(Yicai) July 27 -- The market share of foreign and joint venture car manufacturers in China has dropped below the 25 percent threshold for the first time, squeezed by the rapid rise of domestic new energy vehicle brands. To counter the decline, JV automakers are accelerating their localization efforts to regain competitiveness.

In June, the market share of JV and foreign brands dropped to just 24.5 percent, a scenario unimaginable three years ago, Wang Qian, deputy general manager of Dongfeng Motor Group and Nissan's JV, Dongfeng Nissan Passenger Vehicle, said at the 2026 China Auto Forum recently held in Shanghai.

The challenge facing JV brands is not simply shrinking market share, but also a complete restructuring of the competitive landscape. The old JV model, in which foreign partners supplied technology, while Chinese partners provided distribution, exchanging cost advantages for market scale, has been fundamentally disrupted by the Chinese NEV market, Wang said.

Foreign and JV automakers accounted for more than 60 percent of China’s auto market in 2020, according to data from the China Association of Automobile Manufacturers. However, that figure shrunk to 28 percent in the first half.

Sales of all major foreign brands operating through joint ventures in China declined in the six months. Among them, Volkswagen’s deliveries in the country slumped 26 percent year on year to 971,000 units while Japanese brands Toyota, Nissan and Honda posted declines of 17 percent, 15 percent and 35 percent, respectively, with sales falling to 695,000 units, 237,000 units and 206,000 units.

Luxury foreign brands also struggled. BMW's sales in China plunged 20 percent in the first half from a year earlier to 262,000 units, while Mercedes-Benz recorded a 28 percent drop to 210,000 autos, and Audi logged a 19 percent fall to 218,000 units.

In the era of electrification and intelligent vehicles, Chinese brands have overtaken their foreign rivals by leveraging faster product development cycles, product experiences that better meet consumer demand and more efficient organizational structures, said Liu Yan, deputy secretary-general of the CAAM.

Localization Drive

Localizing research and development, integrating Chinese and international resources, adopting multi-tier brand positioning, overhauling sales channels and leveraging global distribution networks are five viable paths for JV automakers to transform their businesses, said Ron Zheng, head of German consulting firm Roland Berger’s auto business for the Asia-Pacific region. Several leading JV firms have already received positive market feedback from these strategies, he added.

Dongfeng Nissan has adopted a “GLOCAL” strategy under which its China team leads decision-making and core technology development, while matching the rapid pace of product upgrades in the Chinese market, Wang said. Over the past year, the Wuhan-based firm has launched three new models, the N7, N6, and NX8, achieving simultaneous advancement in pure electric, plug-in hybrid and extended-range EVs.

Thanks to these efforts, Dongfeng Nissan's NEV sales surged 192 percent in the first half from the year before, with NEVs accounting for 30 percent of total sales in June, up from 7 percent at the beginning of the year, Wang said.

Beijing-Hyundai Auto, the Chinese JV between Hyundai Motor and BAIC Motor, is also strengthening its local R&D capabilities. The Beijing-based company has established a 1,500-person research team across Beijing, Shanghai, Guangzhou and Yantai, focusing on four key areas, namely electrification, intelligent driving, electronic and electrical architecture, and vehicle manufacturing, General Manager Li Fenggang said at the forum.

The automaker is also working closely with Chinese firms including ‌Contemporary Amperex Technology, ByteDance, Momenta, and Haomo.ai, Li said.

Leveraging its local R&D capabilities, Beijing-Hyundai will launch the IONIQ V, its first pure electric model developed specifically for the Chinese market, in September, Li said.

Editors: Dou Shicong, Kim Taylor