Johnson Controls partners with BAIC to expand in Chinese automotive battery market
Johnson Controls has signed a memorandum of understanding with Beijing Hainachuan Automotive Parts Co. Ltd. (BHAP), an auto parts subsidiary of Beijing Automotive Industry Group Co. (BAIC Group), to set up automotive battery sales and manufacturing joint ventures in China, now the world's largest vehicle market. Under the MOU Johnson Controls and BHAP will partner to offer a range of batteries to automakers and service networks under BAIC Group, one of China's largest automobile manufacturers. These batteries can power conventional vehicles and those for Start-Stop systems, which can help automakers meet increasingly strict fuel efficiency and emission regulations.
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Nearly 20 years after it first expanded into China, Johnson Controls Inc. is announcing on Monday that it's launching a joint venture to sell and manufacture automotive batteries in what has become the world's largest car market.

The company has used joint ventures with Chinese companies to help it dominate the production of car seats in China, and it now is adding a partner, Beijing Hainachuan Automotive Parts Co. Ltd., to help it expand production of fuel-saving advanced batteries that help enable start-stop technology that shuts a car's engine off to save fuel when it's idling.

"We expect about 40% of all new vehicles in China will be start-stop in China by 2020," said Joe Walicki, president of Johnson Controls' power solutions business, based in Glendale.

Johnson Controls is a leading supplier of the fuel-saving batteries, which help carmakers comply with global warming rules that aim to reduce carbon emissions from vehicle tailpipes.

Carbon rules are in place in the United States and Europe as well as China, where carbon emissions and fuel consumption by vehicles are required to drop 27% from 2015 to 2020.

Financial terms of the partnership weren't disclosed. The Chinese company is an automotive parts subsidiary of Beijing Automotive Industry Co., also known as BAIC Group, the fifth-largest China-based automotive company based on 2014 sales, according to Reuters.

"This (joint venture) positions Johnson Controls and BAIC to take advantage of what will be the world's largest automotive battery market by 2020," Walicki said.

The growth plan is looking to do for the battery business what a similar joint venture between the same companies did for Johnson Controls' seating business nearly 20 years ago.

In its first international forays as the auto industry went global, Johnson Controls opened its first factory in India and its first joint venture factory with BAIC in China. That plant, which opened in 1997, made seats for Jeep Cherokees and door panels and other products for Chinese carmakers' vehicles.

Johnson Controls, which plans to spin off the automotive seating business into a separate company, reported $8.5 billion in sales in China last year.

"BAIC and Johnson Controls have already established good cooperation in the past," Xuejun Li, general manager of the BAIC auto parts business, said in a statement. "We are pleased to partner with Johnson Controls on start-stop business."

The joint venture comes a month after Johnson Controls announced it will build a new factory in northern China, an investment of $200 million.

The company shifted the focus of that factory — so that it would primarily build batteries for start-stop technology— in response to surging demand for that technology in China.

China has moved to impose emissions standards that require new vehicles to be more efficient.

That factory is expected to start up in 2018. The company already has two battery factories in China, plus an energy storage research and development center in Shanghai.

The announcement comes as stock markets and carmakers' and auto suppliers' stock prices have been hit by investor worries about slowing growth in China. Car sales in China declined in July by 6%, and year-to-date sales are growing at a slower pace than last year, according to an analysis late last month by Robert W. Baird & Co.

But China is still at the center of the growth strategy for Johnson Controls.

"Even at a slower growth pace, China is still the world's largest automotive market and will continue to grow faster than other markets," Walicki said. "We see great potential for growing our business in the Chinese market across our business portfolio."

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