After 7 years of negotiations, Dongfeng Motor Group and Volvo Car Group officially form a "marriage" on January 26, jointly establishing Dongfeng Commercial Vehicle Co., Ltd. This is the third joint venture agreement signed by Dongfeng Motor in the past four months. In October and December 2012, Dongfeng Motor established a new joint venture with Gertruck Transmission AG and Smith Semi-trailer. In addition, Dongfeng is also promoting the restructuring of Fuqi and Dongfeng Renault joint venture projects.
Compared to Shanghai Automobile's reorganization of the Nanjing Automobile Group and Changan Auto's acquisition of Changhe Hafei's "big handwriting," Dongfeng Motors has given the industry a "cautious" impression. As a result, Dongfeng Motor's aggressive expansion in recent years has triggered an abrupt change in the industry. What is the internal driving force behind the strategic transformation and rapid expansion of Dongfeng Motor?
"Before 2005, the joint venture of Dongfeng Motor was aimed at eliminating difficulties. The joint venture was the need for state-owned enterprises to restructure and revitalize state-owned assets. After years of development, Dongfeng realized the first step to becoming bigger and stronger, and in a new stage, "Going out," "internationalization," and deepening autonomy are Dongfeng's new demands." On January 27, an executive from Dongfeng Motor told reporters.
Frequent marriage
Unlike ordinary Chinese-foreign joint-venture car companies, Dongfeng Motors dominates Dongfeng Commercial Vehicle Co., Ltd., a joint venture with Volvo, in terms of equity, personnel arrangement, and brand use.
Volvo Group acquired a 45% stake in Dongfeng Commercial Vehicle Co., Ltd. for 5.6 billion yuan, and Dongfeng Motor and Volvo Group held 55% and 45% of the shares. In Dongfeng Commercial Vehicle Co., Ltd. 7-member board of directors, Dongfeng Motor appointed 4 members including the chairman and general manager. In addition, Dongfeng Commercial Vehicle Co., Ltd. will develop, produce, and sell "Dongfeng" brand vehicles instead of Volvo brand vehicles.
For Dongfeng Motor, another important aspect of this joint venture is to use Volvo's technology and experience to enter overseas markets. “Dongfeng’s autonomous passenger cars started late, but commercial vehicles have been around for decades. Sales volume is also leading the world. What is the first internationalization of commercial vehicles?†says senior Dongfeng Motors.
In fact, since the second half of 2012, Dongfeng Motor has frequently initiated external expansion and horizontal restructuring within the domestic industry, and has tried to upgrade its system capabilities in a multi-pronged manner. “The past joint ventures were simple product joint ventures. Now the joint ventures pay more attention to the acquisition of overall capabilities including R&D and core parts and components.†Dongfeng Motor’s top executive told reporters.
"Post-Joint Venture" era
In 2005, Dongfeng Motor was considered as a turning point in the company's strategy.
In 1999, Dongfeng Automobile Co., Ltd. lost a total of 500 million yuan a year and faced a situation in which even employees’ wages could not be issued. In 2003, Dongfeng Motor and Nissan Motors established a joint venture car company. 80% of the assets of the old Dongfeng Automobile were reorganized and 70% of the assets entered the joint venture company. In advancing the joint venture with Nissan, Dongfeng Motor launched a strategic recapitalization and promoted a shareholding system at the level of the entire group. Dongfeng's practice of promoting joint-stock system at the group level and introducing Nissan as a strategic investor is known as the "eastern model" of state-owned enterprise reform.
"Before 2005, the company has successively completed joint ventures and cooperation with multinational companies and formed the basic pattern of today's joint venture." Zhu Fushou, general manager of Dongfeng Motor Corporation stated. In 2010, Dongfeng Motor sold 2.62 million vehicles a year, surpassing FAW Group. In 2012, Dongfeng Motor sold 3.07 million vehicles, ranking second in China.
However, it is undeniable that Dongfeng Motor’s sales of up to 3.07 million vehicles contributed approximately 64% to the joint venture company with a foreign brand LOGO, and its own brand car contribution was only 36%. After solving the problem of survival, strengthening and expanding the autonomous automobile industry has become the core idea of ​​Dongfeng Automobile's “post-joint venture†era.
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