What are the causes of the suspension of numerous joint ventures and cooperation projects?

According to media reports, in order to recoup the acquisition of Hafei, Dongfeng Motor had appealed to the SASAC in an attempt to turn it down. Senior CAAC officials revealed that the decision of the new CATIC to develop the automobile business is an iron nail. Hafei's internal preparations for the new CATIC to strengthen and expand the car resources are very welcome. “The current cooperation between Dongfeng and Hafei is no longer possible. Negotiations have been shelved, and finally they must be terminated."

After the rumors of the East-Kazakhstan cooperation broke out, it was rumored that PSA was eager to form a joint venture with Hafei to break through the dilemma of long-selling sales in the Chinese market. According to an insider from AVIC, the joint venture between the two parties is currently in contact, but the new CAAC hopes that PSA can rationalize the relationship with Dongfeng.

According to the First Financial Daily, due to the failure to resolve the issue of Nissan’s equity, the joint venture of Dongfeng Volvo was suspended again. During the joint venture negotiations, the cooperation between the two parties was based on Dongfeng Commercial Vehicle Company as the basic carrier. Dongfeng Commercial Vehicle Co., Ltd. is affiliated with Nissan and Dongfeng Motor (600,006, shares), each with a 50% share of Dongfeng Limited. The joint venture between Dongfeng and Volvo must meet the following conditions: Dongfeng must occupy no less than 50% of the shares. The retention of Nissan became the key to the success of Dongfeng Volvo's joint venture negotiations.

[Analysis Review]

1. In existing joint ventures and cooperation projects, the parties are basically in the second-line camp, or their main products are non-mainstream, such as Hafei, Young Auto, Iranian IKCO, Dongfeng Volvo's heavy truck projects, etc. This shows that during the transformation of the Chinese automobile industry to a mature market, the main competitors in the market are basically determined, and the resources available for cooperation are also becoming less and less, and joint ventures and cooperation negotiations have become increasingly difficult. The full-scale joint venture between Nissan and Dongfeng led Dongfeng to lack resources in the joint venture negotiations with Volvo, and caused the five-year joint venture to stop again.

2. Under the above background, the two parties involved or the strong ones no longer treat the joint venture and cooperation as a top priority, and some of the cooperation even become “chicken ribs”. Unequal mentality in joint ventures and cooperation will lead the parties to desperately press prices or conditions for the other party to the cooperation, and finally let the project that was originally hoped for high hopes fall. The IKCO Samantha model that the young man originally planned to introduce was too old to adapt to the fierce competition in the Chinese market, leading young people to abandon the cooperation.

3, and still related to the characteristics of the current Chinese auto market, "quasi-mature market" and the government's "semi-control" status of the automotive industry determines that the fate of auto companies cannot be entirely determined by themselves. The degree of government control over the automotive industry lies between real estate and home appliances. The system of announcements for the approval of joint ventures and joint ventures for automobiles, the announcement system for new products, and the appointment of large car companies all show the presence of the government and allow joint ventures between enterprises. The cooperation relationship has become very complicated. The joint venture projects between Dongfeng and Renault could not be carried out due to interference from local governments. The low-key purchase of Hafei from Dongfeng coincided with the launch of the national “big-aircraft” project. Both parties believed that the new CAAC would sell Hafei. Therefore, one party tried desperately to lower prices and the other wanted to find a way out for itself. However, the development of things is unexpected. The ambition of the new AVIC will allow Dongfeng's integration plan to be undone and the Eastwind to miss the opportunity for integration.
View related topics: Dongfeng Group announced that it will hold "Hafei"

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