China, the world's largest auto market. Photograph:( Reuters )
German luxury automaker BMW is looking to form a joint venture with Great Wall Motor, a source familiar with the matter said, sending shares in the Chinese automaker up by nearly a fifth on Wednesday.
The automakers are considering the possibility of opening an assembly plant in the eastern Chinese city of Changshu, a BMW executive said while declining to say what type of vehicles would be put together there.
A venture with Great Wall would be BMW's second in China, the world's largest auto market. It has a joint venture with local carmaker Brilliance China Automotive Holdings. Foreign carmakers have to operate in the market with local partners.
"We are in discussions with Great Wall about setting up a JV to produce cars in Changshu," said the executive, who was not authorised to speak on the matter and declined to be identified.
"I don't know how far along we have gone nailing this deal," or whether the two companies have official central government approval for the venture, the person said.
A BMW spokesman said the company "won't comment on speculation."
"Our business development with the joint venture BMW Brilliance Automotive will continue as planned, and we will carry on to invest and develop our joint venture."
A Great Wall official declined to comment.
BMW's China sales grew 11.3 per cent last year and it is the country's second-largest premium brand after Volkswagen AG’s Audi AG. BMW is trying to stay ahead of third-place Daimler’s Mercedes-Benz, which recorded 26.6 per cent growth in China sales in 2016 thanks to a fresher model lineup.
Foreign automakers have recently announced a raft of investments and tie-ups in China, especially in electric vehicles.
China wants electric and hybrid cars to make up at least a fifth of the country's auto sales by 2025 and plans to loosen joint-venture regulations in the market.
Tesla, Ford Motor Co, Daimler AG, and General Motors are among firms that have already announced plans for making electric vehicles in China.
Great Wall, which in August expressed an interest in the Jeep brand of Italian-American automaker Fiat Chrysler Automobiles NV's, is one of China's largest car makers.
Last month it struck a deal to secure supplies of lithium, a mineral key to developing electric vehicles.
The firm's Hong Kong-listed shares soared as much as 19.2 per cent to their highest level in over two years, before paring some gains to stand up 14 per cent in afternoon trade. Its Shanghai-listed shares were suspended from trading, pending an announcement.
Brilliance China Automotive's shares were down 2.76 per cent.
Brokerage Jefferies said in a note that it was "understandable that BMW needs a new partner to defend its market share in a more competitive market", and that the move would hit current partner Brilliance. "As BMW steps out to find new partners, we believe Brilliance will ultimately be squeezed."