Thursday, May 21, 2015
Will global automakers drop local JV partners if Chinas government says they can
Chinese economic policies could be in for a big change, as President Xi Jinping pushes the communist country to open its domestic markets even further. That could mean big things for the auto industry, especially when it comes to the countrys far-reaching joint-venture system.
According to Chinese law, foreign automakers may only maintain a fifty-fifty partnership with their domestic counterparts. But with Jinpings push for openness leading to potential free-trade deals, that policy could be relaxed (or eradicated all together) in short order. Whats an automaker to do?
Well, in BMWs case, stay the course. Automotive News Europe reports that, despite the grumblings about the JV policy changes, the German manufacturer has resigned its agreement with Brilliance through 2028. This is made doubly remarkable by the fact that BMW signed the extension over three years before it was set to expire.
Prevailing logic says thats because these joint ventures allow foreign automakers to operate boots-on-the-ground manufacturing operations that can help drive sales inside the PRC. For BMW, thats key to becoming the top dog in Chinas booming luxury market, notes Automotive News Europe.
BMW isnt the only manufacturer thats extended its partnership for the extended future. Volkswagen inked a deal with its partners in 2012 that will run through the next two decades.
That still leaves a huge number of manufacturers with partnerships up in the air, though. What do you think manufacturers like Mercedes-Benz and General Motors will do if given the option to increase their stake, stage a takeover or divorce from their joint venture partners? Have your say in Comments.
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