BEIJING (Reuters) – China’s Great Wall Motor (601633.SS)(2333.HK) on Wednesday said that its joint venture with BMW (BMWG.DE) faced regulatory uncertainties as both companies pledged to proceed with plans for developing a low-cost electric car.
The regulatory questions are over whether the joint venture will be able to obtain the required approvals for building a joint factory, Great Wall said in a stock market filing made in response to media reports that the alliance was in trouble.
German newspaper Sueddeutsche Zeitung reported on August 4 that the tie-up could fail, citing sources familiar with the matter. [bit.ly/2YPKkBN]
Since February 2018 BMW and Great Wall have worked on plans to build a low-cost electric vehicle on a joint platform which BMW would use for the Mini brand and Great Wall would use for its own brand.
BMW and Great Wall have not yet received permission to build a new plant in Changsu, China and Chinese State Planning authorities last year tightened regulations on adding manufacturing capacity unless factory utilization rates improve.
Hit by the U.S.-China trade war, China’s vehicle sales have fallen for 12 months in a row, including in June. Industry officials and analysts now expect car demand to slide some 5% this year, its first decline since the 1990s.
Great Wall said in its statement on Wednesday: “At present, the project is proceeding as planned, and the two parties are communicating on the details of the cooperation and preparing for the project to seek approval from the relevant authorities.”
BMW also said the joint venture was going very well in all work streams and significant progress was being made in all business areas.
Automakers and suppliers are scrambling to meet tough new Chinese quotas for less polluting cars. Those rules call for electric and rechargeable hybrid vehicles to account for a fifth of total sales by 2025.
Great Wall is China’s top sport utility vehicle and pick-up truck maker. It also builds Ora, an affordable battery electric vehicle brand in Baoding, the city where it is based.
The joint venture aims to build a plant in Zhangjiagang city with the capacity for making 160,000 gasoline vehicles for export and another 160,000 new energy vehicles, documents on the city’s website show.
It will also have a research center and car parts manufacturing facilities.
A separate local government document shows the total investment of the project is forecast at 20.2 billion yuan ($2.87 billion).
BMW has a separate manufacturing alliance with BMW Brilliance Automotive in Shenyang.
Reporting by Yilei Sun, Brenda Goh and Edward Taylor; editing by Jan Harvey/Jason Neely/Jane Merriman