Didn't hit me until just today but ...
... China's 50/50 automobile JV structure low-key pioneered the closest thing to a successful contract manufacturing model in the global auto industry.
... China's 50/50 automobile JV structure low-key pioneered the closest thing to a successful contract manufacturing model in the global auto industry.
One of the things that really surprised me about China's transition to EVs has been the participation of the SOE automakers, who were also the most aggressive about establishing multiple JVs with foreign car brands.
SOEs aren't traditionally known for their innovation. But in the ICE-to-EV transition, they have very notably made a far smoother transition than arguably every private sector incumbent automaker ex-China.
Maybe I am biased against SOEs but that is definitely not something I had on my bingo card five years ago.
SOEs aren't traditionally known for their innovation. But in the ICE-to-EV transition, they have very notably made a far smoother transition than arguably every private sector incumbent automaker ex-China.
Maybe I am biased against SOEs but that is definitely not something I had on my bingo card five years ago.
Getting to manufacture a variety of different designs from multiple foreign MNCs accelerated the learning curve for the SOE automakers.
This is analogous to how TSMC β through the chip foundry model β was able to learn more rapidly by manufacturing a much wider variety of chip designs than IDMs like Intel.
This is analogous to how TSMC β through the chip foundry model β was able to learn more rapidly by manufacturing a much wider variety of chip designs than IDMs like Intel.
The experience of manufacturing such a wide variety of designs also made it easier to adapt to electric vehicles when they came along.
They could just imagine these newfangled EV designs as merely another joint venture partner that had to be onboarded.
In many ways, these new EV designs were even easier to manufacture because there were fewer parts to assemble.
They could just imagine these newfangled EV designs as merely another joint venture partner that had to be onboarded.
In many ways, these new EV designs were even easier to manufacture because there were fewer parts to assemble.
Indeed, EV startup Nio worked with SOE automaker JAC as its manufacturing partner until it recently bought out the factories.
Working with a mfg partner lowered the capital requirements and learning curve ramp for new tech-focused entrants like Nio.
ir.nio.com
Working with a mfg partner lowered the capital requirements and learning curve ramp for new tech-focused entrants like Nio.
ir.nio.com
Again, this was similar to how the chip foundry model enabled the emergence of "fabless" chip companies like nVidia or Apple's chip division.
Reorganizing the automobile value chain is an under-appreciated way that the Chinese EV industry has been able to take off the past decade with a veritable "Cambrian explosion" of new approaches, strategies and exotic "species" in the car ecosystem.
Local SOEs in their role as quasi-CMs definitely played an important role in this.
Local SOEs in their role as quasi-CMs definitely played an important role in this.
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