BMW takes control of its Chinese joint venture

Ivan Schwartz
October 14, 2018

Brilliance, which makes the vast majority of its revenue from BMW-branded cars, has seen its shares tumble almost 50 per cent this year on talk that such a deal was in the offing.

Shenyang -Germany's BMW said it would take majority control of its main China joint venture for €3.6bn, the first such move by a global auto maker as Beijing starts to relax ownership rules for the world's biggest vehicle market.

The German carmaker announced Thursday that they would extend the contract term of the joint venture BMW Brilliance Automotive (BBA) in northeast China and to increase investment for its production capacity expansion.

In August, China's new vehicle sales continued to fall, following a drop in July.

A new plant will be able to produce fully electric, partly electric, and conventional vehicles on the same line. Previous year it turned out nearly 400,000 vehicles at two plants in the northeastern city Shenyang, which owns the remaining 9.5 percent of equity.

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BMW is one of the biggest exporters of vehicles from the United States to China, putting the carmaker firmly in the crosshairs of a trade war which has seen both sides raise tariffs on a multitude of goods, including automobiles.

It becomes the first worldwide vehicle manufacturer to disclose type of a deal since the Chinese government relaxed ownership restrictions earlier in the year, as it looks to race ahead of other global auto makers in China. The transaction is expected to be closed in 2022, the year in which China would lift the ownership limit now existing on vehicle manufacturing operations.

Brilliance China's shares in Hong Kong have plummeted this year, and were suspended from trading on Thursday. Production capacity there will remain the same, but the structure of the plant will gradually be expanded for future BMW model variants and the expected market growth.

BMW is expected to take more of its production to China as a result of the move, boosting profits amid the US-China trade war which has raised BMW's cost of importing cars manufactured at its SC plant. Two-thirds of all BMW vehicles sold in China previous year were produced by BBA at the two automotive plants in Tiexi and Dadong.

German automaker BMW has increased its investment in the Chinese joint venture BMW Brilliance, The Paper reported.

Other reports by GizPress

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