German automakers announced a flurry of partnerships and cooperation agreements with Chinese companies that will see the relaunch of Volkswagen AG's SEAT brand in the Asian market as well as production of an electrified version of Bayerische Motoren Werke AG's Mini.
With its huge population and ready uptake of electric cars by consumers, China's importance is growing for producers like Mercedes-Benz maker Daimler AG, BMW and Volkswagen, which are pouring money into electrification. As a U.S.-China trade war appears to be intensifying, that deepening relationship with the Asian market may now bring even greater comfort.
The U.S. and China on July 6 began imposing tariffs covering $34 billion of goods traded between them as trade tensions bubbled over. The U.S. on July 10 extended the application of tariffs to $200 billion of goods with a 10% levy.
In addition, the U.S. had threatened to slap tariffs on European cars after it raised the duty on steel imports, arguing U.S.-made cars shipped to Europe were unfairly penalized by such taxes.
Appearing to diffuse the tension, German Chancellor Angela Merkel has said that she is amenable to a cut in tariffs on U.S. car imports.
At a press conference on July 10 during a visit to Germany by Chinese Premier Li Keqiang, Merkel said she hoped "Germany and China can make a contribution towards ensuring that the world does not end up blundering into a spiral of trade conflicts," Reuters reported.
Meanwhile, German and Chinese companies are not sitting idle. They pressed ahead with deals that focused on the automotive sector's transition to electrified and autonomous vehicles, signing them in the presence of their countries' leaders at events in Berlin.
BMW, which builds cars in China in a 50-50 partnership with Brilliance Automotive Group Holdings Ltd., announced an increase in capacity to 520,000 cars per year up from about 450,000, some of which will be used to produce the electric iX3 from 2020, the first Chinese-made BMW model that will be exported from China.
The company also announced it would buy €4 billion worth of batteries from Contemporary Amperex Technology Co. Ltd., a Chinese manufacturer with domestic and German production to serve BMW factories in both countries.
China is now BMW's largest market, with 560,000 vehicles sold there in 2017, more than the total sold in its No. 2 and No. 3 markets, Germany and the U.S.
Munich-based BMW said it would make the electric version of the Mini in China in tandem with local automaker Great Wall Motor Co. Ltd. in a joint venture to be named Spotlight Automotive Ltd. It would open a plant in Jiangsu province. The Mini is already sold in China with a conventional internal combustion engine.
Volkswagen-owned Spanish brand SEAT will launch in China in 2020 or 2021 by taking a stake in the Volkswagen joint venture with Chinese manufacturer Anhui Jianghuai Automobile Group Corp. Ltd. and take the lead in the research and development of electric cars. SEAT previously made a timid and brief entry into China, offering its Ibiza and Leon models in 2012 and 2013, a spokesman confirmed.
Audi, Volkswagen's premium brand, signed a memorandum of understanding with Huawei Group Holdings Ltd. to carry out research into connected vehicles, or cars that can communicate their presence and position on a road, technology that may help with traffic management as well as averting collisions.
In the area of autonomous driving technology, BMW tightened existing cooperation with online search engine Baidu Inc. for the development of its Apollo autonomous driving platform while Daimler and Tsinghua University in Beijing agreed to extend their research in the same field for another three years.
Bosch and Chinese electric car maker NIO signed a cooperation agreement for the development of sensor technology, automated driving, electric motor controls and intelligent transport systems. NIO produces a high-performance electric SUV, the es8, as well as the eP9, a supercar that it says is the fastest electric-powered vehicle in the world, according to its website.
While European and U.S. consumers are only beginning to warm to the idea of electric cars as more chargers are deployed and driving range increases, sales have been storming ahead in China, largely of small, low-cost battery-powered cars. That has largely been driven by the government's aggressive push as it continues to grapple with smog in large cities.
China will require that at least 10% of the sales of any automaker selling cars in the country be of electric cars by 2019, the Associated Press reported, delaying a previous requirement of 8% by 2018 after complaints by manufacturers, which said it was unrealistic.