On October 26, Stellantis, the European automobile giant that ranks 4th in the world in sales, invested 1.5 billion euros (240 billion yen, equivalent to 1 euro = 158 yen) in China’s emerging EV company Zhejiang Leapmotor. announced that it would acquire approximately 20% of the stock. The two companies will establish a joint venture to export the prototype EV to Europe and other countries.
Automakers other than Tesla and BYD, including Japanese companies, are struggling in the Chinese market, and a new type of collaboration between major foreign companies and emerging Chinese companies is gaining momentum to avoid a war of attrition.
[Reiyu]Hong Kong listing in 2022 will result in an accumulated deficit of 250 billion yen
Leap Motor International, a joint venture between the two companies, will be 51% invested by Stellantis and 49% by Leap Motor, and will produce and export and sell first-class EVs in Europe and other countries. In addition, Stellantis will be able to dispatch two directors to Reiho itself through its investment.
Most Japanese people, unless they are involved in the automobile industry, do not know about the EV manufacturer called Reiyu, but it was established in 2015, which is quite early among China’s emerging EV companies, and it ranks among the top in terms of sales volume. It’s a manufacturer.
The founder, Chairman and CEO Zhu Jiangming, is a serial entrepreneur with an engineering background, and is also the co-founder of Zhejiang Dahua Technology, a major surveillance camera company. Reiyu develops key components and autonomous driving systems in-house, and mainly sells EVs priced at 150,000 to 200,000 yuan (approximately 3 to 4 million yen, equivalent to 1 yuan = 20 yen). The sales volume in 2022 is approximately 110,000 units, and among the emerging EV manufacturers, Riso Automobile (over 130,000 units), NIO (over 120,000 units), and XPeng (approximately 120,000 units) 4th place after . It was listed on the Hong Kong Stock Exchange in September 2022.
Lingyu Technology, which was established in 2015, went public in Hong Kong in 2022, but has not managed to escape from the red.
However, Reiyu has not made any progress in reducing its development costs, and the more it sells, the more it is unable to break out of the deficit (BYD was also in the same situation until around 2020). The final deficits from December 2019 to December 2022 are 901.1 million yuan (approx. 18 billion yen), 1.1 billion yuan (approx. 22 billion yen), and 2,845.7 billion yuan (approx. 57 billion yen), respectively. ), which is increasing year by year to 5,190,000,000 yuan (approximately 102 billion yen). In the January-June period of 2023, profits deteriorated due to price cuts, and the company posted a deficit of 2.276 billion yuan (approximately 45 billion yen). This means that the company is losing 50,000 yuan (approximately 1 million yen) for every unit sold, bringing the cumulative net loss to 12.2 billion yuan (approximately 240 billion yen).
CEO Zhu said in September that the company would “do our best to become profitable in 2025,” but the company is in an extremely difficult environment as its main models compete with BYD’s main price range.
In addition to the end of the Chinese government’s subsidies for purchasing EVs at the end of 2022, new entrants from other industries and the continued introduction of new vehicle models have intensified competition in China’s EV market, leading to a war of attrition due to price cuts. are doing. From 2022 onwards, BYD’s sales volume rapidly increased (2022 results, 1,862,000 units) and began to erode the market share of other companies. It has been whispered for a year that “in 2023, there will be a shakeout or reorganization of major manufacturers,” and in October 2023, EV startup “Weima Automobile,” which is funded by Baidu and others, was sued in a Shanghai court. filed for bankruptcy.
Some believe that EVs in China will be polarized into high-end, high-margin cars like Tesla, and low-end cars like Hiromitsu MINI. “I may be forced to do so.”
The current situation is that it is impossible to receive an investment from Stellantis that is almost the same size as the accumulated deficit, invest the funds raised in the development of new cars and autonomous driving technology, avoid a war of attrition in China, and find a way out in the European market. It makes sense if you think about it.
[Stellantis]Struggling in the Chinese market
For Stellantis, the partnership with Reiyu holds an important key to its China strategy, which has been under pressure to review.
Stellantis was created in 2021 through the management merger of major French car group PSA and Europe’s Fiat Chrysler Automobiles (FCA). It has 14 brands including Peugeot, Fiat, Jeep, and Maserati, and ranks 4th in the world in terms of sales. According to the company, it has a 20% market share in Europe, 26% in North America, 26% in South America, and 15% in the Middle East.
However, all of Stellantis’ predecessor companies have struggled in China.
Citroën, one of the Stellantis brands, announced the new compact EV “E-C3” on October 17th.
Changan PSA, which was established in 2011 by France’s PSA and Chongqing Changan Automobile to produce the luxury car brand DS, had both parent companies withdraw from the joint venture in 2019, and was acquired by Baoneng Group in 2020. The name was changed to Shenzhen Baoneng Automobile.
PSA’s other joint venture, Shenlong Motors, which was established in 2003 with Dongfeng Motor Group, had sales of 600,000 units in 2016, which fell to 127,000 units in 2022, and reached its sales volume in the same year. Two factories were sold to Dongfeng Honda.
In 2022, two joint ventures between GAC Group and Stellantis, GAC FCA and GAC FCA, filed for bankruptcy, and GAC FCA’s Guangzhou factory, which produced Jeeps, was transferred to GAC Group’s EV subsidiary. Ta.
Looking at the Chinese automobile market as a whole, joint venture manufacturers between foreign and local companies increased sales volume during the 2000s and 2010s, when the market rapidly grew, but in 2018 the Chinese automobile market experienced negative growth for the first time in 28 years. Since then, it has been in decline. The automobile market itself has returned to a growth trajectory since 2020, but as it has been replaced by EVs, the approach of joint venture manufacturers focusing on gasoline-powered vehicles no longer works. Mitsubishi Motors, which announced in October that it would withdraw production from China, also stalled around the same time.
New collaboration between major foreign automobile companies and emerging Chinese EVs
Stellantis, which originally did not have a presence in the Chinese market, was one of the first foreign companies to be weeded out, but in the current Chinese market, all manufacturers, both long-established and new, with the exception of Tesla and BYD. The situation is now on the defensive.
Germany’s Volkswagen (VW)’s global sales from January to June 2023 increased by 13% year-on-year to 4.37 million units, but sales in China decreased by 1% to 1.45 million units. Chairman Oliver Blume mentioned the intensity of competition in the Chinese market at a press conference held in late July to report financial results for the January-June period. The German Mercedes-Benz Group’s sales volume in the Chinese market for the January-June period of the same year was 370,000 units, an increase of 7% compared to the same period last year, but due to price reductions on some models, sales of the Chinese business were 9. %Diminished.
German manufacturers have been increasing their market share even as European, American, and Korean manufacturers have been in decline since around 2018, but they are now feeling the brunt of the EV shift and price-cutting competition centered on Tesla and BYD, increasing their sense of crisis. There is.
In July 2023, VW, which will be second only to Toyota Motor Corporation in global car sales in 2022, invested $700 million (approximately 100 billion yen, equivalent to 1 dollar = 150 yen) in Xiaopeng Automobile, and will invest in China’s medium-sized car market. announced that they will jointly develop two VW brand EV models for the VW aims to leverage the Chinese market by incorporating the technological capabilities and speed of Xiaopeng Automobile, which is highly regarded for its software development capabilities such as self-driving cars. Meanwhile, Xiaopeng Automobile, which plans to enter the German market in 2024, aims to leverage VW’s brand power and network to expand into developed countries.
When VW’s investment in Xiaopeng Motors was announced, it was reported that Stellantis was also looking for a new Chinese EV maker to partner with, and Lingyu was considered to be one of the leading companies.
Joint ventures between foreign automakers and Chinese companies established from the 1980s to the early 2000s were a scheme for foreign companies to “pass” technology and know-how to the Chinese market in order to enter the Chinese market. The partnership between Stellantis and Reiyu is a joint venture that aims to increase competitiveness by sharing the brand power and network of foreign companies with the technological capabilities and manufacturing resources of emerging Chinese EV companies, with an eye on the global market for EVs. With Tesla and BYD making a big comeback, it seems likely that the search for a new team will become even more active.
Sanae Urakami: Economic journalist, Hosei University MBA practitioner lecturer, English/Chinese translator. Graduated from Waseda University, Faculty of Political Science and Economics. After working for Nishinippon Shimbun for 12 and a half years, he spent six years in Dalian, China, studying for a government-funded doctoral degree (business administration) and teaching at a university for ethnic minorities. Latest issue “New Corona VS China’s 1.4 billion people”.She has been an unmarried mother for 13 years, and married for the first time with a child at the age of 42.
Source: BusinessInsider
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