BMW eyes China joint venture with Great Wall Motor

German luxury automakerBMWis looking to form ajoint venturewithGreatWall Motor, asourcefamiliar 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, aBMWexecutive said while declining to say what type of vehicles would be put together there.

AventurewithGreatWall would beBMW's second inChina, the world's largest auto market. It has ajointventurewith local carmaker BrillianceChinaAutomotive Holdings. Foreign carmakers have to operate in the market with local partners.

"We are in discussions withGreatWall 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 theventure, the person said.

ABMWspokesman said the company "won't comment on speculation."

"Our business development with thejointventureBMWBrilliance Automotive will continue as planned, and we will carry on to invest and develop ourjointventure."

AGreatWall official declined to comment.

BMW'sChinasales grew 11.3 per cent last year and it is the country's second-largest premium brand after Volkswagen AG’s Audi AG.BMWis trying to stay ahead of third-place Daimler’s Mercedes-Benz, which recorded 26.6 per cent growth inChinasales in 2016 thanks to a fresher model lineup.

Foreign automakers have recently announced a raft of investments and tie-ups inChina, especially in electric vehicles.

Chinawants electric and hybrid cars to make up at least a fifth of the country's auto sales by 2025 and plans to loosenjoint-ventureregulations in the market.

Tesla, Ford Motor Co, Daimler AG, and General Motors are among firms that have already announced plans for making electric vehicles inChina.

GreatWall, which in August expressed an interest in the Jeep brand of Italian-American automaker Fiat Chrysler Automobiles NV's, is one ofChina'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.

BrillianceChinaAutomotive's shares were down 2.76 per cent.

Brokerage Jefferies said in a note that it was "understandable thatBMWneeds a new partner to defend its market share in a more competitive market", and that the move would hit current partner Brilliance. "AsBMWsteps out to find new partners, we believe Brilliance will ultimately be squeezed."