Chinese EV Makers Deepening Ties with Global Automakers Amid Green Push

Chinese electric vehicle industry is expanding cooperation with European and global automakers which are ramping up development of pure electric vehicles amid the governments' aggressive environmental policies. In the latest move, Chinese electric car battery leader Contemporary Amperex Technology announced last week to set up a battery cell manufacturing base in Europe.

Contemporary Amperex Technology will invest 240 million euros to establish the car battery cell manufacturing facility in the eastern German state of Thuringia, which is scheduled to be put into operation in 2021 and achieve a production capacity of as much as 14 gigawatt hours of battery cells in 2022. The battery cells produced by the factory is expected to equip electric vehicles manufactured by a number of auto majors including BMW, Volkswagen and Daimler, said the company.

Additionally, Contemporary Amperex Technology and BMW signed a procurement agreement on the same day, which allows the Chinese firm to provide battery cells valued at 4 billion euros to the German automaker, which has also invested in the Thuringia-based plant.

BMW could be the first automaker to place orders for the battery cells produced in the new Thuringia-based manufacturing facility, as the purchase contract will require production of battery cells worth 1.5 billion euros at the Thuringia factory, with the rest to be made in China.

Previously, Daimler and Volkswagen had reached procurement agreements with Contemporary Amperex Technology, which recently completed its initial public offering at the Shenzhen Stock Exchange and aims to become the world's largest electric vehicle battery producer by 2020. Besides Europe, the Ningde, Fujian province-based company has also stretched its tentacles to Japan, where it has opened an office and developed into an integral supplier in the supply chain of Japanese automakers like Honda Motor.

The procurement agreement could also show BMW's heightened attention to the Chinese market, where the German carmaker plans to enhance the production capacity by expanding the joint venture company it established with local partner Brilliance Automotive.

The joint venture company, called BMW Brilliance Automotive, is set to produce 520,000 cars annually at two factories in China by 2019, according to a deal signed last week. The production capacity expansion could decrease BMW's dependence on imports from US factories as China and the United States have slapped tariffs on each other's goods. About one third of the cars BMW sold in China last year were imported.

In 2017, BMW sold 594,000 cars in China, representing an increase of 15 percent from a year earlier, the company said earlier this year. BMW's plant in the northeastern Chinese city of Shenyang will start the production of the iX3, the first pure electric vehicle of BMW, in 2020.

In 2012, a year after its establishment, Contemporary Amperex Technology became a battery technology solution provider of BMW by taking part in the automaker's high-tension battery project.

The signing of the agreement on establishing a German plant was witnessed by Chinese Premier Li Keqiang, who was on a tour of Germany. During an event last week attended by German Chancellor Angela Merkel, Li publically expressed the Chinese government's support for the expansion of foreign ownership in Chinese automobile companies.

In June, the National Development and Reform Commission, China's top economic planner, and the Ministry of Commerce unveiled a new version of the negative list to give foreign investors wider access to the sectors that had been off-limit for foreign investment.

According to the new negative list, which will take effect on July 28, the foreign ownership limits on new energy vehicles will be fully lifted, and the restrictions on foreign ownership in joint ventures producing commercial cars and passenger cars will be removed by 2020 and 2022 respectively.

BMW is reportedly planning to boost its stake in BMW Brilliance Automotive to at least 75 percent, making it the first foreign automaker to take majority control of a joint venture in China.