Localized operations key to keeping stake

Despite a shrinking market share, multinational automakers are boosting investment in China and shifting from global-model imports to local innovation — a move experts say still has a fighting chance in the world's biggest car market.

Latest data from the China Association of Automobile Manufacturers show foreign brands' share of China's passenger car market fell to 24.5 percent in June, down from a peak of about 75 percent in 2014. Domestic brands, by contrast, took 75.5 percent — up 8.2 percentage points year-on-year — continuing a run of record monthly highs.

This is because during the ongoing energy transition, local players have swiftly rolled out new products with smart features tailored to domestic consumer preferences. By contrast, joint ventures have long relied on global vehicle platforms, encumbered by lengthy R&D approval chains that slow their response to market shifts. This analysis was given by Ron Zheng, a senior partner at Roland Berger, who spoke at the 2026 China Auto Forum last week.

Roland Berger forecasts that local Chinese automakers will widen their advantage in foundational technology, market execution and cloud services over the next five to 10 years. Still, the consultancy notes that top joint venture brands retain significant growth potential given the market's size — but only if they show real progress on products, cost control and local innovation.

The competition remains intense across the market, with more than 500 new and updated models launched in the first half of 2026. Over the past decade, NEV startups with internet roots have embraced a "speed-first" philosophy, demanding efficiency and agility through rapid product iterations, real-time user feedback loops and dynamic pricing, as well as configuration adjustments.

Joint ventures, by contrast, maintain rigorous quality and process standards, yet they are inherently slower to respond. Zheng attributes this bottleneck to a structural misalignment: global decision-making frameworks, steered from overseas headquarters, are out of step with the fast-moving dynamics of China's market.

The supply chain gap is equally telling. Local suppliers outmatch their overseas rivals not only on cost, but also in co-development, iteration speed and capacity support — areas where joint ventures consistently lag. Most joint ventures remain dependent on foreign suppliers, with local sourcing limited to "made in China" rather than genuine local R&D collaboration, leaving them with a structural cost disadvantage.

Recognizing these headwinds, multinational automakers are redirecting resources to China. They are transferring authority for product definition and R&D of core areas — including complete vehicles, three-electric systems (battery, motor, electronic control), and smart cockpits — from overseas headquarters to independent or joint R&D centers in China.

Volkswagen has extended its partnership with SAIC Motor until 2040, BMW has upgraded its R&D hub in Shenyang, home to its joint venture headquarters, and Hyundai has launched an innovation center in Shanghai.

The latest signal came from Honda, which announced last week that it has renewed its joint venture with GAC through 2038.

GAC Honda, established in 1998 as Honda's first production and sales joint venture in China, was an early mover in launching models simultaneously in China and overseas. The venture has sold more than 11 million vehicles since its inception.

But its fortunes have reversed sharply. Honda's China deliveries plunged to 645,000 units in 2025, down from 1.63 million in 2020, according to company data. GAC Honda's sales over the same period fell to 352,000 from 807,000 five years earlier.

Honda President Toshihiro Mibe made a trip to Guangzhou in April for intensive talks with GAC and other Chinese partners, followed by a May statement in which Honda pledged to strengthen its product and cost competitiveness by using locally procured standard components and local next-generation technologies, and by introducing NEVs built on platforms supplied by local partners.

Wang Qian, deputy general manager of Dongfeng Nissan Passenger Vehicle Co, said Dongfeng Nissan has responded with a "GLOCAL" framework that fuses global standards with local leadership to tackle the challenges facing traditional joint ventures: half-year decision-making delays, protracted technology import cycles and development schedules dictated by overseas headquarters.

Under this model, its China-based team holds direct decision-making authority and spearheads independent R&D of core technologies, ensuring that product launch timelines are aligned with the fast-moving domestic market.

Within a single year, it launched three new models — the N7 and N6 sedans and the NX8 SUV — covering battery electric, plug-in hybrid and extended-range electric platforms. In June, cumulative sales of Dongfeng Nissan's Nseries NEVs reached 100,000 units. Its NEV penetration rate surged from 6.6 percent at the start of the year to 30 percent in June and NEV sales in the first half rose 192 percent year-on-year.

"The window for joint ventures hasn't closed — it's just moved from global introduction to local creation," Wang said. "We didn't wait or lean on others; we walked over and pushed it open ourselves. China's auto market is big enough to accommodate all serious players."

caoyingying@chinadaily.com.cn