German luxury automaker BMW is seeking to establish a joint venture with China’s Great Wall Motor. The prospective deal focuses specifically on electric vehicles, according to sources familiar with the matter. A cooperative relationship with Great Wall would be BMW’s second in the world’s largest auto market – and a necessary one, as China forces all foreign automakers to team up with local partners in order to do business within the country.
Great Wall Motor Co. is China’s largest SUV maker by volume, and witnessed a nearly 20-percent rise in its share price on Wednesday after Asian media outlets reported it was in talks to partner with BMW.
Reported by Reuters, Bernstein analysts said that, given China’s aggressive push toward electrification and BMW’s pre-existing internal combustion sales, it’s believed any new venture would have to sell exclusively electric vehicles. It wouldn’t make much sense to bring in another gas-burning brand. Instead, experts claim BMW will sell EVs under the Mini badge.
“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,” the analysts elaborated.
BMW already has a foot in the door with China. Working with Brilliance China Automotive Holdings, the German brand has two facilities in the Shenyang province already. A spokesman for the company confirmed it will continue working with Brilliance but was unwilling to discuss any plans with Great Wall.
However, an unnamed BMW executive already spilled the beans, saying, “We are in discussions with Great Wall about setting up a joint venture to produce cars in Changshu.”
BMW’s China sales grew 11.3 percent last year and it is currently the country’s second-largest premium brand. It’s currently trying to compete with Mercedes-Benz, which sells fewer vehicles overall but achieved 26.6 percent sales growth in China in 2016 — narrowing the gap. But BMW also wants mainstream success and EVs will play a major role in that.
The country wants electric and hybrid cars to comprise over one-fifth of its total auto sales by 2025. It’s so serious about this that it’s even considering loosening regulations on foreign automakers to achieve this goal. As a result, Tesla, General Motors, Ford Motor Co., and Daimler AG have all announced plans to build EVs in China.
“I don’t know how far along we have gone nailing this deal,” the BMW executive said. But Great Wall has already purchased a glut of lithium so that it can produce the batteries necessary to power upcoming models. It might not deal with BMW specifically but it’s clearly gearing up for battery-electric vehicles.