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Regulatory Uncertainty Faced By BMW And Its Chinese Partner Great Wall In China

Regulatory Uncertainty Faced By BMW And Its Chinese Partner Great Wall In China
There were looming regulatory challenges for the joint venture between BMW and its Chinese joint venture partner China's Great Wall Motor, a joint venture necessary as a precondition of or doing business in China for any foreign company. This was commented to by the Chinese firm on Wednesday. The tow companies however would push ahead with their plans of development of a low costs electric car.
In response to media reports that the joint venture was in trouble with regulators, Great Wall said in a stock market filing that the uncertainties concerning the regulators is over the question of whether the partnership company would be granted permission by the regulators to build a factory in China jointly.
A report that the joint venture could split up and fail was published on August 4 in the German newspaper Sueddeutsche Zeitung.
The plans and preparations for the development and manufacturing of a low cost electric vehicle is being discussed and mulled by BMW and Great Wall since February 2018. According to the companies, that new platform, if and when developed, would also be used for manufacturing of the Mini brand as well as for building vehicles of its own brand by Great Wall.
The companies have planned to build the factory jointly in Changsu, China but are yet to get any permission or the construction from the regulators. Last year, regulations on adding manufacturing capacity were tightened by the Chinese State Planning authorities and permission is only being given to those who have shown enhanced capacity utilization I their existing plants.
The sale of cars and other vehicles in Chinese have declined for 12 months straight primarily because of the trade war between the United States and China. There was also a drop in sale of vehicles in June. At the current rate, analysts and industry officials predict that there would be a fall of 5 per cent in the demand for cars for the current year which would mark the first annual drop in the sector since the 1990s.
"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," Great Wall said in its statement on Wednesday.
The joint venture is making significant progress in all business areas and the joint venture was going very well in all of the work streams, BMW has also said.
China has recently implemented tough quotas for low pollution vehicles – including electric and hybrid ones, and this had put pressure on the automakers in the market to meet those enhanced stricter targets. The new Chinese regulations mandate that the sale of electric and rechargeable hybrid vehicles should be at least one fifth of the total vehicles sold by a company by 2025.
Great Wall is the leader in the sport utility vehicle and pick-up truck segment in China. Ora, a affordable battery electric vehicle brand is also manufactured by it in Baoding.

Christopher J. Mitchell

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