Chinese automaker Great Wall Motors stock rose by 14% to mark a 2-year record high after a Chinese news outlet reported that the company has entered into a partnership with British auto giant BMW. BMW is reportedly in agreement in principle with the Chinese automaker they aere already looking for a site to set up manufacturing and assembly plants for the joint venture.
Great Wall Motor is one of China’s largest carmakers, and the number one SUV producer in the country. The firm came into prominence when it started offering customers spacious SUV models at cheaper prices compared to other foreign car models. After the news of its joint ventures with BMW hit the newsstands, the share price of Great Wall Motor skyrocketed with a 19.2% gain before settling to a 14% at the end of the trading session.
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There isn’t any official statement concerning the latest development from both companies; yet, it is rumored that the two companies will be working for several months on the final drafts before making the official statement.
BMW is making a strategic move into China
According to an inside source, BMW is planning to open another assembly plant in the city of Changshu, eastern China, with the possibility of exporting cars from the Mini brand to Eurasia. However, the type of cars to be assembled in the plant has not been specified. The insider also noted that the new business venture would not affect the existing joint venture partnership that BMW has with Brilliance China Automotive Holdings running until 2028.
The new JV deal with Great Wall Motors will be the second joint venture of its kind for BMW in China. No foreign car manufacturer can do business in China without collaborating with an indigenous company; hence, the fact that BMW is having a second JV suggests that it has a good shot at breaking into the Chinese market.
In 2016, BMW China sales recorded an 11.3% increase making it the second largest premium brand after Volkswagen in China. Now, BMW is working hard to outpace Daimler’s Mercedes Benz that recorded a 26.6% sales growth in China sales last year.
With the success of the BMW Mini brand that sold more than 230,000 cars within the first eight months, the company is planning of doing the electric version to drive more sales. BMW is shifting gear into the development and production of electric cars in order to meet up with government regulations around the world now that policies to reduce pollution and impose stricter rules on fossil fuels are quite common.
China’s auto market is expanding
Recently, foreign automakers are beginning to take a keen interest in China’s auto market, especially in the electric vehicles industry. In addition, Beijing wants electric and hybrid cars to make up to fifth of the auto sales in China by 2025. China is a smart destination for foreign automakers because the Chinese government is working on making joint ventures regulations favorable for investors. Other companies that have showed interest in making electric vehicles in China and has a joint vehicle partnership include Ford Motor and Chinese automaker Zotye, Volkswagen and China automaker giant JAC.