Automotive News   |   Automotive News Europe   |   Autoweek   |   Automobilwoche

Automotive News China Newsletter
Register our free newsletter, sent each Monday and Thursday

     Automakers   Suppliers   Auto Show   Comment   Car Cutaway   Newsletters   Press Releases   Register for Newsletter
  Contact Us:   Editorial   Advertising   Subscription Information   |   About Us   Media Kit
Home >> Automaker Email this story   Print this story
Who will follow BMW and gain control of key China operations?
Yang Jian | 2018/10/19

SHANGHAI -- BWM Group last week signed a deal with Brilliance China Automotive Holdings to increase its stake in their partnership to 75 percent from 50 percent. 

Who will become the second major global automaker to gain control of its China joint ventures, where ownership has been capped under Chinese government rules at 50 percent? 

For clues, check out what BMW has done lately in China, because it signals that foreign automakers must execute on two critical fronts before pulling off a similar feat.

EV partnership
On one front, foreign automakers must create an electric vehicle joint venture with a separate local partner. It sounds ironic, but it is the realty global car automakers face in China. 

Under U.S. President Donald Trumps trade threats and tariffs, Beijing announced plans in May to phase out all ownership restrictions on foreign carmakers operating in China by 2022.

But global carmakers are under tremendous pressure to comply with the carbon credit program the Chinese government laid out last year. The program goes into effect in 2019 to goad automakers to ramp up EV output and sales.

Most Chinese carmakers have little problem meeting the new regulatory requirement. Enticed by government subsidies, they have launched a large number of EVs in the past several years.

But global brands, in general, have been laggards because many remain    skeptical about consumer demand after Beijing phases out subsidies for EVs and plug-in hybrids in 2020. 

The majority of global automakers still plan to produce EVs at existing joint ventures and most of the EVs the partnerships will initially launch are reworked products of their Chinese partners. 

By doing so, they qualify for part of the carbon credits generated by the EVs. Its a practical solution and wont disrupt the status quo of their partnerships. 

Three global automakers have set out on a different path to gain carbon credits, with each forming a separate EV joint venture with a new Chinese partner. 

BMW established a joint venture with Great Wall Motor Co. in July. Last year, Volkswagen Group formed a partnership with Jianghuai Automobile Co. while Ford Motor Co. teamed up with Zoyte Automobile Co. 

The three new joint ventures will churn out small and low-priced EVs under new brands. 

With a new EV partnership earning carbon credits, BMW can concentrate on strengthening its existing joint venture BMW Brilliance Automotive, which builds and markets products under the BMW brand.

Obtaining a controlling stake in BMW Brilliance will enable BMW to streamline decision-making, speed up new model introductions and better protect its technology. That was the main considerations behind its deal with Brilliance China last week.

Aside from BMW, VW and Ford, Daimler, which now builds gasoline-powered cars and light trucks for the Mercedes-Benz brand with BAIC Motor Group, also has an EV joint venture with a separate local partner. 

Daimler formed an EV partnership, Denza New Energy Automotive Co., with Chinas largest EV maker, BYD Co., in 2010. The joint venture has only launched one product -- a Denza-badged compact sedan -- and sales remain tiny.

As BMW demonstrated when it agreed to pay 3.6 billion euros (28.8 billion yuan) for the additional 25 percent stake in BMW Brilliance, it will be an expensive proposition for global automakers to take control of Chinese joint ventures.

Who can amass sufficient capital to buy the additional interest in their traditional vehicle joint ventures? 

Ford is tied up with the restructuring of its global business, not to mention the deteriorating trade relations between China and the United States.

That leaves VW, even at it reels from nearly $32 billion in financial penalties for widespread emissions violations, and Daimler, as the more likely candidates. 

Daimler still needs to figure out how to make optimal use of its joint venture with BYD, so VW stands out as the most likely global automaker to gain control of its partnerships with China FAW Group Corp. and SAIC Motor Corp.

Related Stories
  • Daimler suspends Mercedes franchise after customer complaint goes viral
  •     --Published:2019/19/4
  • VW Group sales continue to decline on weak VW, Skoda results
  •     --Published:2019/16/4
  • VW plans Tesla-fighting electric crossover
  •     --Published:2019/16/4
  • VW: China to become global software development hub for AV tech
  •     --Published:2019/16/4
  • VW eyes buying big stake in China partner JAC, report says
  •     --Published:2019/12/4
  • Why VW may become 2nd foreign automaker to gain control of China JV
  •     --Published:2019/12/4
  • VW signs up Chinese lithium supplier
  •     --Published:2019/9/4
  • Ford appoints industry veteran Yang Song as China sales chief
  •     --Published:2019/9/4
  • Daimler, BMW to limit scope of venture to affordable China EV, report says
  •     --Published:2019/5/4
  • Ford to launch more than 30 new models in China over next 3 years
  •     --Published:2019/5/4
  • Brazil's CAOA, a Chery partner, signs agreement with Ford over plant purchase, report says
  •     --Published:2019/2/4
  • Europe's automakers scramble to protect profits in China
  •     --Published:2019/2/4
  • Daimler to recast Smart with Geely as China-based EV brand
  •     --Published:2019/29/3
  • Great Wall, Ford target growing Chinese demand for pickups
  •     --Published:2019/29/3

    Our Newsletter Editions
    Automotive News China produces two email newsletters each week. You can sort your news by the articles highlighted in each of our newsletters here.

    Select your newsletter     


    Automotive News China
    Room 1303, Building 2, Lane 99, South Hongcao Road,
    Shanghai 200233
    Telephone: 86-139-1851-5816
    Fax: 86-21-6495-0895
    Home | Help Center | About Us | Privacy Policy | RSS
    Entire contents © Crain Communications, Inc.
    Use of editorial content without permission is strictly prohibited. All Rights Reserved.