BAIC New Energy and Magna to establish joint venture to produce high-end electric vehicles

On June 18, Beijing New Energy Automobile Co., Ltd. (hereinafter referred to as "BAIC New Energy") and Magna signed a cooperation agreement term sheet in Nanjing, Jiangsu. The two parties announced that they intend to establish a joint venture to build an open and shared high-end intelligent pure electric vehicle R&D and manufacturing center. Industry insiders said that this cooperation with Magna will help BAIC New Energy improve its car manufacturing capabilities. As new energy vehicles become the strategic focus of the entire BAIC Group, how to achieve the upward development of its own brand will become an important issue facing BAIC New Energy in the future.

Joint venture company

According to the list of terms signed on June 18, after the establishment of the joint venture, BAIC New Energy and Magna will jointly develop a high-end intelligent pure electric vehicle sharing platform, customize specific vehicle models according to customer needs, and provide new energy vehicle engineering services.

It is understood that Magna is one of the world's largest suppliers of automotive parts. It also has complete vehicle engineering development technology and high-end manufacturing capabilities. It has 328 manufacturing plants in 29 countries around the world, providing product development and production services for many international luxury brands such as Mercedes-Benz and BMW. In the field of new energy vehicles, in recent years, Magna has begun to provide electric drive systems for various automakers, and the pure electric concept car independently developed by Magna has also been officially unveiled.

According to the plan, BAIC Group's existing factory in Zhenjiang, Jiangsu will serve as the base for the establishment and operation of the two joint ventures between BAIC New Energy and Magna. The Zhenjiang factory will be upgraded and transformed into a production base for the manufacturing joint venture. The first batch of mass-produced models is scheduled to be put into production in 2020, with an annual output of 180,000 vehicles. It is planned to first produce related models of BAIC New Energy's high-end brand ARCFOX.

Xu Heyi, Chairman of BAIC Group, said that the establishment of a joint venture between BAIC New Energy and Magna is an important measure guided by BAIC Group's "2025 Strategy", based on an open and shared business philosophy, integrating global high-quality resources, and committed to the development of a new generation of high-end intelligent pure electric vehicles.

In April 2018, during the visit of the Austrian President and Prime Minister to China, BAIC Group and Magna Steyr, a wholly-owned subsidiary of Magna, signed a strategic cooperation agreement. After signing the agreement, BAIC New Energy and Magna will advance the project according to the work plan and approval procedures.

Industry insiders said that with Magna's technical advantages in vehicle platform development, manufacturing, and new energy vehicle research and development, BAIC New Energy will have stronger capabilities in the research and development and production of high-end models in the future. However, it remains to be seen to what extent the cooperation between the two parties can promote BAIC New Energy's high-end strategy.

Competition with Beiben

Although BAIC New Energy chose Magna for this joint venture, BAIC Group did not forget to bring in its old partner Daimler when it was planning its high-end vehicle business. In March 2015, BAIC Group and Mercedes-Benz Technology Company formally established a joint venture company, BAIC-Benz, which is responsible for the technical research and high-end vehicle platform and model development of BAIC. The two companies each hold 51% and 49% of the shares, and established R&D centers in Beijing and Stuttgart respectively.

At the same time, Daimler also chose to cooperate with BAIC Group when promoting its high-end new energy vehicle strategy. In July 2017, Daimler and BAIC Group signed a framework agreement, which showed that the two parties would establish a pure electric vehicle production base and a power battery factory in Beijing Benz to produce pure electric vehicles of the Mercedes-Benz brand. In May 2018, the strategic restructuring project of Beijing Benz was officially signed in Shunyi, with a total investment of 11.9 billion yuan, which will become the first domestic high-end new energy vehicle production base of Mercedes-Benz.

In addition to technology and manufacturing, Daimler has also increased its cooperation with BAIC Group at the capital level. In March 2018, Daimler Greater China Investment Co., Ltd. announced that it would acquire 3.93% of the shares of Beijing New Energy, a subsidiary of BAIC Group, for a total price of 630 million yuan. A Daimler official said that the investment was made in accordance with a framework agreement between the company and its long-term joint venture partner, Beijing Auto, and aimed to expand the cooperation between the two parties in the field of new energy vehicles.

However, this time, BAIC New Energy and Magna are working together to develop high-end new energy vehicles. Some people believe that in the future, they will compete head-on with the new energy vehicle cooperation project between BAIC and Mercedes-Benz. In this regard, industry insiders believe that BAIC New Energy's layout of high-end electric vehicles will not conflict with the previous cooperation between BAIC and Mercedes-Benz, but will complement each other. Previously, BAIC and Mercedes-Benz have always cooperated on traditional fuel vehicles, and the two sides have little intersection in the field of new energy vehicles. Daimler only has some investment in BAIC New Energy.

In fact, the cooperation between BAIC and Magna and between BAIC and Mercedes-Benz in the development and manufacture of electric vehicles is more similar to the relationship between Geely and Volvo. In October 2016, Geely Holding Group, Geely Auto Group and Volvo Cars jointly established the high-end brand Lynk & Co. The Volvo brand and Lynk & Co. brand form a complementary relationship. A Geely official said that Lynk & Co. is a brand developed for global urban consumer groups. The launch of Lynk & Co. has improved the brand portfolio and market coverage of Geely Holding Group. Lynk & Co. is an important strategic supplement after Volvo in the luxury market and Geely Auto in the independent market. Lynk & Co. fills the gap in the joint venture market under Geely Holding.

Using Magna to get out of trouble

It is worth mentioning that BAIC introduced Magna to establish a joint venture in order to get rid of its image of manufacturing low-end pure electric vehicles. At present, BAIC New Energy has three series of models on sale, including the EC series positioned at the A00 level, the EU series positioned at the A level, and the EX series positioned at small SUVs. According to statistics, in the first five months of 2018, BAIC New Energy's cumulative sales were 51,000 vehicles, continuing to rank first in the pure new energy vehicle market. Among them, the EC series, which is positioned in the low-end market, sold 39,000 vehicles, accounting for nearly 80% of the total sales. The rapid expansion of low-end models has made BAIC New Energy the first pure electric vehicle company in China with an annual production and sales of more than 100,000 vehicles.

In fact, over-reliance on low-end models represented by the EC series and neglect of the development of mid-to-high-end models have gradually become BAIC New Energy's obvious shortcomings. Although BAIC New Energy launched a new mid-to-high-end brand ARCFOX as early as November 2016, the sales of BAIC New Energy's mid-to-high-end models have not been ideal. Automobile analyst Jia Xinguang said: "BAIC New Energy's single product sales account for 80%, which is very dangerous. It used to be the case with Brilliance, where a single SUV accounted for 80% of sales. Once the market changes, it is too late to adjust."

At present, BAIC New Energy has begun to be impacted by its competitors in the new energy vehicle market share. According to data released by the China Passenger Car Association, since the beginning of 2018, except for January, BAIC New Energy has missed the title of the domestic new energy passenger car monthly sales champion. In April, BAIC New Energy sold 10,100 vehicles, more than 3,000 less than the champion BYD.

In addition to traditional car companies, BAIC New Energy is currently facing mass production pressure from new forces in the new energy vehicle industry. Since 2018, NIO, WM Motor, and Xpeng have entered the mass production and delivery period. On May 29, Xpeng Motors held a ceremony at its headquarters in Guangzhou to deliver 100 registered Xpeng cars; on May 31, NIO also delivered 10 cars to the first batch of users.

According to Cao He, an automotive industry analyst, my country's new energy vehicle industry is entering a new round of elimination competition, and the competition is becoming increasingly fierce. The technical problems that BAIC New Energy is currently facing, such as batteries and charging time, are common problems faced by the industry. Compared with some emerging companies that are "purely capital-operated", BAIC New Energy, which was one of the earliest companies to be deployed, has a solid foundation and deep roots. In this round of competition, the "chance of winning" is still worth looking forward to.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.