BMW looking at Chinese-made electric Mini

People check out a BMW at a motor show in Beijing. The German automaker aims to manufacture a Chinese made electric Mini in the country. (Reuters)
Updated 23 February 2018

BMW looking at Chinese-made electric Mini

BEIJING: BMW Group said Friday it is talking with China’s biggest SUV maker about a possible partnership to produce electric versions of its Mini as automakers ramp up electric development under pressure from Beijing to meet sales quotas.
BMW said it signed a letter of intent with Great Wall Motors headquartered in Baoding, southwest of Beijing, and needs to work out a cooperation agreement and investment details.
Auto brands face pressure to meet quotas that require electric vehicles to make up at least 10 percent of sales starting next year. Later, they face pressure to raise that to meet increasingly demanding fuel efficiency standards.
Beijing is using access to its auto market, the world’s largest, as leverage to induce global automakers to help Chinese brands develop battery and other electric vehicle technology. Foreign automakers that want to manufacture in China must do so through local partners, which requires them to hand over know-how or help potential Chinese competitors develop their own.
General Motors, Volkswagen, Nissan Motor and other brands already have announced similar plans with local partners to produce dozens of electric models for China.
MINI’s first battery electric model is due to be produced at its main British factory in Oxford in 2019, according to BMW.
“This signals a further clear commitment to the electrified future of the MINI brand,” BMW said in a statement.
Sales of pure-electric passenger vehicles in China rose 82 percent last year to 468,000, according to an industry group, the China Association of Automobile Manufacturers. That was more than double the US level of just under 200,000.
China is BMW’s biggest market. The Munich-based automaker said about 560,000 BMW brand vehicles were delivered to Chinese customers in 2017, more than its next two markets — the United States and Germany — combined.
China was MINI’s fourth-largest market in 2017, with 35,000 vehicles delivered, the company said.
An electrics venture with BMW would be a boost for Great Wall, which industry analysts have warned will struggle to satisfy Beijing’s sales quotas and had yet to announce any significant electric plans.
Great Wall sells more than 1 million fuel-hungry SUVs annually. That sets a high baseline for electric sales and will make it harder to meet fleet average efficiency standards.


Gold rush at Turkish bazaar a test of trust for lowly lira

Updated 15 August 2020

Gold rush at Turkish bazaar a test of trust for lowly lira

  • As precious metal prices soar, Turks rush to buy amid economic uncertainty and a volatile currency

ISTANBUL: Hasan Ayhan followed his wife’s instructions last week and took their savings to buy gold at Istanbul’s Grand Bazaar as Turks scooped up bullion worth $7 billion in a just a fortnight.

With memories of a currency crisis which rocked Turkey’s economy only two years ago fresh in his mind, the retired police officer was among those playing it safe as he queued in the city’s sprawling market, where a screen showed the gold price rise by one Turkish lira ($0.1366) in just 10 minutes.

“I think it is the best investment right now so I converted my dollars to buy gold,” the 57-year-old said. “I might withdraw my lira and buy gold with it too, but I am scared to go to the bank right now because of coronavirus.”

The day after Ayhan bought his gold on Aug. 6, the lira hit a historic low and remains skittish, laying bare concerns that Turkey’s reserves have been badly depleted by market interventions, which are showing signs of fizzling out.

Turks traditionally use gold for savings and there may be 5,000 tons of it “under mattresses,” with more added after the recent buying spree, Mehmet Ali Yildirimturk, deputy head of an Istanbul gold shops association, said.

Although bullion has never been more expensive, vendors at the Grand Bazaar said almost no one was selling their gold jewelry. There are only buyers.

HIGHLIGHTS

  • Currency touched record lows in three volatile weeks.
  • Local holdings of hard currencies at all-time high.
  • All are buyers at Grand Bazaar, despite expensive gold.

“I’ve been chatting with hundreds of people who are thinking about selling their cars or houses to invest in gold,” vendor Gunay Gunes said.

In the last three weeks, as selling gripped the lira, local holdings of hard assets such as dollars and gold jumped $15 billion to a record of nearly $220 billion.

There is no evidence suggesting people are about to pull savings from banks, and this week the lira has hovered around 7.3 versus the dollar, although it remains among the worst emerging-market performers this year.

Demand has eased since Turks withdrew some $2 billion in hard foreign cash from their banks during a March-May period in which a lockdown was imposed and the lira hit its last low. Analysts say that if Ankara cannot boost confidence in the currency, which has fallen almost 20 percent this year, import-heavy Turkey risks inflation and even a balance of payments crisis that will worsen fallout from the coronavirus crisis.

Given foreign investors now have only a small stake in Turkish assets, they say the key for President Recep Tayyip Erdogan’s government is convincing Turks to stop turning to the perceived stability of dollars and gold.

The central bank and treasury did not immediately comment on the dollarization trend or any policy response.

Finance Minister Berat Albayrak, Erdogan’s son-in-law, said on Wednesday the lira’s competitiveness was more important than exchange rate volatility.

The central bank has effectively borrowed on local dollar liquidity to fuel foreign exchange market interventions, which are meant to stabilize the lira.

Through Turkish state banks, which together are “short” foreign exchange by $12 billion, the central bank has sold over $110 billion since last year. In turn, the bank’s gross FX buffer has fallen by nearly half this year to below $47 billion, its lowest in years.

The central bank has said its reserves naturally fluctuate in stressful periods, and the treasury says the bank intervenes at times to stabilize the currency.

But ratings agencies say Ankara should take decisive steps, such as an interest rate hike, to rebuild reserves and restore confidence. Otherwise, rising current account deficits and possible debt defaults could tarnish a solid reputation for meeting foreign obligations.

“Locals don’t want to keep Turkish lira, they’ve been dollarizing and buying gold. Turks have hardly ever done that,” said Shamaila Khan, New York-based head of EM debt strategy at AllianceBernstein, which manages $600 billion. “That is why you need proactive policies because if you get to that stage where locals are unwilling to keep their money in the bank then you’re heading to a balance of payments crisis. That’s when the alarm bells will start ringing.” 

Some banks imposed fees on withdrawals this week, while the central bank has curbed cheap credit channels it opened to ease the coronavirus fallout. Yet while lira deposits now earn more than the 8.25 percent policy rate, their real return is negative with inflation at 11.8 percent.

Traders say such backdoor tightening needs to reach 11.25 percent to stabilize the lira, which has nearly halved in value since early 2018.

Market expectations have risen for a formal rate hike that economists say would reinforce central bank independence, even while it could slow economic recovery.

Politics may stand in the way.Erdogan, whose popularity has dipped this year, holds the view that high rates cause inflation, and sacked the last central bank governor for disobedience.

He said on Monday he hoped market rates would fall further.

But firms such as System Denim, which imports materials and makes clothes for companies like Zara and Diesel, are feeling the pinch from rising costs. Owner Seref Fayat said he converted his 4 percent euro-denominated loans to lira at 10 percent. “No need to take on additional FX risk,” he said. “I pay a higher rate, but at least I can see ahead.”