By on September 10, 2011

It happens to all foreign joint venture partners: They are invited to have tea and a chat with representatives of China’s National Development and Reform Commission (NDRC). After the pleasantries are exchanged, the weather has been discussed, and statements of mutual admiration have been made, someone from the NDRC side will say: “Don’t you want to start a Chinese brand? We would really appreciate it.” Who can say no to the wishes of the Chinese government?

The latest to say “Ja” is BMW. BMW will build a second, truly “Chinese” brand for China. “We are discussing this with the NDRC, and we will find a solution,” said BMW CEO Friedrich Eichiner to Germany’s FAZ. BMW’s futuristic carbon fiber i cars won’t be BMWs  in China.

Some will say that this will be BMW’s second Chinese brand, because its joint venture partner Brilliance has this irritating tendency of building cars that could be mistaken for a BMW. But that’s a different story for another day.

There is no law that demands that every joint venture has to have a Chinese brand. But there are strong suggestions by the Chinese government that doing so would improve the overall harmony.  GM has its Baojun, Honda has its Everus, Nissan has its Venucia. Even Toyota, long opposed to any Chinese brands, caved it and allegedly will offer electric vehicles under a Chinese brand.

Volkswagen will offer its EVs and hybrids under the “Kaili” brand in China. And BMW will offer its “New Energy Vehicles” under a new, yet to be announced name.

Now why the push for Chinese brands? Multiple reasons. Carlos Ghosn, who agreed to supply a Venucia EV instead of a Leaf to China, said it’s national pride. A few months ago in Beijing, he said that Germans have a strong German car industry, France has a French car industry , Japan a Japanese and so forth. He had great sympathies for the world’s largest auto market seeking a bit of national identity – as long as Ghosn keeps his fingers in the pie. There’s more: If the brand and the model are officially Chinese, then no licenses for brand and model have to be paid (which does not mean that there won’t be license payments for the innards.) Cars will be high quality and can be exported. And lastly, the Chinese government is frustrated with its own car industry which is loafing along at 30 percent market share. And finally, the Chinese government is partner, in one way or the other, in most joint ventures, and has little to no interest in homegrown companies. As a final point, the Chinese government is unhappy with the slow pace of the electrification of the homegrown Chinese industry, and wants foreign help while keeping the all-important face. And ultimately, and so on.

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7 Comments on “And Now: An Original Chinese BMW...”

  • avatar

    One thing that has always struck me as odd about China is their complete inability to develop desirable brands – for some reason they seem to be stuck on the low end of the value chain, putting together other people’s stuff.

    By the late ’60s, Japanese brands like Nikon and Toyota were becoming well known and respected. Korean brands like Samsung and Hyundai command a fair bit of respect these days. I suppose Huawei is starting to become a global brand, but they aren’t exactly known for quality and they are hardly a household name like Apple or Ford.

    It’s been over 30 years since the Chinese started to liberalize their economy, by now they should be much further along in terms of developing brands that are known outside their home market…

  • avatar

    I thought the world was coming to an end when BMW Bangled its cars. Now, after reading this story, I know the world actually HAS ended.

  • avatar

    Oh BMW, a company that does everything great except for brand management.

    Aside from the reasoning presented in the blurb, I wonder if creating a new brand for China is a tacit admission by BMW that they’ve completely screwed up their brand strategy in major global markets, including the US.

    Let’s think about:
    -In the U.S. they’ve pigeonholed themselves as a luxury brand whereas their global strategy points towards chasing volume in the upper middle-market segment. BMW is a company that shares engines with Peugeot and sells a 116 in some markets, and they can’t sell anything cheaper than a 328 to Americans.

    -They’ve chased the big bucks in the crossover/SUV segment, diluting their core performance brand and angering enthusiasts (who may rarely actually buy new cars, but are considered thought leaders / experts by the market at large).

    They’ve made some forays downmarket (Mini), but Mini is too much of a niche brand and even that they tried to shoehorn a range of models into (countryman anyone?).

    Every major foreign manufacturer has a two-tiered brand strategy in the US. Toyota/Lexus, Volkswagen/Audi, heck Mercedes even tried to get into it with their disastrous Chrysler merger. It’s the only way to actually sustainably grow sales, and that is what publicly traded companies (and MBAs) live and breathe for.

    China is a clean slate, and they have a chance to get it right there: domestic brand for volume sales, BMW brand for luxury.

  • avatar

    Well, the two examples mentioned have something of an advantage: Both the Japanese and Korean people seem to prefer primarily domestic markets. Imported brand have little traction in both countries. I’m not sure about China, but looks like the import nameplates has much stronger desirability and much greater traction in there. Meaning that even if a Chinese currently have a Chinese car (because it’s cheaper), he’s lusting after an import brand. As soon as he has the money, he’ll be off to that import car dealer. I think that domestic brand preference helps their domestic market a lot, especially when it’s still in its infancy. Even the seemingly import-loving U.S., there were times when Domestic brand totally dominates the market. Probably why the Chinese gov’t came up with this plan. If these imports were marketed with a Chinese brand, it will raise the reputation of Chinese cars in general for the Chinese people. Foster their preference towards a domestic brand.

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