Why Foreigners Create Chinese Brands, Explained Using Nissan And Venucia

Dongfeng-Nissan President Kimiyasu Nakamura watches Yao Bin, Huang Kai Fong, and Ye Lei Yesterday, Nissan's affable China president Kimiyasu Nakamura brought a Chinese delegation home to Yokohama, to explain to a largely skeptical Japanese press why Nissan had started a new brand in China with joint venture partner Dongfeng.  The brand goes by the name of Venucia. Nissan is not the only one doing that. Nearly every foreign joint venture partner in China either has established a Chinese brand in China, or is intensively thinking about it. Curiously, the trend of  foreign joint ventures making Chinese cars had been started by GM, which announced its Baojun brand in 2010.  This was quickly followed by Nissan and Venucia. Pretty soon, it became known that these branding exercises had not been totally voluntary.  The Chinese government strongly suggested to all joint ventures that it would be a great idea to launch an independent Chinese brand that is owned by the joint venture. There is no law that requires this, but foreigner quickly realize that is is in their best interest to play along. When it comes to new energy cars that are supposed to benefit from Chinese subsidies, then the car absolutely must be built and sold under a Chinese brand, Nissan's CEO Carlos Ghosn said at this year's Beijing Auto Show. Nissan's Leaf will be a Venucia when it comes to China. Except for the cut and dry subsidy issue, the overarching reason for these pseudo Chinese brands is not completely clear. Officially, it is supposed to make the car more affordable. Lower cost cars definitely are the key to China's expanding market, as cars morph from toys for the rich to transport for the masses. However, foreign makers privately had long argued that one does not need a new brand to make an affordable car, as the Jetta and Santana vividly illustrate in China. Actually, to seriously launch a new brand can be quite costly. Conspiracy buffs argued that the insidious Chinese are trying to grab valuable IP with that scheme. Foreign joint venture  partners snicker at that idea. The cars they introduce under the Chinese brands typically are based on previous-gen platforms. And electric cars? "How much protectable IP is in the concept of rigging electric motor to a battery?" the R&D chief of a Japanese carmaker had quipped last year. Sales and market share passenger vehicles in China by brand nationality, January-April 2012 Country Units Share Japan 948,000 18.8% Germany 868,300 17.2% USA 553,900 11.0% Korea 399,800 7.9% France 142,100 2.8% Total foreign 2,912,100 57.7% Chinese 2,137,000 42.3% Total 5,049,100 (Source: CAAM.) More and more, it appears as if it is a grand whitewashing exercise. The market share of indigenous brands is anywhere between 30 and 40 percent, depending on who you ask and how the counting is performed. All agree that the market share of indigenous brands is sinking. "Despite a massive local presence, the domestic car industry is steadily losing market share," wrote state owned  Xinhua in April. It pains the patriotic pride when that happens. On the other hand, Chinese partners of joint ventures with foreign carmakers are nearly all state owned enterprises, whereas domestic brands are often in the hands of small and medium sized independents. The government would shoot itself in both feet would it favor the independents. Instead, a Chinese solution was found. The strong joint ventures create Chinese brands that hopefully make the domestic brand statistics look better as time goes on, and at the same time, both laowei and Chinese SOEs keep their lines busy. The foreigners can recycle old platforms and tools that otherwise would have been scrapped. The Chinese can be proud that they don't have to pay license fees for a brand, something that goes against the grain of a Chinese anyway.  The foreigners more or less happily play along. Nissan said yesterday that it sold 7,700 Venucia D50 in the first month after its 4/23/2012 launch, which is "a good start," as Chris Keeffe of Nissan put it.  Dongfeng Nissan wants to launch another Venucia car in 2012, for a total of 5 by 2015. from The Truth About Cars http://www.thetruthaboutcars.com

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