BMW eyes China JV with Great Wall Motor
German automaker BMW is looking to form a joint venture (JV) with Great Wall Motor, a source familiar with the matter said, sending shares in the Chinese automaker up by nearly 20 percent in Hong Kong on Wednesday.
The automakers are considering the possibility of opening an assembly plant in Changshu, East China’s Jiangsu Province, a BMW executive said.
A venture with Great Wall would be BMW’s second in China, the world’s largest auto market. It has a joint venture with local carmaker Brilliance China Automotive Holdings.
Foreign carmakers have to operate in the market with local partners.
“We are in discussions with Great Wall about setting up a JV to produce cars in Changshu,” said the executive, who was not authorized to speak on the matter and declined to be identified.
“I don’t know how far along we have gone nailing this deal,” or whether the two companies have official central government approval for the venture, the person said.
A BMW spokesman said the company ”won’t comment on speculation. Our business development with the joint venture BMW Brilliance Automotive will continue as planned, and we will carry on to invest and develop our joint venture.”
A Great Wall official declined to comment.
BMW’s China sales grew 11.3 percent last year and it is the country’s second-largest premium brand after Volkswagen AG’s Audi AG. BMW is trying to stay ahead of third-place Daimler’s Mercedes-Benz, which recorded 26.6 percent growth in China sales in 2016 thanks to a fresher model lineup.
Foreign automakers have recently announced a raft of investments and tie-ups in China, especially in electric vehicles.
China wants electric and hybrid cars to make up at least one-fifth of auto sales by 2025 and plans to loosen joint-venture regulations in the market.
Tesla, Ford Motor Co, Daimler AG, and General Motors are among those that have announced plans for making electric vehicles in China.
Great Wall, which in August expressed an interest in the Jeep brand of ItalianAmerican automaker Fiat Chrysler Automobiles NV’s, is one of China’s largest carmakers.
Last month it struck a deal to secure supplies of lithium, a mineral key for developing electric vehicles.
The company’s Hong Kong-listed shares soared as much as 19.2 percent to their highest level in more than two years, before paring some gains to stand up 14 percent in afternoon trade. Its Shanghailisted shares were suspended from trading, pending an announcement.
Brilliance China Automotive’s shares were down 2.76 percent.
Brokerage Jefferies said in a note that it was “understandable that BMW needs a new partner to defend its market share in a more competitive market” and the move would hit current partner Brilliance. “As BMW steps out to find new partners, we believe Brilliance will ultimately be squeezed.”