of the two roads has been questioned.
"The joint venture development model, because of the irreconcilable contradiction between national interests and the interests of transnational corporations, will eventually find it difficult to get rid of the subordination economy that is confined to assisting transnational corporations in dividing the domestic market." Wang Haoliang said in the proposal.
This is not the first time that the joint venture route has been questioned. "The market is limited. Once it is let go, it will be difficult to win it back. It will make the market lack core technology, and it may develop into a dependent country and finally be controlled by others." In 2005, Deputy Minister of Science and Technology Liu Yanhua was also in "China Science and Technology." "People's Forum" put forward a reflection on "market for technology."
Members of the National Committee of the Chinese People's Political Consultative Conference (CPPCC) who attended the “Two Conferences†with Wang Haoliang and Yin Mingshan, Chairman of Chongqing Lifan Group, compared the joint venture to the “South Slope†and compared their own brands to the North Slope. "I felt a bit boring when I walked over the southern slope, because I climbed to the top of the hill and inserted the flags of others. We are willing to climb from the north slope and climb up and insert the Chinese flag."
However, the slow development of self-owned brands has also caused anxiety in the automotive industry.
According to statistics, in 2006, the country’s sales of cars were 3.83 million, of which sales of self-owned brands were 980,000, accounting for only about 1/4, and over 70% of them were sales of Xiali, Geely, and Chery. Economical sedan was created. The average car price for self-owned brand exports is only around US$5,000, and most of them can only be exported to some underdeveloped countries.
“At this stage, we can only participate in international competition with low-car prices and low-grade models. Even if we achieve a certain low-end market share, it will be difficult to form the brand's influence. At the same time, companies cannot survive because they cannot make a profit or even lose money.†Wang In his proposal, Hao Liang also showed no optimism for the indigenous and long-term self-owned brand development model.
"The third way"
Under the background that both roads were criticized, the "third road" began to surface.
“Chinese auto companies have acquired intellectual property through international mergers and acquisitions, have their own international brands, started from the high end, digested, absorbed, and reinvented the original technologies.†Wang Haoliang explained the concepts and steps of the “third roadâ€. "Adding (through mergers and acquisitions) a set of international top-level R&D, manufacturing, quality inspection and assurance systems, and marketing systems that are in line with international standards, can thus constitute our core competitiveness."
Before submitting the proposal, Wang Haoliang had already begun the "third road" attempt. This was the case in 2005 that caused a sensation in the acquisition of Luofu by Nanqi at home and abroad.
“Rover Company has nearly 1,000 dealers in the global market. After the acquisition, Nanjing Auto can use Rover’s brand effect in the European and American markets and its existing sales network to directly sell domestically produced parts and components and MG vehicles. To Europe and the United States, we have entered the world's most important mainstream automotive market."
Wang Haoliang believes that taking the "third road" can avoid the shortcomings of joint ventures and cooperation that do not obtain the low starting point of the core technology and the road of independent brands. This will greatly shorten the internationalization process of China's autos and make it possible to "completely realize it."
However, for the feasibility of the "third road", the views of the academic community and the automotive industry are not consistent.
Similar to Wang Haoliang, the director of the Changjiang Business School Xiang Bing. As early as 2004 when Lenovo bought IBM, Xiang Bing proposed the concept of "the third road." "In 2002, I suggested that SAIC could consider buying 25% of the shares of German Volkswagen as its largest single shareholder, and then sincerely support the German public to make it more globally competitive." Xiang Bing said, "This It may be more effective than independent research and development of self-owned brands that go now."
Dr. Bai Ganrang’s calculation at Fudan University’s School of Management also supports the “third way†viewpoint. This calculation shows that the production capacity of some major automobile manufacturers has remained high for a long time, causing the average utilization rate of the global automotive industry to rapidly decline from 80% in 1990 to 69% in 2002. The inefficient idleness of large production capacity increases the possibility of selling assets, thus providing opportunities for cross-border mergers and acquisitions.
However, some people in the auto industry are not optimistic about the "third way."
Li Zhen, Chairman of Makai Group, which specializes in cross-border acquisitions, told reporters on March 14 that in recent years, the global auto industry has indeed presented opportunities for Chinese companies to cross-border M&A, but the major opportunities are from low-value-added parts companies rather than entire vehicle companies. .
“The cross-border mergers and acquisitions of Chinese auto makers have come one step later. For US companies, a billion or five billion US dollar merger is not a big deal, but it is a large number of Chinese auto makers who have not been accumulating for a long time. The problem may still be solved by agencies such as private equity funds, but how do you convince them that Chinese auto manufacturers have such management capabilities?" Li Zhen said.
Also skeptical are senior automotive industry commentators Zhong Shi. He believes that almost all of the mergers and acquisitions of the international car industry are mergers and acquisitions itself has a strong brand, R & D capabilities and a wealth of product lines, automotive companies through mergers and acquisitions to engage in technical reverse flow of cases is very rare.
Zhong Shi does not advocate that the state should give policy support to the "third road." "This is a matter of the market. Equally competitive, we should not engage in any policy tilt."
An official from the National Development and Reform Commission also stated that at present, auto makers need to go through approvals for overseas greenfield investment and mergers and acquisitions, and the country does not have “special treatment†in overseas mergers and acquisitions in the automotive industry.
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