Foreign automakers expand stakes in JVs

China’s home-grown auto industry will face tough times and setbacks as a number of global automakers are reportedly pushing for bigger stakes in their joint ventures, insiders and analysts warned.

“Shareholding losses for Chinese auto entrepreneurs will inevitably threaten their fledging car brands since the foreign partners will not only control core technology but eventually manipulate incomes,” said Chen Wenkai, CEO of Gasgoo.com, an automotive information portal.

“With inadequate market attention, the trend leads to regression among domestic automakers, many of whom may turn into Original Equipment Manufacturers (OEM) that are highly dependent on foreign capital,” he noted.

Automobile joint ventures in China, the world’s largest auto market, produce more than 10 percent annual growth, which is still ballooning, according to Cui Dongshu, deputy secretary-general of the China Passenger Car Association.

“It’s natural that multinational players eye for huge profits and management dominance,” he said.

The concerns were expressed as three global giants, Volkswagen AG, General Motors Co and Daimler AG, have come to the limelight for allegedly taking over some of the stakes of their Chinese partners.

FAW plans to transfer an additional 9 percent stake in its 20-year-old joint venture with Volkswagen AG to Volkswagen’s luxury unit Audi, the Beijing News quoted insiders as saying. Dong Fang, PR manager of FAW-VW Audi sales division, denied the report Monday to the Global Times, calling it “a total rumor.”

However, GM has told its China partner, SAIC, that it wants to buy back the 1 percent stake in Shanghai GM that it sold to the Chinese automaker in 2010 for about $85 million, to bring its stake in the joint venture back to 50 percent, Reuters cited GM’s chief executive Daniel Akerson as saying on August 4.

Foreign automakers have long sought for greater shares in their partnership with Chinese carmakers, but it’s strategically “the right time to seek results,” said senior auto analyst Lang Xuehong with consulting firm Sinotrust.

“A minority stake helped to reduce risks since foreign automakers didn’t know much about the local market when they first came,” Lang told the Global Times.

Although the Chinese government is trying to develop the country’s home-grown auto industry by asking foreign companies to nurture domestic brands, most local companies reported sluggish sales growth.

Local automakers sold 3.52 million cars in the first seven months this year, down 1 percent year-on-year, said the China Association of Automobile Manufacturers.

Global Times

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