Sharing Brands in China Has Benefits and Drawbacks

Tim Dunne

Sharing a joint brand* with a major domestic automaker in China is a way for General Motors to target buyers at a lower price point without hurting the company’s international image for producing higher-end vehicles, according to a recent news report in The Wall Street Journal. However, unlike the old joint venture (JV) approach, the joint brand means that intellectual property is held in common with the Chinese partner.

In the same article, an expert on the Chinese automotive industry said that in the long-run, this joint branding may not be good news for GM and other foreign joint venture automakers because China has made it clear that it wants its own national manufacturers to dominate the domestic market.

J.D. Power also sees that the key concern for the Chinese OEMs is the Intellectual Property (IP). Chinese automakers will have legal access to the IP with these new JVs, which will allow China’s automakers to build and export vehicles to other developing markets with the technology. Right now, the Chinese are somewhat hindered, because if they try to appropriate another automaker’s IP, they could be accused of breaking World Trade Organization (WTO) rules, and risk being sanctioned or barred from selling the vehicles. By sharing a joint brand with a partner, however, the Chinese remain in compliance with WTO regulations.

And yes, the Chinese have always maintained they want to have their own homegrown industry with domestic brands. Chinese automakers are interested in cooperating with foreign automakers as long as there is a need—and right now foreign automakers still provide the bulk of the design and engineering of vehicles. Once Chinese automakers catch up to non-Chinese brands, there will be less incentive to cooperate and share profits. Our own sales analysis indicates that China’s own brands’ share of the domestic passenger-vehicle market in the country climbed from just 18% in 2000 to 32% of the market in 2010.Tim Dunne, director of global coordination at J.D. Power and Associates

*SAIC-GM-Wuling Co. Ltd., one of GM’s joint-ventures, will begin selling the Baojun 630 small car within the next few months. The plan is for the Baojun brand to compete against domestic Chinese rivals such Chery Automobile, Geely Automobile Holdings Ltd. and Warren Buffet-backed BYD Co. Ltd., according to a Reuters report.

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