BMW to gain control of China venture as ‘new era’ revs up
shenyang (China) — Germany’s BMW said it will take control of its main China joint venture for €3.6 billion ($4.2 billion), the first such move by a global carmaker as Beijing starts to relax ownership rules for the world’s biggest auto market.
The luxury carmaker will boost its stake in its venture with Brilliance China Automotive Holdings to 75 per cent from 50 per cent, with the deal closing in 2022 when rules capping foreign ownership for all auto ventures are lifted.
The move will likely spur BMW to shift more production to China, helping boost profits amid a whipsawing trade war between Washington and Beijing that has raised the cost of BMW importing cars manufactured at its South Carolina plant. The deal also marks a milestone for foreign carmakers which have been capped at owning 50 per cent of any China venture and have had to share profits with their local partner.
“We are now embarking on a new era,” BMW chief executive Harald Kruger said in a speech on Thursday in the northeast city of Shenyang where the joint venture is based. He thanked Chinese Premier Li Keqiang who he said had “personally supported” the plan.
Beijing has been keen for global carmakers to invest more in China and has also eased restrictions that cap foreign ownership of electric vehicle businesses at 50 per cent this year. As trade tensions have escalated, China’s government has pledged to open up its markets more widely, including cutting taxes on imported vehicles, cancer medicines and a range of consumer goods.
The country’s leaders have also played up other milestone deals such as German chemical maker BASF winning approval in July to build China’s first wholly foreignowned chemicals complex.
The rule changes have already helped Tesla Inc gain Beijing’s approval for a wholly owned China manufacturing and sales company in Shanghai, marking the first time a foreign carmaker will be able to establish a full presence in China without a partner.
BMW is one of the biggest exporters of vehicles from the United States to China, putting it firmly in the crosshairs of the trade war.
“Given the trade dispute between the US and China, there is a powerful incentive for automakers to produce vehicles in the market where they sell them,” said independent auto industry analyst James Chao. —