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German carmakers increase China presence despite tariff risk

Discussion in 'World Affairs' started by TaiShang, Oct 12, 2018.

  1. TaiShang

    TaiShang ELITE MEMBER

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    German carmakers increase China presence despite tariff risk

    By Shen Weiduo Source:Global Times Published: 2018/10/11

    Expansion may offer opportunity to grab market share from US rivals

    [​IMG]
    Employees look at a BMW car at an auto show in Shanghai on September 28. Photo: VCG


    German automakers have been increasing their footprints in China despite the escalating trade war with the US, which experts said reflects China's efforts to improve the foreign investment climate and promote the electric vehicle (EV) market.

    According to a statement BMW Group sent to the Global Times on Thursday, the group will invest more than 3 billion euros ($3.46 billion) in a new automotive plant and existing plant structures in Shenyang, capital of Northeast China's Liaoning Province, in the coming years.

    The German automaker also intends to increase its stake in BMW Brilliance Automotive (BBA), BMW's Chinese joint venture, from 50 percent to 75 percent, and both partners signed an agreement on Thursday, read the statement, indicating the company is targeting long-term development in China.

    BMW Chief Executive Harald Kruger said that the company has prioritized its Chinese strategy. He stressed that China is not only a huge market but also a world-level production base, and the automaker will export its models produced in China, according to a statement on the Chinese government's official website.

    BMW's China expansion comes as trade tensions between China and the US are escalating, which some analysts and media reports said might threaten China's status as a production base. Some predicted that many manufacturers, including German carmakers, would shift production lines out of China to avoid risks.

    Wang Jun, deputy director of the Department of Information at the China Center for International Economic Exchanges, said that it's understandable that some foreign companies, which came to China for cheap labor, might send some production lines to Southeast Asia now since tariffs might increase their operating cost.

    But many of these factories are low-end, and their departures could make space for more advanced manufacturing, which could also be an opportunity for China to upgrade and transform its industry structure, Wang told the Global Times on Thursday.

    "However, given German car manufacturers' high market shares in China, as well as the attractive development prospects of the huge EV market and policy dividends in the sector, they will not quit the Chinese market just due to tariff concerns. It's easy to weigh the trade-off," Zhao Junjie, a research fellow at the Chinese Academy of Social Sciences Institute of European Studies in Beijing, told the Global Times on Thursday.

    According to a Bloomberg report, China will lead the transition in electric vehicles (EVs). Sales of EVs in China are estimated to account for almost 50 percent of the global EV market in 2025 and 39 percent in 2030.

    China announced it would end foreign ownership limits for special vehicles and new-energy vehicle manufacturing starting on July 28 this year. Limits on general passenger car manufacturing will be lifted by 2022. It also vowed to roll out more measures to create a better environment for foreign investment.

    Eying the big market, another German carmaker - Audi AG - also boosted its presence in China by strengthening its cooperation with telecommunications equipment provider Huawei Technologies Co in the intelligent connected vehicle sector, Huawei said in a statement.

    Audi wants to be involved in the formulation of laws and regulations for autonomous driving in China, Saad Metz, head of the R&D division at Audi China, told a press conference in Shanghai on Thursday.

    "Given the China-US trade tensions, cooperation between the US and China in the auto industry might be hindered to some extent, but it might be a good opportunity for German automakers to grab more market share from their US counterparts in the coming EV era," Wang said.

    http://www.globaltimes.cn/content/1122655.shtml
     
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  2. Menthol

    Menthol FULL MEMBER

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    Well, it's an opportunity for Germans.

    I think USA doesn't lose much on automotive sector in China, as USA owned many of Chinese car makers shares.
     
  3. Nein

    Nein FULL MEMBER

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    How come Germany and China have not thought about a Sino-German cooperation like in the 1930s at a time like this. I think it could prove fruitful especially with trump declaring war on the global economy.
     
  4. Offshore

    Offshore FULL MEMBER

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    because germany see China as Communist country with different ideology.
    We also compete with western country in future technology.
     
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  5. serenity

    serenity FULL MEMBER

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    Germany today is not as independent as before. They need to agree with EU and USA policy and not just only what they want or what makes more money.
     
  6. TaiShang

    TaiShang ELITE MEMBER

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    US companies do not of majority shares. They have equal-share JVs. Their overall share is declining. Same with other foreign brands. They are all JVs. But, with the recent change in regulations, now, foreign JVs can have majority stake.

    What BMW is doing is to increase its majority stake in the JV. US JVs have not done that. I am not sure they have money for a share buy-back.

    ***

    BMW X5 to be produced in China from 2022

    Ramy From Gasgoo| October 12 , 2018

    [​IMG]


    Shanghai (Gasgoo)-
    On October 11, Brilliance China Automotive Holdings Ltd. (CBA) announced that after selling half of its stake in Brilliance BMW to BMW Group, BMW and Shenyang Jinbei Auto will own 75% and 25% stake in the joint venture respectively. The total registered capital of BMW Brilliance is 150 million euros, 113 million of which is from BMW while the rest is from its local partner.

    The announcement also revealed some future investment. First of all, the BMW X5 and battery electric vehicles are expected to be locally produced from 2022. The total annual production capacity will be up to 1 million units. Then, new investment will be granted for new and existing plant structure in Dadong and Tiexi plants.

    Currently, the BMW X5 sold in China are produced in BMW’s Spartanburg plant. Affected by the trade spat, a 40% tariff is levied on the imported BMW X5. Thanks to the local production, the price of the model would be lowered sharply. Taking the price gap between the locally-produced BMW X3 and the imported X3 for reference, the locally-produced BMW X5 will be at least RMB 100,000 cheaper than the imported one.

    After the deal is closed, the board of BMW Brilliance will be composed of 8 members, six from BMW and 2 from Shenyang Jinbei, while the chairman will be appointed by BMW. All top managers will be named by BMW except vice general managers responsible for financing and personnel.

    Under the deal, neither party is allowed to transfer the interests from the registered capital or take it as pledge without the prior written consent from the other party.

    http://autonews.gasgoo.com/china_news/70015249.html