Consumer Discretionary / Industrials

Henry Kwon

Equity Bottom-Up

<p>Ford officially announced on November 8 that the company has signed a definitive JV agreement with privately held Zotye to establish Zotye Ford Automobile Co. in Zhejiang dedicated to developing, producing and marketing BEVs under a new Chinese brand, pending regulatory approval.  The two companies had signed an MOU back in August, so the knowledge of a JV formation between the two has been in public domain for well over 2 months.  However, the press release does add a few more details than what had been previously announced to the public.</p><p>Initial investment in the JV will be RMB 5 Bn (USD 756mn) to set up the venture which will include a new manufacturing plant in Zhejiang with a dedicated R&amp;D center, consistent with China's regulations for NEV JVs to have IP owned by the Chinese partner.  The new brand will have a dedicated sales &amp; service network according to the press release from Ford, without specifying a timeline (pls see Ford's press release attached to this note for details).  The JV will also work to develop new mobility services.</p><div class="content-highlight"><p>It is too early to start estimating how profitable the venture might be as there are no details other than the USD 756mn initial investment mentioned in the press release.  The basic structure of the JV is consistent with regulatory dictates so there will most likely be no stumbling blocks to getting the government's green light.  Product choice and Distribution strategy seem logical if executed efficiently.</p></div>

Ford officially announced on November 8 that the company has signed a definitive JV agreement with privately held Zotye to establish Zotye Ford Automobile Co. in Zhejiang dedicated to developing, producing and marketing BEVs under a new Chinese brand, pending regulatory approval.  The two companies had signed an MOU back in August, so the knowledge of a JV formation between the two has been in public domain for well over 2 months.  However, the press release does add a few more details than what had been previously announced to the public.Initial investment in the JV will be RMB 5 Bn (USD 756mn) to set up the venture which will include a new manufacturing plant in Zhejiang with a dedicated R&amp;D center, consistent with China's regulations for NEV JVs to have IP owned by the Chinese partner.  The new brand will have a dedicated sales &amp; service network according to the press release from Ford, without specifying a timeline (pls see Ford's press release attached to this note for details).  The JV will also work to develop new mobility services.It is too early to start estimating how profitable the venture might be as there are no details other than the USD 756mn initial investment mentioned in the press release.  The basic structure of the JV is consistent with regulatory dictates so there will most likely be no stumbling blocks to getting the government's green light.  Product choice and Distribution strategy seem logical if executed efficiently.

Ford: Initial Impressions of the JV Agreement with Zotye in China

Ford Motor Co

Ford: Initial Impressions of the JV Agreement with Zotye in China