The world's biggest car market has traditionally raised a great wall of tariffs and regulations against foreign invaders.
To make automobiles in China, international firms have had to enter joint ventures with local partners. While imports represent about a third of car sales in the U.S., in China they're rarely more than a percentage point or so.
That may be on the brink of changing. BMW AG is in discussions with Great Wall Motor Co. about manufacturing its Mini brand in the country, people with knowledge of the plan told Bloomberg News Thursday. More significantly, they're looking at China as a possible export base.
The hefty taxes that China levies on imported cars are still a powerful incentive for foreign automakers to come to some sort of arrangement with a local player. Among brands wholly reliant on imports, only luxury marques Lexus and Porsche have sold more vehicles in China so far this year than Mini.
Even so, some sort of export market is almost certainly going to be necessary to any deal. Mini's sales in Asia's biggest economy have been growing at a decent clip, but compared to those of BMW's own-brand cars they're barely a rounding error. Renault SA, which has a tie-up with Dongfeng Motor Group Co. via its alliance with Nissan Motor Co., is the only mass-market foreign brand to bother manufacturing in China for such small volumes.
For Great Wall's General Manager Wang Fengying, a deal would be a major fillip. As Gadfly's Shelly Banjo has written, Wang deserves a lot more credit than she's received since Great Wall's shares suffered a 50 percent slump in the middle of 2015. The company's return on invested capital, at 1.19 times its weighted average cost of capital, surpasses BMW's 1.11 times ratio and that of most other large automakers worldwide.
While Great Wall remains one of China's few large automakers to lack a foreign partner, and seems unlikely to buy Fiat Chrysler Automobiles NV's Jeep brand, it's just one hit car away from a broader success.
With China already attempting to change its onerous joint venture regulations, a new production base in the People's Republic could help BMW build a more competitive global supply chain for one of its niche marques, while cracking another corner of the local market open a little further.
That's probably cold comfort for plant workers in England, where the first Minis rolled off an Oxford production line almost six decades ago and where the challenges of integrating operations with German factories in the wake of Brexit are already leading to fears of job losses or outright closure.
But countries that turn their backs on their trading partners may find their trading partners doing the same. As a new wave of protectionism causes great walls to rise in Europe and North America, in Asia, at least one may be crumbling.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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