BMW plans to take control of China joint venture

Irving Hamilton
October 13, 2018

Harald Krueger, chairman of the board of management of BMW, addresses the ground breaking ceremony for the BMW Brilliance Tiexi New Plant in Shenyang, northeast China's Liaoning Province, Oct. 11, 2018.

BMW's request to take control of BBA came after the Chinese central government announced in April it would scrap foreign-ownership limits on local auto firms and open up the market by 2022. The deal, which is set to be completed in 2022 when China lifts the rules on foreign ownership limits, will see BMW upping its share in the JV from 50% to 75%.

The filing on Thursday said the new agreement has received support from the Chinese government.

Mr Kruger said in Shenyang that the joint venture planned to add a new plant at its site in the city, spending over 3 billion euros on a large-scale expansion of the existing production facility. "Our success story goes hand in hand with the success of the joint venture BBA". That marked the first time a foreign carmaker established a full presence in China without a partner.

The firm's shares were suspended on Thursday, but plunged as much as 30 percent on Friday to a 28-month low, with analysts saying the deal would substantially decrease Brilliance's long-term value.

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Brilliance Auto is not the only Chinese partner of BMW. Last year, battery-only and hybrid cars were 2.2 per cent of the Chinese market; the International Council on Clean Transportation estimates that could rise to around 4 per cent by 2020 under the policy.

But Chinese demand for mass-market passenger cars has fallen, increasing the dependence of some local players such as BAIC on income from ventures with premium brands like Daimler.

"We are consistently following our growth strategy for China".

BMW and Brilliance have just signed an extension to their joint venture operations in China, with the new contract seeing the two automakers working together until 2040.

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