BMW To Take Con­trol­ling Share in China Joint Au­to­mo­tive Ven­ture

NewsChina - - NEWS BREIF -

BMW an­nounced on Oc­to­ber 11 that it would in­crease by half its stake in BMW Bril­liance Au­to­mo­tive (BBA), a long-run­ning joint ven­ture with Bril­liance China Au­to­mo­tive, from 50 per­cent to a dom­i­nat­ing 75 per­cent.

This move was an­nounced on the fif­teenth an­niver­sary of the found­ing of BBA when BMW and Bril­liance China re­vealed that they would ex­tend their col­lab­o­ra­tion con­tract un­til 2040. BBA also an­nounced a three bil­lion euro (US$3.4B) in­jec­tion of funds into its plants in the city of Shenyang, and an in­creased an­nual pro­duc­tion tar­get of 650,000 cars start­ing from the early 2020s.

Ac­cord­ing to the an­nounce­ment, the share deal, val­ued at 3.6 bil­lion euro (US$4.1B) will take ef­fect in 2022, co­in­cid­ing with the dead­line by which China has pledged to re­lax re­stric­tions which ban for­eign automakers from hold­ing more than half the shares in a do­mes­tic joint ven­ture, which the gov­ern­ment has de­scribed as a strong mea­sure to ex­pand re­form and open­ing-up.

Ac­cord­ing to Chi­nese me­dia re­ports, BMW is the first ben­e­fi­ciary of the pol­icy change. Af­ter the deal takes ef­fect, BBA'S new eight-seat board of di­rec­tors will in­clude six from BMW and two from Bril­liance China, and the chair­man and gen­eral man­ager will also be nom­i­nated by BMW.

China's ban on for­eign au­to­mo­tive in­vestor ma­jor­ity own­er­ship started in 1994 when the na­tion's auto in­dus­try was per­form­ing poorly in an ef­fort to pro­tect do­mes­tic car­mak­ers. Since then, do­mes­tic automakers have learned much from co­op­er­a­tion, but have been left too re­liant on for­eign in­vestors.

It is hoped that lift­ing the ban will urge do­mes­tic automakers to pri­or­i­tize self-suf­fi­ciency and in­no­va­tion. As more in­ter­na­tional brands fol­low BMW and pur­sue a larger share of the Chi­nese mar­ket, lo­cal brands – though they al­ready oc­cupy nearly half of the mar­ket – will face greater threats to their sur­vival. The mar­ket has al­ready shown con­cern about do­mes­tic mak­ers. Straight af­ter the lat­est share deal the stock price of Bril­liance China plunged by around 27 per­cent.

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