BMW is talking to China’s 800 lb gorilla SAIC about producing BMW’s luxo-barge, the 7-series in China. This according to Bloomberg who has it from Dongfang Daily, who heard it from an unnamed source at SAIC.
BMW and SAIC had been talking about a joint venture three times in the past, says the Chinese paper, but noting came of it.
If this isn’t one of those Chinese rumors that are floated on one day, and denied the next, then this could be interesting in several respects.
One, BMW has a joint venture in China, with Brilliance. Brilliance hasn’t been doing so, well, brilliantly. In the first half of the year, Brilliance racked up losses to the tune of 9b Chinese Yuan ($1.3b). Its homegrown department has been in the reds for years as R&D costs mount and high-flying export plans falter. If BMW were to tie the knot with SAIC, this wouldn’t automatically mean the end to BMW/Brilliance. Polyamory runs rampant in Chinese joint ventures. One classic example is Volkswagen. They have a joint venture with FAW in the North and with SAIC in the South. Both are bitter rivals. VWs are sold through three different sales channels: FAW-VWs through FAW-VW dealers, SVWs through SVW dealers, and imported VWs through a small network of import dealers.
Two, at SAIC, the 7-series BMW would collide with a number of other joint ventures. VW, as mentioned, and GM being the biggest. Again, nothing unusual in China. German car makers may not let other brands drive past the gates of their plants – in China, they live in (supposedly) perfect harmony with their biggest competitors.
Three, a Made in China 7-series may not go down too well with China’s well-heeled. If you play in that league, you want the real, imported thing.
Three, a Made in China 7-series may not go down too well with China’s well-heeled. If you play in that league, you want the real, imported thing.
This. If they were going to make anything in China, I feel like it would make more sense to make the higher volume 3 or maybe even 5-series there. Is there something I’m missing here?
CommanderFish: As mentioned previously, “BMW Brilliance, a joint venture in China between BMW and Brilliance China Auto, makes BMW 3-series and 5-series models. The BMW 1-series may also become “Made in China” by next year.” China is BMW’s 4th largest market.
How much “manufacturing” are we talking about?
Is BMW shipping knock down kits to China? Or are they stamping sheet metal there?
CKD didn’t make commercial sense in China, as the country had slapped a 25% duty on imported “parts” if the number or value of imported parts used in an assembled vehicle exceeded 60 percent. After WTO action, this has been abolished. CKD amounted to only 2% of Chinese production in 2008. With the new tariff, this is likely to change.
Aren’t CKD kits only commercially viable if the technological base in the production country is too low and import tariffs for completed cars prohibitively high?
Kristjan: CKD also makes sense when the import tariff is high and the numbers of cars made are low. Last I looked, the tariff for complete cars was 25% in China, whereas parts are 10% now (down from 25% …) In its heydays, the 7-series sold 40K to 50K units worldwide, so China should be somewhere in the four digits … not really a number for mass production …
Thanks Bertel – so in effect like the 7 Series being produced in Egypt?
I am not an expert but are those cars not assembled completely, then taken apart again, then loaded into crates and shipped off to be assembled again?
I’m reminded of Japanese pickups and pickup boxes being shipped separately into the United States and then reassembled. (Sometimes this resulted in the cab and box coming from different paint lots.) I also remember someone saying that cars shipped by sea would have the bumpers removed so the crate could be smaller. (I suppose the bumpers would be under the car.) Would this simple step qualify the shipment as parts, rather than an automobile? I’d say it depends on the specific language of the tariff involved.
When the Chinese produce an E39 clone, you can color me happy. But it must be a real clone, down to every detail and using the same materials. Except for the cooling system – feel free to replace the plastic with heat resistant metal. Ah yes, the power of dreams…
@Kristjan Ambroz
I don’t know about BMW 7 series being produced in other countries, but what you proposed doesn’t make sense.
My experience here in Venezuela is that a CKD car comes completely disassembled. You have to set up a body and paint and trim shop to get it together.
An SKD car, as we assemble in this factory, is an welded and painted body to which the trim/mechanicals are installed.
How is done depends a lot on local tariff/industry policy regulations.
Maybe I’m wrong but isn’t it terribly wrong-headed to teach the Chinese how to do EVERYTHING the west does well so that once they are well practiced and educated – they might out-do us and sell us their own products manufactured by methods they learned from us?
Oh, perhaps the managers figure they’ll be retired or dead by the time this comes back to bite us in the ass?
We in the west BETTER get our ducks in a row of Asia will stomp us into the dirt under their shoes and out market, produce and deliver more stuff than we ever will. And we’ll be trying to catch up.
Of course the people here at the top won’t care because they’ll still be profiting through investments or business agreements with Asian companies. And they’ll still be selling Chinese stuff to us in the big box retailers.
No, I’m not xenophobic or anything. Just want to keep America rolling/selling/making good stuff so we have ways to earn livings without first slipping to third world status before recovering a few generations later.