Economy

BMW sets course to buy controlling stake in Chinese joint venture

BMW sets course to buy controlling stake in Chinese joint venture”

"This will make BMW more nimble, larger and less volatile". China, the world's largest auto market, had long sealed off its industries from foreign competition, forcing non-Chinese companies to operate in joint ventures with local businesses.

In April this year, the Chinese government announced it would remove foreign ownership caps on makers of fully-electric and plug-in hybrid vehicles by the end of 2018.

BMW fell 1.3 percent to 74.34 euros a share at 10:54 a.m.in Frankfurt trading, compared with a 1.8 decline in the Stoxx Europe 600 Automobiles & Parts Index amid a broader market slump. BMW reached an agreement with Brilliance Auto in 2003 to form the BMW Brilliance Automotive (BBA) joint venture, which now produces around 400,000 vehicles per year from two plants, Dadong and Tiexi, in Shenyang province. That is when the 50:50 joint venture requirement for auto manufacturing in China ends. BMW said the changes to its joint venture would come into effect in 2022, in line with the new regulations. "Together with our partners, we contribute to the sustainable development of the Chinese market". "I see it as a long-term partnership even though we have the majority stake now". It has also restricted big global brands from gaining full access to the world's biggest vehicle market.

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.

Brilliance, which got most of its earnings from the partnership a year ago, has a market capitalisation of about $7 billion. SAIC Motor Corp., Volkswagen's local companion, declined 4.6 percent.

Beijing is looking to lure global carmaker to invest in China. "If that happens, it will definitely cut contribution to the Chinese carmaker and hurt their profits". Daimler said it welcomed China allowing companies to take majority stakes, adding there wasn't "more to say to that from today's perspective". It had shipped over 100,000 SUVs to China from its Spartanburg facility in SC in the previous year, but the company has warned that U.S. BMW has warned that trade tensions could drag on profits in the coming months.

He said BBA was the cornerstone of BMW's ongoing success in China - its largest single market - and that with the increased investment the German firm wanted to make, it would be able to produce up to 100% electric vehicles.

The term of the joint venture is also to be extended to 2040 from 2028, the German automaker said. In the next three to five years, the total capacity will gradually increase to 650,000 units per year, while creating 5,000 new jobs. It will eventually consolidate the lucrative entity, which made an 11.1% operating margin previous year, into.

"We are now embarking on a new era", BMW Chief Executive Harald Krueger said in a speech in Shenyang, northeast China, where the joint venture is based.



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