Reports indicate that German carmaker BMW and Chinese auto firm Great Wall Motor are considering forming a joint venture which will focus on building electric vehicles. This would be the second time BMW is partnering with a Chinese car maker as rules in the largest car market in the world require foreign vehicle manufacturers to form partnerships with local firms.
Sales of BMW cars in China grew by 11.3% in 2016. BMW is the second biggest luxury brand after Audi. BMW’s other rival, Mercedes Benz, is the third largest luxury brand in China and the former is trying to maintain the distance. Last year sales of Mercedes Benz vehicles in China increased by 26.6% after new models were introduced.
Other car manufacturers intending to make electric vehicles in China include General Motors, Daimler, Ford Motors and Tesla. Mercedes and BMW are of the opinion that they are capable of mass-producing new electric vehicles that are based on conventional car designs. Skeptics however say they will require to overhaul their plans in order to beat the threat posed by Tesla as well as other startups making electric vehicles.
Given China has placed a moratorium on the approvals of new gasoline vehicle businesses, analysts at Bernstein believe that the joint venture between Great Wall and BMW would focus exclusively on manufacturing electric vehicles. By 2025 Beijing wants 20% of all motor vehicles sold to be either electric or hybrid.
The analysts also added that the vehicles rolling of the assembly line under the joint venture would take up the Mini brand.
“If an agreement were to be reached, we’d expect an arrangement like Denza (Mercedes-BYD), or VW-JAC, Ford-Zotye to be the most plausible outcome, whereby a new brand is used to sell EVs,” Bernstein analysts wrote in a note to clients.
Brilliance China Automotive Holdings
BMW’s other joint venture in China is with Brilliance China Automotive Holdings. The joint venture makes cars at plants located in Shenyang. According to analysts BMW’s quest to seek a form a new joint venture would reflect badly on Brilliance China Automotive. After the reports came out shares of Great Wall rose sharply while those of Brilliance fell.
Two months ago Great Wall had expressed interest in acquiring Fiat Chrysler’s Jeep brand. Last month Great Wall, which is one of the biggest car makers in China, also inked a deal to purchase lithium, which is key in the development of electric vehicles.