Germany’s BMW has broken ground for a new factory to produce battery-powered Mini cars in China, forging ahead in its partnership with domestic manufacturer Great Wall Motor despite a slowdown in the world’s largest electric vehicle market.
The partnership is the latest of several between Chinese and international automakers focusing on EV production in response to rapid growth in China’s new energy vehicles, or NEVs, a category that includes both hybrids and fully electric models.
That growth has stalled in recent months after the government curbed subsidies for both buyers and manufacturers.
The partnership with Great Wall would help bring down costs for electrification, especially for smaller cars, BMW chief financial officer Nicolas Peter told the Financial Times. Reducing such costs was the industry’s “number one challenge”.
International automakers have been left trying to balance the risks of overestimating growth in China’s NEV market against the government’s push for a fifth of Chinese car sales to be NEVs by 2025.
In April 2018, China put in place new rules that amounted to a quota for the import or manufacture of NEVs for automakers that sell above 30,000 cars per year.
Spotlight Automotive — BMW’s 50:50 partnership with Great Wall, China’s largest producer of sports utility vehicles — will contend with slower sales growth and a crowded NEV market.
Analysts expect dozens of Chinese electric vehicle producers to go bankrupt in the coming years as the market consolidates.
In August, Great Wall said the partnership faced “uncertainties” with receiving approvals, given heightened government attention to problems of excess capacity.
Executives from both companies cast the ceremony on Friday, held in an empty field on the outskirts of the city of Zhangjiagang in Jiangsu province, as a response that answered concerns about the venture.
The €650m factory will be complete by 2022 and have capacity to manufacture 160,000 petrol and electric vehicles annually, a portion of which will be exported. BMW will only make electric Minis at the plant.
BMW and Great Wall will not set up a joint sales channel for the venture, a departure from the usual practice, which analysts said suggested a more cautious approach to collaboration.
The industry and business logic of the joint venture made more sense when talks began several years ago, but the environment has changed significantly in that time, according to Yale Zhang of Automotive Foresight.
“Five years ago it was very popular for foreign automakers to have two partners to optimise production and play them off against each other,” but now that companies could fully own an entity it made less sense, Mr Zhang said.
In April last year China scrapped a decades-old rule that limited international automakers to owning a maximum of 50 per cent of Chinese joint ventures.