BMW is reported to be considering a manufacturing joint venture with China’s Great Wall (gwllf).
The deal, reported by Reuters quoting an unnamed BMW executive, would involve opening an assembly plant in the city of Changshu. However, it remains unclear how far talks have gone, or whether it has approval from the Chinese government—which wants foreign car-makers to team up with local partners.
The nature of the cars in question also remains unconfirmed, although they would almost certainly have to be electric or hybrid, as the government has issued a moratorium on new capacity for gasoline vehicle production.
A couple weeks back, China delayed a new credit scheme relating to the production of new zero- and low-emission vehicles, in order to better give the auto industry time to prepare. The timeline now begins in 2019 rather than next year, but the industry saw the move as showing how serious the targets would be.
As reported by Barron’s, Bernstein analyst Robin Zhu suggested that BMW’s interest in the new joint venture may have to do with creating a new stream of electric-vehicle credits “on the cheap,” and making money off licensing and selling components into the venture. He added that Great Wall, whose stock popped by a fifth on the BMW (bmwyy) news, could help the Chinese firm reach compliance with the new government targets.
BMW already has a Chinese partner: Brilliance (bcauf). While a BMW spokesperson refused to comment on the Great Wall speculation “as a matter of principle,” they said the Brilliance joint venture would “continue as planned” through 2028.
Zhu said a new JV with Great Wall should not affect Brilliance’s earnings as it is already working on multiple BMW lines with a target of over 600,000 sales by 2020. “With a battery pack factory also being set up in Shenyang, and several BEV (X3) and PHEV (X1, 5-series) models already confirmed for local production, it’s unclear what a Great Wall-BMW JV could sell within the BMW brand,” he said.