When we talk about joint-venture cars in China, we invariably refer to auto brands resulting from the cooperation of Chinese and foreign carmakers. This may no longer be the case soon with an emerging tie-up between BYD Co. Ltd. (01211.HK, 002594.CN) and Guangzhou Automobile Group Co. Ltd. (GAC Group) (02238.HK, 601238.CN).
GAC Group is renowned for its long list of foreign partners such as Toyota, Honda, Fiat, Mitsubishi and Hino. But this time around, it has set aside the popular notion that foreign is better by choosing a local partner to set up a joint venture in the green car segment.
BYD and GAC Group are close to signing an agreement to jointly establish a production line for all-electric bus in Zhencheng, Guangdong province, Nan Fang Daily quoted the municipal party chief as saying. More intriguingly, state-owned GAC Group will concede the controlling stake to the privately-run BYD, holding only up to 49 percent interest in the proposed venture.
The two companies make strange bedfellows if one considers that their market positions are diametrically opposed to each other. But then again, they are also highly complementary.
Shenzhen-based BYD has long been committed to forging a complete industry chain on its own. Riding on its cutting-edge battery technology, the auto firm is emerging as the world’s leading green- car maker. That said, its profit is mainly derived from selling entry-level petrol vehicles.
GAC Group, meanwhile, is the top player in the southern China market. It continuously upgrades itself through technology transfers from its foreign partners. With the help of foreign brands, the company has come up with JV models that are very popular in the mid-range market. But despite its strength in gasoline-powered vehicles, it remains a complete novice in the field of environment-friendly, new-energy automobiles.
By tapping into GAC Group’s sales channels, BYD could extend its reach into the closed public transport market of Guangzhou city. On the other hand, the partnership will provide the Guangzhou-based carmaker with valuable know-how in the commercialization of green cars.
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