Former Chinese Minster: "Joint Ventures Are Smoking Dope"

Bertel Schmitt
by Bertel Schmitt

If you want to make cars in China, you need a joint venture partner. The Chinese joint venture partners have done well. 98 percent of last year’s sales of central government-owned Dongfeng came from joint ventures with Nissan, Honda, and Peugeot. Largest Chinese automaker SAIC derives 60 percent of its sales from made-in-China GM and Volkswagen cars.

That policy “is like opium. Once you’ve had it you will get addicted forever,” said former machinery and industry minister, He Guangyuan.

The influential ex-minister and former Standing Committee member gave an interview to the Chinese versions of Yahoo Auto , with an excerpt provided by Fang Yan of Reuters:

“From central authorities to local governments, everyone has been trying hard to bring in foreign investment. But so many years have passed and we don’t even has a one brand that can be competitive in the auto world. I feel red-faced.”

Reuters points out that it is extremely rare for current and even former senior government officials to publicly criticize an existing policy. Often, public utterances of former officials are meant to test the waters and could signal a shift. But a shift in which direction? Is the former minister suggesting to open the doors completely to foreign automakers, so that the cold wind of competition will wake up the Chinese industry from its Opium-induced slumber?

Dongfeng-Nissan President Kimiyasu Nakamura watches Yao Bin, Huang Kai Fong, and Ye Lei

China’s failure to create strong indigenous brands has been much discussed in China. China’s own brands lose market share to joint venture brands. A few years ago, the Chinese government started to strongly suggest to all joint ventures that it would be a great idea to launch an independent Chinese brand that is owned by the joint venture. The thinking was that this way, access to foreign technology would become easier.

It did not work out that way. Says Reuters:

“But instead of developing a car from scratch that would allow Chinese partners to claim half the patent rights and obtain know-how from their foreign partners, all the JVs simply took an existing foreign car model and only made a few changes to “create” a new JV car.”

From reading the interview, it sounds like the minister is going to a different direction. He praises Great Wall, one of the few Chinese car companies that start to make a name for themselves abroad.

“One should focus on support for the independent brands,” the former minster suggests.

As long as China’s state owned enterprises can indulge in being joint venture partners of the large multinationals, as long as the government fleet looks like the parking lot of Audi, the ex minister’s recommendations will fall on deaf ears.

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • Icemilkcoffee Icemilkcoffee on Sep 04, 2012

    This is the same complaints that used to be aired about a lot of the 'tranplant' car factories here in the US. Americans were complaining that all the design work, engineering, and even engine assembly sometimes is done in Japan, and only final assembly is done in the US. That was true in the beginning. But as time went by, most of the japanese carmakers established design and engineering firms here in the US and started designing for the US market. I believe the same will happen in China. But whether it's a good idea or not is highly debatable. Personally I think every one of the 'designed in America for America' japanese car, have been abject failures (even though most of them have sold very well- another tragedy)

    • 28-Cars-Later 28-Cars-Later on Sep 04, 2012

      "Personally I think every one of the ‘designed in America for America’ Japanese car, have been abject failures (even though most of them have sold very well- another tragedy)" Agreed.

  • Outback_ute Outback_ute on Sep 04, 2012

    It does sound as though the minister is not making the same point as Reuters, because Great Wall also "simply took an existing foreign car model and only made a few changes to “create” a new JV car", or at least in Great Wall's case they took a combination of different parts from past vehicles, with a little new sheetmetal. I don't believe they have built a car from scratch.

  • TheMrFreeze That new Ferrari looks nice but other than that, nothing.And VW having to put an air-cooled Beetle in its display to try and make the ID.Buzz look cool makes this classic VW owner sad 😢
  • Wolfwagen Is it me or have auto shows just turned to meh? To me, there isn't much excitement anymore. it's like we have hit a second malaise era. Every new vehicle is some cookie-cutter CUV. No cutting-edge designs. No talk of any great powertrains, or technological achievements. It's sort of expected with the push to EVs but there is no news on that front either. No new battery tech, no new charging tech. Nothing.
  • CanadaCraig You can just imagine how quickly the tires are going to wear out on a 5,800 lbs AWD 2024 Dodge Charger.
  • Luke42 I tried FSD for a month in December 2022 on my Model Y and wasn’t impressed.The building-blocks were amazing but sum of the all of those amazing parts was about as useful as Honda Sensing in terms of reducing the driver’s workload.I have a list of fixes I need to see in Autopilot before I blow another $200 renting FSD. But I will try it for free for a month.I would love it if FSD v12 lived up to the hype and my mind were changed. But I have no reason to believe I might be wrong at this point, based on the reviews I’ve read so far. [shrug]. I’m sure I’ll have more to say about it once I get to test it.
  • FormerFF We bought three new and one used car last year, so we won't be visiting any showrooms this year unless a meteor hits one of them. Sorry to hear that Mini has terminated the manual transmission, a Mini could be a fun car to drive with a stick.It appears that 2025 is going to see a significant decrease in the number of models that can be had with a stick. The used car we bought is a Mk 7 GTI with a six speed manual, and my younger daughter and I are enjoying it quite a lot. We'll be hanging on to it for many years.
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