Great Wall and BMW take the necessary new energy joint ventures to emerge in full compliance with the general trend

It is not profitable to move in harmony with profit. In five months, the cooperation between Great Wall Motor Co., Ltd. (601622.SH, 02333.HK, hereinafter referred to as “Great Wall Motors”) and the BMW Group has been rumors that the “Great Wall MINI” electric vehicle may be coming.

On the evening of February 23, Great Wall Motors announced the "Announcement of Great Wall Motor Co., Ltd. and BMW AG's Signing of Letter of Intent". According to the announcement, according to the letter of intent, both parties are evaluating the prospects and feasibility of cooperation in the form of joint venture companies in the field of new energy vehicles. The details of the investment scale and business model of the joint venture company have not been determined. In an interview with a reporter from the China Business News, Great Wall Motor’s secretary general said that the cooperation between Great Wall Motors and BMW will focus on new energy vehicles and future technologies. At present, the two sides are negotiating the details of cooperation.

On the same day, BMW Group also publicly announced the joint venture with Great Wall Motors for the first time, and mentioned that working with Chinese partners to promote the development of MINI brand business, while emphasizing that the sales and service network of BMW Group in China remains unchanged. With regard to the details of the cooperation, the relevant person in charge of the BMW (China) Public Relations Department stated: "At present, the two parties are still negotiating the negotiations. Since the other party is a listed company, the announcement of information needs to be reviewed, so no details can be disclosed."

According to industry insiders, the cooperation between the two parties "just needed" to promote the obvious. In the face of the increasingly fiercely competitive luxury car market and the landing of the double-integration policy, companies are seeking new breakthrough points. Newly built new energy automobile joint ventures will set off waves one after another.

"Gossip" has come true

In October last year, it was reported that Great Wall Motor will establish a joint venture with BMW in China and is already looking for a site. At that time, Great Wall Motors announced that it had not signed any legal documents with BMW on the establishment of a joint venture in China, but said that it had signed a feasibility study with the MINI brand on April 18, 2016 to explore and develop pure electric vehicles and traditional power vehicles. The confidentiality agreement was signed; and on February 21, 2017, an agreement was signed to discuss and evaluate the feasibility of the MINI brand automobile cooperation.

Subsequently, BMW issued a notice saying: "The company plans to further expand the MINI brand in the world, the development in China 'only with local partners can be possible.' BMW Motors plans to expand cooperation with BMW Brilliance brand." Although Great Wall Motors was not mentioned in the announcement, industry insiders believe that BMW has planned to seek a joint venture partner for the MINI brand in China. "Actually, BMW and BMW's actions can be found in the previous and BMW announcements, and BMW's move took care of Brilliance Automotive. This is also the biggest resistance of BMW and Great Wall Motors' joint ventures." A senior investor in the automotive industry told reporters.

Audi's sales in China in the first half of last year were directly affected by SAIC Audi's incident. "To avoid repeating the mistakes of SAIC Audi, BMW has done an appeasement work and certain concessions to its old partner, Huachen Automobile." "The BMW Group will not build new sales and service channels outside China's existing network system. This is the most obvious concession."

The reporter found in an interview with BMW Brilliance dealers in Beijing, Tianjin and Hebei that they did not have much opinions on the joint venture between BMW and Great Wall Motors. "At present, there is no case where dealers can't get a car, and it doesn't affect terminal sales," says a BMW Brilliance dealer. MINI dealers said frankly: "There is no impact at this time. After all, there is no substantive joint venture disclosure."

The cooperation between Great Wall Motors and BMW is significant for both parties. The Great Wall Motor has always been relying on SUVs to walk on one leg. There are shortcomings in cars and new energy vehicles. The pressure on new energy vehicles is very obvious. The cooperation with Hebei Yujie cannot solve its fundamental problems. The joint venture with BMW can Relieving the pressure brought by the double-integration policy, we can also learn BMW new energy vehicle technology and make up for shortcomings.

For BMW, it can help promote the brand expansion and localization of the MINI brand in China, accelerate the electrification process, and find new breakthroughs in the increasingly competitive luxury car market.

Market anxiety

The above-mentioned senior investors in the automotive industry believe that the joint venture anxiety between BMW and Great Wall Motor comes from the increasingly incandescent luxury car market. Cui Dongshu, secretary-general of the National Passenger Vehicle Market Information Association, further analyzed that “currently private enterprises have not yet joint ventures and only Great Wall Motor is optional, so there is little room for BMW to choose.”

Judging from the performance of the luxury car market last year, the sales gap of the first camp of luxury cars comprising Audi, Mercedes-Benz and BMW has further narrowed. According to public data, Mercedes-Benz (including smart) sales in China for the year 2017 totaled 611,000 units, up 25% year-on-year; Audi's total sales in China in 2017 were 595,000 units, up 1.05% year-on-year; BMW (including MINI) last year Cumulative sales in China totaled 594,000 vehicles, a year-on-year increase of 15.1%. From the data, the sales advantage of BMW compared with the other two is not obvious. In addition, the second-tier luxury car market is also focused on strength, from the sales growth point of view, Cadillac, Jaguar Land Rover, Volvo and other second-tier luxury brands in China in 2017 have achieved higher growth.

From the perspective of the development of the domestic auto market, on the one hand, consumer demand and age have changed, and all brands are developing younger; on the other hand, when the saturation of traditional models in the market has formed a certain scale , To create a brand new or younger brand will bring new vitality for car companies. In addition to Mercedes-Benz and BMW, Volvo also launched the new Polestar brand electric vehicle. The first model is expected to be released in the domestic market in 2019.

“The penetration rate of China's luxury car market is basically around 10%. The overall Chinese automobile market, including the luxury car market, will have a stable and sustained growth in the future.” When talking about the development of the domestic luxury car market, BMW (China) Automobile Trading Co., Ltd. The company's president Liu Zhiru thinks. Li Yanwei, a member of the Expert Committee of the China Automobile Dealers Association, said: “Last year, the unit price of luxury cars dropped drastically and the barriers to entry decreased; the luxury car structure has changed, the ABB gap has narrowed, and the second-tier brand has restructured; market."

Cui Dongshu believes that the pattern of the first camp of luxury cars will not change significantly during this year and the next two or three years, but the gap between them will be smaller and smaller; and the more obvious changes will be in independent brands and luxury cars. The camp and the influx of independent high-end brands. With the clear understanding of consumer demand, and brand building, product launch, and channel construction investment, second-tier luxury car brands may usher in a period of rapid growth, but due to the system's short board, instability or lead to larger Changes in rankings; Independent brands have become even more attractive to young consumers, and despite the influx of independent high-end brands, it is still difficult to capture a substantial share in the short term and it will take 3 to 5 years to achieve a breakthrough.

Trends

In order to make new breakthroughs in the Chinese auto market, the new energy auto market cannot be taken lightly. Kang Siyuan, former president and chief executive of BMW Group in Greater China, said bluntly: “In the field of electrification, the new energy products provided by BMW in China in 2018 will be increased to 6 cars. In addition, the infrastructure of electric vehicles will also be improved.” Apart from the BMW Group, it is planned to realize the local production of MINI pure electric models in China. Mercedes-Benz launched a smart global electric strategy.

Last year was the most intensive year for changes in the new energy automotive industry and adjustment of industrial policies. This gave birth to Daimler Group and Beijing Automotive Group, Volkswagen and Jianghuai Auto (600418.SH), Ford Motor Co., Ltd. and Zhongtai Auto (000980.SH), Renault. - A marriage between Nissan and Dongfeng Motor.

In the second half of the year, ministries and commissions such as the Ministry of Industry and Information Technology jointly issued the “Measures for the Concurrent Management of the Average Fuel Consumption of New Passenger Vehicles and New Energy Vehicle Points” (hereinafter referred to as the “Dual Credit Policy”); the Ministry of Industry and Information Technology later stated that the dual-point policy will be officially launched on April 1 this year. Implementation. In addition, the State Council issued a "Notice on Measures to Promote the Growth of Foreign Investment," and stated that it will further reduce the restrictions on foreign investment. The adjustment of policies is the main driving force for the joint venture of new energy vehicles. In addition, Wang Binggang, head of the National New Energy Vehicle Innovation Project Experts Group, proposed that the retreat of new energy vehicle subsidies is also one of the reasons for the emergence of new energy vehicle joint ventures.

The dual-point policy has great pressure on car companies that rely on traditional fuel vehicles and have shortcomings in new energy vehicles. Some experts said that the rapid development of domestic independent brands depends on the layout of SUV models, while the rapid development of foreign car companies in China also benefits from high fuel consumption vehicles such as SUVs. With the landing of the double-integration policy, these car companies began to seek development in the field of new energy vehicles to cope with the pressure.

At present, various countermeasures are not the same: domestic domestic BYD, Beiqi New Energy, which started earlier in the new energy field, can deal with double-integration policies on their own; joint venture marriage is another route, such as the BMW Great Wall, Jianghuai VW , Ford Zhongtai, Renault-Nissan and Dongfeng Motor; of course, the joint venture between Great Wall Motors and Hebei Yujie is also a joint venture response. In addition, although the new vehicle builders are massive, they lack production licenses for new energy vehicles and can't produce in batches. This has given birth to OEM models for Weilai and Jianghuai, Xiaopeng, and Haima. On the one hand, this model can make vehicles. The new forces will achieve mass production. On the other hand, the OEM models will need to be sold under the OEM brand name. In a certain sense, they will also be able to relieve pressure on the auto makers. Finally, the most direct way is to buy points, such as SAIC, Beijing Hyundai and other car companies will use this method. Wang Binggang believes that “even if it is implemented one year later, the car companies that have not yet been deployed in the field of new energy vehicles still have pressure to cope with the 2019 dual-point policy. At this time, the purchase of new energy vehicle points by other companies is the most direct and most effective. One way."

At present, the details of the joint venture between BMW and Great Wall Motor have not been determined, but the joint venture seems to be a foregone conclusion. In the short term, the inclusion of such a joint venture solution can ease the pressure of the double-integration policy; in the long run, it can provide a new breakthrough point for car companies, and in the market environment where competition is gradually becoming incandescent, they will give Enterprises bring new impetus.