Why China's joint-venture brands are languishing

SHANGHAI -- By 2013, nearly all global automakers had introduced new brands under their joint ventures at the request of the Chinese government. Beijing hoped the initiative would give Chinese automakers access to foreign technology and design expertise.Instead, most of the new brands are sinking into oblivion. And now the government is learning a bitter lesson: Brands created to meet government edicts -- rather than consumer demand -- cannot survive even in a market as large as China.Over the past decade, Beijing began urging foreign auto manufacturers to launch new marques for their joint ventures to help their local partners, which are all state-owned companies. Honda was the first global player to satisfy the government's wish. In 2008, it unveiled the Everus brand under its joint venture with Guangzhou Automobile Co.Other automakers were slow to follow suit, so Beijing raised the ante. Foreign automakers that wanted to expand production would have to do two things with their joint ventures: create new brands and introduce electric vehicles.The tactic worked. From 2010-13, all major global automakers introduced new brands.Given the array of new marques in the limelight at the Beijing and Shanghai auto shows, one might assume they would make a big splash in the market. But that has never happened.Volkswagen, Ford and Hyundai all unveiled new models for their newly crafted brands. But the companies are skeptical about the brands' market prospects, so production hasn't begun on any models.Meanwhile, Honda, Nissan and BMW have begun assembling vehicles for their joint ventures' brands. But consumer demand is low, and it's easy to see why. These models are either gasoline-powered vehicles built on obsolete platforms, or expensive EVs. As a result, sales are woefully small.Consider Honda's experience. After its partnership with GAC introduced the Everus brand, Honda unveiled the Ciimo marque for its joint venture with Dongfeng in 2012. Everus markets the S1 compact sedan, which is based on the old Honda City. Ciimo sells a compact sedan that uses the old Civic's underpinnings.The models' obsolete technology has failed to stir consumers' interest, and sales have thinned to a trickle. In the first 10 months of this year, only 3,208 Everus S1s and 2,706 Ciimos were sold.Nissan's joint venture with Dongfeng has encountered similar misfortune. Since 2012, its Venucia brand has introduced a compact sedan, a subcompact sedan, a compact crossover and rebadged Leaf electric car. The sedans are adapted from the previous generation Tiida, while the crossover is derived from the old Qashqai. The rebadged Leaf, dubbed Venucia e30, has a starting price of 267,800 yuan ($41,800). Even with government subsidies, it is still twice expansive as a gasoline Nissan car with a similar size. So it's no wonder that combined sales of the four Venucia models are less than 10,000 vehicles a month.To be sure, one joint-venture brand is healthy and growing, and that is Baojun. Launched in 2010 by SAIC-GM-Wuling Automobile Co., Baojun markets an affordable lineup of entry-level multipurpose vehicles and crossovers. In the first nine months of this year, sales nearly tripled to 300,000 vehicles.Why has Baojun excelled? The reason is simple: That brand was created to satisfy robust demand in China's rural areas and small cities for affordable vehicles.By contrast, rival brands were crafted to comply with the government's edict. Is there any doubt why Baojun succeeded while the others failed?Pictured: Yang Jian is managing editor ofAutomotive News China.

Why China's joint-venture brands are languishing

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