Automotive

The global automotive sector continues to evolve with advances in electric cars, intelligent design and networking of vehicles. This provides the Chinese automobile industry with a precious opportunity to undergo transformation and upgrades, with the goal to advance China from being a large manufacturing power to a strong manufacturing power. The central and local authorities at all levels in China have reacted swiftly and positively to these changes, by introducing legislation and industrial policies.  This includes the launch of the Planning for the Mid- and Long-term Development of the Automobile Industry.  Developing ideas, planning targets and policy orientations for the mid- and long-term work of the Chinese automobile industry are pointed out in this document. The central government and various other local governments have promulgated administrative rules regarding autonomous vehicles, in an effort to promote the research, development, testing and commercialization of smart cars. The National Development and Reform Commission and the Ministry of Industry and Information Technology have made arrangements with regard to the gradual relaxing of restrictions on shareholding percentages by foreign partners in automobile manufacturing joint ventures and on the numbers of these joint ventures, so as to enable fair competition in foreign investments in the automobile industry.  The newly promulgated Administrative Measures on Automobile Sales and Guidelines on Anti-monopoly Practices in the Automobile Industry has broken the competitive advantages of complete vehicle brands in terms of price, resource and supply, which helps to create a market environment for automobile distribution with sufficient competition. We believe these changes in the laws, regulations and policies will further promote deeper growth in the Chinese auto industry in the coming years.

 

In order to keep abreast with the evolution of the automobile industry and the rapid changes in the relevant laws and policies, legal counsels with understanding and keen insight in legislative developments are needed to ensure smooth transactions. JunHe has accumulated vast professional expertise and abundant experience in this industry, and is providing new and existing clients with full-range legal services with respect to mergers and acquisitions, greenfield investments, joint ventures and cooperation. They are also adept at interpreting laws and policies, drafting and reviewing contracts, compliance reviews, legal risk prevention and professional training. 

Recent Representative Cases

NIO’s release of the ES8 as its first production vehicle

 

NIO released its first production vehicle, the ES8, in December 2017. It took NIO less than two and a half years to issue the ES8 after its establishment. Most other new vehicle brands established at the same period are building their own factories, which requires much larger investments of funds and time; NIO, on the other hand, ventured out in cooperation with a domestic complete vehicle manufacturer in its first production model.  

 

JunHe participated in the entire process of the ES8 project, which included design, research and development, and also setting up a supply chain system, trial productions and mass productions. JunHe provided strong support to NIO with respect to its entrance by foreign investment in the automobile manufacturing industry, feasibility analysis on the mode of cooperation, advice on compliance issues, the drafting of legal documents, and leading rounds of tough negotiations with the cooperation partner. In addition, JunHe provided a legal solution to help NIO realize a creative business mode of sales and after-sales service. This included online direct sales, the separation of titles of vehicles and batteries, mobile power banks, and speedy battery change, JunHe was also involved in the legal services for NIO in its legal compliance and the establishment of rules, with respect to autonomous vehicles, automotive navigation and entertainment systems, internet of vehicles, and cross-border information transmission.

 

Magna’s acquisition of 100% equity in GETRAG

 

In December 2015, Magna, a German vehicle part manufacturer listed on the stock exchanges of both New York and Toronto, completed its acquisition of 100% equity interest in GETRAG, a well-known German transmission manufacturer, with a total consideration of 1.75 billion euro. Magna is a world leading vehicle part supplier with 305 production and operation centers, as well as 95 R&D, engineering and sales centers throughout 29 countries, with more than 139,000 employees globally. GETRAG is one of the largest independent suppliers of gearboxes and transmissions in the world, with over 13,500 employees in over 23 countries. China played an important role in the global layout of GETRAG; it has two large-scale joint ventures in China, located in Wuhan and Nanchang, with a total staff of over 4,500 in China.

 

Acting as the Chinese counsel for Magna in this project, JunHe efficiently completed the legal due diligence investigation and provided legal opinions on various issues under the Chinese laws relevant to the transaction. This included the  concentration of business undertakers, tax laws, labor laws and intellectual property, as well as on a list of jobs to be completed before closing. During the legal due diligence investigation, JunHe sorted out the complex situation and thoroughly pointed out the legal risks to the client, and made suggestions on the proper arrangements in the acquisition.    

 

DFM’s acquisition of 14% equity in PSA

 

In March 2014, Dongfeng Motors (DFM) invested 800 million euro into Peugeot Citroen (PSA) by way of a private placement and share allotment, for 14% equity interest in PSA, thus becoming one of the three biggest shareholders of PSA (the other two are the French government and the Peugeot family). This transaction was the biggest overseas acquisition transaction conducted by a Chinese central enterprise in the automotive industry.

 

This project involved parties with vastly different backgrounds, including not only Chinese and/or foreign listed companies such DFM and PSA, but also shareholders representing the state will or private interests, such as the French government and the Peugeot family, making it pivotal to fully consider and weigh the interests of the parties throughout the transaction. As the Chinese counsel for PSA, JunHe participated in all stages of the transaction. The company provided legal services including the review, communication and negotiation of the transaction documents as well as issuing legal opinion under the laws of mainland China and Hong Kong on the legal issues involved in the offshore transaction. JunHe also provided detailed analysis and advice on the restructuring, tax and anti-monopoly issues in the R&D center, that was to be established by the parties in mainland China, as proposed in the strategic cooperation framework agreement.