Geshi Watch: The OEM has achieved internationalization through exports

The acceleration of the process of international economic integration has prompted the ambition of China's domestic capable car manufacturers to pursue international markets. However, according to the changes in the current international trade environment and the increasing difficulty of enterprises in the actual operation of the market, Chinese automakers would like to rely on a large number of product exports to occupy the target market, thus realizing the golden age of their “international” companies. Never to return.

Statistics show that although China’s auto exports account for only 3.3% of global trade in this category, China’s total exports have accounted for more than 10% of global exports. As of now, no country in the world has ever crossed the 10% "pressure line." Obviously, the continued growth of China’s trade surplus may lead to global trade imbalances, exerting great pressure on the appreciation of the RMB exchange rate and incurring more barriers to non-tariff trade protection.

As a major consumer product, auto vehicle products, once exported to China as much as Japan and South Korea, will undoubtedly lead to a significant increase in the proportion of China’s exports to the total global export trade, which will inevitably force the yuan to appreciate substantially. It is highly probable that an outbreak of the global trade protection war will occur, and trade frictions will continue to emerge. This will eventually lead to the unsustainable Chinese vehicle exports. In fact, after re-examining the policy of export-oriented internationalization, the Chinese government has in fact used "trade balance" as the main development goal of international trade in recent years instead of "promoting exports." Li Daokui, a member of the central bank’s monetary policy committee, recently stated that as part of China’s future economic restructuring, the government will “have confidence” for the next five years to make the trade surplus drop substantially. According to our judgment, this position is likely to be a major position that the Chinese government will adhere to for a long period of time in future international trade. As a result, the probability of a vast "military army" scenario for car exports will be greatly reduced, and it is almost impossible for OEMs to adopt a large number of product exports to achieve their "international" corporate goals.

In fact, under the drive of China's international trade surplus, the issue of the gradual appreciation of the RMB exchange rate has been continuously raised by some other countries, and the protection of trade for Chinese exporters has emerged in an endless stream. Since the beginning of this year, European and American countries including the United States have been pressing on the renminbi exchange rate, and the exchange rate of the renminbi has reached new highs. For this reason, most export-oriented enterprises have been pressured to increase due to the increase in exchange rates. At the same time, in the medium to long term, the relative appreciation of the renminbi’s external appreciation against internal inflation will continue, and the original price advantage of Chinese OEMs will continue to weaken. Therefore, we believe that under this background of “internal and external troubles,” compared with the golden era of export of Chinese products 10 years ago, the difficulty of relying on the “export model for internationalization” by Chinese OEMs has increased significantly.

Of course, we have judged that China's OEMs have achieved internationalization through exports at a golden age. In addition to the macro factors of the international trade environment that cannot be supported, there are factors at the micro-operational level of the company.

First, along with the increasing international competitiveness of China's OEMs to a certain extent, they gradually began to be embankments of overseas competitors. As competitors in some overseas markets have concerns about whether Chinese automakers will follow the strategy of Japanese OEMs in the North American market to gradually nibble their markets from low-end to high-end, they are gradually expanding their Chinese vehicle products on their sites. The market share will be highly vigilant and will have corresponding means of competition. Therefore, when "export-oriented internationalization" is the first step in the implementation of an internationalization strategy, that is, when it enters the market, it will be subject to strong resistance from its opponents.

In addition, major global markets are protecting the country’s auto manufacturing industry. Policy makers tend to be able to produce localized vehicles in their own country instead of relying entirely on imports or assembly production. As a result, more and more tariff and non-tariff barriers have largely hindered the rapid flow of Chinese vehicle products into the global market as exports.

Finally, the auto industry's international competition has reached the stage of globalization of the value chain, and will rely on the “export model” to compete with leading competitors who have already deployed resources in the globalized world. It will also be passive because the competition model is not suitable for international competition. . It is hard to imagine that the Chinese-made models exported to India will be more competitive than Hyundai’s models developed for the Indian market, mass-produced in India, and sold and exported locally. At present, some domestic OEMs have exported low-priced products to less-developed markets. Although the economies of these countries and regions are in a period of rapid development and have great market potential, markets that can export to such regions are, on the whole, non-mainstream. In the low-end market, it is difficult to play a key role in increasing the profits of automakers, international brand image, and international operating capabilities. Therefore, the efforts to shape the "international" companies of Chinese automakers are also general.

To sum up, we believe that the full competition in the global automotive market has made the international strategy in front of China's entire vehicle companies apparently with few options. After a golden period of missing product export-oriented internationalization, the road to internationalization using export strategies will naturally be more difficult. Therefore, companies need more innovative business growth models to meet the needs of the new era of competition. The failed case of SAIC's acquisition of Ssangyong has given us an opportunity to sum up experiences and lessons learned. Geely's acquisition of Volvo directly contributed to the evolution of its own "international" company. These may be a reference worthy of our consideration and advancement.