BMW becomes first global car brand to take control of Chinese venture
October 15, 2018 Category China News Round-up, Weekly
BMW is spending €3.6 billion to acquire a majority stake in its Chinese joint venture, a deal that will give it more power over the its business in the world’s biggest car market, but also retain a larger proportion of the earnings it generates in the country. The agreement with Brilliance China Automotive Holding makes BMW the first carmaker to take advantage of China’s new policy to let foreign companies take majority control of their local partnerships. The car maker said it is increasing its stake in the venture with Brilliance to 75% from the current 50%. The increase in ownership of its joint venture lessens the impact of higher import tariffs, as it now plans to boost manufacturing capacity in China and expand local production of models, including electric cars.
“We are now embarking on a new era,” said BMW CEO Harald Krueger. “China is quickly becoming an important development and production base for BMW new energy vehicles.” It is expected that Daimler, Volkswagen and General Motors will also increase the share in their joint ventures. “BMW’s move is a signal that China may be giving a green light for foreign carmakers to lift their stakes in local joint ventures ahead of the original timeline,” said Tian Yang, Analyst with China Securities International in Hong Kong. All global car companies in China are now approaching their Chinese partners over their joint-venture stakes, Brilliance CEO Qi Yumin said. Until now, foreign carmakers’ ownership in Chinese joint ventures has been capped at 50%. China said in April it was scrapping the limit for electric-car ventures as soon as this year. For commercial vehicles, the cap will be eliminated in 2020 and the one for passenger vehicles will end in 2022.
BMW said its deal will be completed in 2022. The company is the biggest exporter of vehicles from the U.S. to China, meaning it is most exposed to the U.S.-China trade war. BMW has warned that trade tensions could become a drag on profits in the coming months. Last year, the carmaker shipped more than 100,000 sport utility vehicles (SUVs) to China from its Spartanburg plant in South Carolina in the U.S. BMW will start making its first pure-electric vehicle in China under the joint venture with Brilliance by 2020, the South China Morning Post reports.
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