Mercedes-Benz Group is considering sharing its manufacturing plant in South Africa with Great Wall Motor Co (GWM), a move that could boost the facility’s viability as US trade tariffs take effect, people familiar with the matter said.

The luxury carmaker and Chinese firm are in talks about co-manufacturing at the factory in the port city of East London, according to the people who asked not to be identified because the discussions are private. Representatives for GWM have presented a proposal to senior officials at South Africa’s Department of Trade, Industry and Competition outlining the company’s interest in producing vehicles there, one of the people said.

“Mercedes-Benz strives to ensure that all its production sites remain globally competitive, are on an optimal operating point and adapted to new requirements whenever necessary,” its South African unit said, declining to comment further. GWM South Africa said it is continuously investigating ways to expand its presence in the local market, without adding more details.

A deal hasn’t been finalized and the companies could structure alternative tie-ups, said the people. Mercedes is also considering using the plant as a global hub to re-purpose end-of-life batteries from passenger vehicles, according to one of the people.

Mercedes has shipped the C-Class sedan from South Africa to the US since 1997, taking advantage of the African Growth and Opportunity Act, which allowed for duty-free car exports to the world’s biggest economy.

President Donald Trump’s 30% tariff on South African goods destined for the US — imposed in August last year — threatened the economics of the plant. While the US Supreme Court suspended that duty in February, his administration plans to impose a 15% global levy on goods destined for American shores starting this month.

The German automaker spent about €600-million ($694-million) to modernise the facility in 2022. A deal to share the factory that employs about 2 400 people could reduce overcapacity, lower operating costs and preserve jobs as established manufacturers from Europe, the US and Japan lose market share to cheaper imports from China and India.

Just one in three cars sold in South Africa are made locally, down from 56% two decades ago. Automakers, including a local unit of Volkswagen, have called on the government to safeguard the industry against a flood of shipments, partly through improved tax breaks.

Typically, these arrangements involve a contract where the plant owner produces vehicles for other brands and charges a fee per car.

While Mercedes’ existing production line could accommodate another brand with relative ease, the second company would need to set up its own body shop, or part of the factory where vehicle structures are welded, assembled and prepared for painting.

For GWM, local production facilities would help meet growing demand for its South African offerings, which include its Haval and Tank brands.