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The Dongfeng Aeolus L60 ushers in China’s “post-JV’ era

The Dongfeng Aeolus (Fengshen) L60 launched to the market in Beijing on March 25 ushered in a new era in JV manufacturing in China.

For the first time in China’s cooperation with multi-national OEMs, a Chinese brand developed jointly by Dongfeng Passenger Vehicle Co. (DFPV) and Dongfeng-Peugeot-Citroën Automobile (DPCA) has been assembled and calibrated at a DPCA’s assembly plant utilizing the platform, supply chain and quality control resources of the JV company.

The Aeolus L60 is jointly designed by DFPV and DPCA based on the Peugeot 408 vehicle architecture out of PSA’s PF2 platform. It will be distributed as DFPV’s Aeolus brand through its sales network in China. But the Aeolus L60 is also a JV Chinese brand because of DPCA’s contribution in project management, procurement, manufacturing and export sales and PSA’s contribution in providing platform and technology support. Both DFPV and DPCA own the intellectual property rights of the L60.

The birth of the Dongfeng Aeolus L60 shows that an old JV partnership in China has evolved into a more equitable strategic relationship that benefits both parties especially in terms of adding equity value to both foreign and Chinese brands at a JV. Chinese partners in Sino-foreign vehicle JVs have long been complaining that it has been unfair for the JVs to manufacture and sell only foreign brands in a partnership with either equal or majority equity ownership by the Chinese side.

Since Dongfeng became a 14 percent owner of PSA and the two entered into a global strategy partnership a year ago, DPCA has established a sales company in charge of imported Peugeot and Citroën cars as well as another company in charge of Peugeot, Citroën and Dongfeng brand sales in the ASEAN region. Dongfeng and PSA are also building a new technical center that will develop future models under the French and Chinese brands. DPCA is targeting 1.5 million in annual sales by 2020.

Liu Weidong, Dongfeng Motor’s vice president, aptly describes the launch of the Aeolus L60 as the beginning of a “post-JV” era in China. “The best indication of the so-called ‘post-JV era’ is the transformation of a JV company from a contract manufacturer (of foreign brands) into a true vehicle development and manufacturing company,” he said.

DFPV president Li Chunrong told CBU/CAR that the Dongfeng Aeolus L60 epitomizes an innovative development in China’s history of automobile JVs.

The new partnership between Dongfeng and PSA clearly reflects a shift in the balance of power between Chinese and foreign partners. As the largest shareholder of PSA, Dongfeng now effectively controls both PSA and DPCA, while most JVs in China today are still effectively controlled by foreign partners.

Now that China has become the world’s largest new car market, the DFPV and DPCA model of developing and manufacturing a Chinese brand may point to a sustainable future for JV operations in China. If unchanged, the existing business models of Shanghai-Volkswagen, FAW-Volkswagen, Shanghai-GM, FAW-Toyota, Beijing-Hyundai, etc. may be questionable in the long term.

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