Auto joint venture sets benchmark for Sino-Japanese business partnership

2019-10-21 11:11:53Xinhua Editor : Cheng Zizhuo ECNS App Download

After joining Sino-Japanese joint venture GAC Honda in 1998, Liang Hongyi was first told to pay special attention to restroom cleanliness in the newly-established carmaker.

"It later dawned on us that it showed the meticulous mode of operation on the Japanese side," said Liang, who is now a technical director at GAC Honda, which was jointly formed by Japanese carmaker Honda and China's Guangzhou Automobile Group (GAG).

After the establishment of the joint venture, Honda brought to China the sixth-generation Accord, their latest sedan model. After nine months, the first China-made Accord rolled off the production line in March 1999.

The Japanese carmaker also brought to the joint venture a new strategy, which emphasized less investment, fast production and incremental growth.

By the end of 1999, GAC Honda reached an annual production volume of 10,000 vehicles with an investment of less than 200 million U.S. dollars, about a third of its counterparts in China. A year later, the production volume tripled.

The Sino-Japanese joint venture shattered a long-time myth that the quality of foreign brands would inevitably deteriorate once they moved their production line to China.

"The first model manufactured by GAC Honda, which was 40 percent China-made, topped the quality checks among 14 of Honda's overseas plants," said Fang Weibiao, a veteran employee of the joint venture.

Today, GAC Honda achieved an annual production volume of 600,000, becoming an oft-cited success story of Sino-Japanese cooperation in the business field.

Many industry insiders attributed their success in large part to the 50-50 ownership split of the joint venture. The arrangement stipulated that the company's major decisions need to be approved by both Honda and GAG before being implemented.

"There has been no disagreement over the company's ownership between the Chinese and the Japanese, who shared the same goal of making it stronger," said Liang. "The Chinese are more familiar with the domestic market and customers, while the Japanese are more adept at technology and management."

"GAC Honda's decision-making mechanism proved successful in striking a balance between efficiency and product safety," said Kadowaki Koji, a former general manager of the joint venture.

The success of the joint venture has also spearheaded a wave of Sino-Japanese partnerships in the auto sector, promoting the development of Guangzhou as a hub for auto manufacturing.

Following the cooperation with Honda, GAG established 40 joint ventures with 24 Japanese auto firms, including big-name carmakers such as Toyota, Hino, and Mitsubishi.

GAG has been on the Fortune 500 list for six consecutive years. The auto industry has also become a pillar of Guangzhou's economy, with an annual production volume of three million vehicles and an output worth 500 billion yuan (about 704 billion U.S. dollars).

"The success of GAC Honda has attracted more Japanese auto firms to set up factories in Guangzhou and nurtured numerous technical and management talent, contributing to the development of the auto industry in Guangzhou, as well as in China," said GAG's chairman Zeng Qinghong.

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