Wanda sets up venture to sell Red Flag limousines in China even as it distances itself from the costly business of making cars

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Chinese conglomerate Dalian Wanda Group is expanding its foray into the automobiles sector with the formation of a joint venture that will offer car services such as sales and parking.

Wanda Automobile Technology Services was founded on Monday with a registered capital of 100 million yuan (US$15.65 million), according to sources close to the group. Tai Qing (Beijing) Technology, its joint venture partner, is a mainland Chinese firm that offers these services.

The new company’s formation comes after Wanda formed a partnership with FAW last month to provide user experiences for owners of the latter’s Red Flag cars. As part of the deal, cars of Red Flag, also known as Hongqi, will be sold at all Wanda Plazas across China starting in Beijing on January 8, according to the sources.

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“The two companies are building a mutually beneficial partnership, where Red Flag cars will be able to tap Wanda Plazas’ huge foot traffic, while Red Flag owners will be able to enjoy free parking, free movie tickets, easy charging and more,” the sources said.

A total of 25.31 million cars were sold in China, the world’s second largest automobiles market, last year. Of these 1.4 million were electric vehicles (EVs).

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But Wanda was “by no means going into the business of making cars”, despite forming Wanda Automobile, the sources said. The idea is that Hongqi vehicles will be sold at Wanda Plazas, while a range of cars services will be provided by the joint venture Wanda Automobile in the car parks.

EV makers have in particular rapidly opened up experience stores across China’s shopping malls this year, according to real estate consultancy JLL. Unlike traditional showrooms, these stores offer visitors anything from food and refreshments to libraries, sometimes even allowing potential buyers to test cars.

The conglomerate, which is controlled by Wang Jianlin, has 400 Wanda Plazas across China. In Beijing alone it has 10.

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FAW, which is based in the Jilin provincial capital of Changchun in north-eastern China, is the country’s first automotive assembler, with several ventures that assemble passenger and commercial vehicles with Audi, Volkswagen, General Motors and Toyota. The company delivered 3.7 million vehicles last year, with 697 billion yuan in revenue.

Hongqi is China’s first indigenous automotive brand, launched in 1958 exclusively for the Chinese leadership and visiting dignitaries. The brand was relaunched in the 1990s as a limousine and luxury sedan for the wealthy, complete with rear-hinged “suicide doors” for passengers in the L Series, similar to Rolls-Royce. When Xi Jinping inspected the troops during the country’s military parade in September 2015, the Chinese president did so in a specially fitted Hongqi.

The brand delivered 236,000 vehicles in the first 10 months of this year, a record 35,000 vehicles in October alone, according to the car industry’s data.

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