Abstract

Purpose: This study evaluates the challenges faced by foreign legacy automakers’ joint ventures (FLAJVs) in China’s new energy vehicle (NEV) market segment within the context of liability of foreignness (LOF). Research design, data and methodology: The research draws on various secondary sources, including reports from the China Association of Automobile Manufacturers, industry reports, external media sources, and the annual reports of VW Group (2019-2023), BYD, and Nio (2018-2023). Results: The remarkable speed of China’s ascent to market leadership in the NEV segment is attributable to a dual-faceted NEV policy. This policy includes government grants and subsidies designed to bolster the technological capacity of domestic automakers and incentives to encourage consumers to purchase domestic NEVs. These measures have effectively shifted both supply and demand from internal combustion engine (ICE) vehicles to NEVs. Consequently, the market positioning of FLAJVs has weakened due to intense competition from established domestic automakers and new entrants. Conclusion: This study demonstrates that FLAJVs are increasingly experiencing the effects of the liability of foreignness, leading to higher costs associated with purchasing regulatory credits and the implementation of costly strategic initiatives to comply with the Dual-Credit Policy (DCP).