BMW sets course to buy controlling stake in Chinese joint venture

2018 BMW 5-Series built by BMW Brilliance Automotive joint venture

To build cars in China and escape the country’s steep tariffs on imports, foreign automakers have had to partner with local firms via 50:50 joint ventures.

However, the Chinese government earlier this year laid out a plan to phase out the rule by 2022, thus paving the way for foreign automakers to buy out their joint-venture partners and take home more of their profits.

The first to take action is the BMW Group which on Thursday said it intends to increase its stake in a joint venture held with Chinese automaker Brilliance from the current 50 percent to a controlling 75 percent. The move will cost BMW approximately $4.2 billion and is still subject to shareholder approval.

BMW also on Thursday signed a contract extension with Brilliance to extend their partnership to 2040 and said the joint venture, known as BMW Brilliance Automotive, will spend close to $3.5 billion in upgrading plants and adding capacity. As a result, the total annual production capacity of BMW vehicles at the joint-venture plants will gradually increase to 650,000 units by the early 2020s.

The extra capacity will provide BMW with greater flexibility should the trade war between the United States and China worsen in the coming years. Last year BMW built 400,000 vehicles in China, while selling 560,000 in the country.

The BMW Brilliance Automotive joint venture was founded in 2003. Over the past 15 years, it has become one of the most successful premium vehicle manufacturers in China, encompassing production and sales of BMW automobiles in China, as well as local R&D.

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The Volkswagen Group is the only other foreign automaker granted permission from the Chinese government to increase its ownership of its Chinese joint venture for now.

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