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Why are the prices of Chinese auto brands like Geely and Chery significantly lower than those of joint-venture vehicles in the same class? Some people believe it's because these independent brands have weaker brand recognition, leading to lower pricing. Others argue that it's a result of aggressive pricing strategies aimed at capturing market share. However, the real reason lies in the growing number of core technologies with independent intellectual property rights that companies like Geely and Chery have developed. This allows them to avoid high costs associated with foreign patents or technology licensing, giving them greater control over production expenses.
A recent visit to Zhejiang Geely Group revealed how the company has made significant strides in innovation. One standout feature is their independently developed plastic intake manifold, which reduces engine weight and improves fuel efficiency. An Zhihui, Vice President of Geely Holding Group, explained that in some joint-venture manufacturers, this component is controlled by foreign partners, with a unit price of around 1,300 yuan. In contrast, Geely’s own R&D and production of the same part cost less than 200 yuan. "Only by mastering our own core technologies can we achieve cost and procurement control," he said.
Geely’s technological capabilities go far beyond this. At the recent Shanghai International Auto Show, the company showcased nine new engine models featuring advanced technologies such as turbocharging, direct injection, common rail systems, CVVT, and DCVVT. Their JL4G18 VVT all-aluminum engine has broken through key bottlenecks in China’s engine development, delivering performance that surpasses many 2.0L engines used by joint-venture brands.
When it comes to automatic transmissions—a long-standing weakness for domestic automakers—An Zhihui noted that the profit margin on an automatic transmission is comparable to that of a whole vehicle. Geely’s breakthroughs in this area have laid a solid foundation for cost control. At the Shanghai Auto Show, Geely unveiled its first self-developed dual-clutch automatic transmission, the 7DCT, featuring seven forward gears. The company also displayed two other self-developed gearboxes and recently acquired DSI, the second-largest automotive transmission manufacturer in the world. DSI can produce a wide range of transmissions, from small to high-torque models, and under Geely’s ownership, it is expected to challenge foreign dominance in the auto parts market.
Previously, industry sources mentioned that as car prices continue to drop, 4S dealerships are increasingly relying on profits from auto insurance, after-sales services, and repairs. A major cause of this situation is the foreign control over core components and pricing power. It's well known that the value of dismantled vehicles for parts often exceeds the value of the car itself. In the long run, this not only harms consumer interests but also allows foreign companies to continue profiting from China's auto aftermarket.
It's worth noting that joint-ventures are now launching their own brands as a trend. While this could be beneficial for China in terms of gaining control over core technologies, it raises questions about whether these brands truly possess the necessary technical expertise. Who controls the procurement channels and pricing power of critical components? On the surface, these joint-venture brands may appear to be equally owned by both Chinese and foreign partners, but if the core technologies and pricing remain in foreign hands, the true goal of these brands may still be driven by profit rather than innovation.
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