BMW to Pay $4.2 Billion to Take Control of its Chinese Joint Venture

author: Eric Walz   

Automaker BMW is paying 3.7 billion euros (US$4.2 billion) to raise its stake in its joint venture with Chinese automaker Brilliance China Automotive Holdings Ltd. BMW's stake in its joint venture is currently 50%, but it will climb to 75% on Feb 11. Brilliance will indirectly will hold the remaining 25%.

BMW Brilliance Automotive Ltd ("BBA"). It was founded in 2003 and produces BMW vehicles with internal combustion engines and electric vehicles for the China market, as well as vehicles for export at two locations in Shenyang (Liaoning Province).

The BBA joint venture will be fully consolidated in the Group Financial Statements of BMW AG. Payment of the purchase price is expected to be completed by Feb 22.

As part of the new agreement, BMW is extending its joint venture contract with Brilliance through 2040. The agreement on the contract extension was signed by the two joint automakers back in Oct 2018, on the 15th anniversary of the company. 

"Today marks an important step, as we continue to expand our long and successful commitment to China," said Oliver Zipse, Chairman of the Board of Management of BMW AG. "We firmly believe that our continued success in the world's largest automotive market can only go hand in hand with the growth and further development of our BBA joint venture." 

China is the world's biggest auto market and an important one for BMW. In 2021, 846,237 BMW Group vehicles were delivered to customers in the Chinese market,  which was an 8.9% jump from 2020. Last year, BBA produced more than 700,000 BMW vehicles in China with a workforce of roughly 23,000 employees.

In the past decade alone, BBA has invested more than 10 billion euros ($11.4 billion) in China. 

BBA is increasing production capacity in Shenyang again this year in order to meet rising demand. The BBA manufacturing facility in the Dadong district is currently undergoing a comprehensive expansion to ramp up production. In addition, a new plant is being built in the Tiexi district. 

The BMW Group said it will use the additional capacity to locally manufacture models for the Chinese market, which are also being produced in other plants. It will also be used to manufacture additional fully electric models in China.

"BBA's remarkable success story testifies to the proven partnership within the joint venture and with the provincial government in Liaoning," said Nicolas Peter, member of the Board of Management of BMW AG responsible for Finance. "Our local investments are proving to be the right approach. BBA has significantly contributed to position the BMW brand as a leading premium brand in China." 

Since 1994, rules have been in place in China that limited foregin automakers from owning no more than 50% of their joint venture partnerships with Chinese automakers. The rules were intended to help support China's own auto industry. 

The previous rules required overseas automakers like Toyota, BMW, Audi, General Motors and Ford Motor Co to form joint venture partnerships with a Chinese partner to build cars locally. 

However, the Chinese government announced in April 2018 that it was removing the 50% cap and further opening up its market to global automakers. 

Tesla was the first automaker to wholly own its operations in China, paving the way to build its Shanghai factory in 2019. Building cars locally allows Tesla to avoid steep tariffs giving the company a big advantage over its rivals.

The foreign ownership limit of 50% for passenger vehicle (PV) joint ventures was officially lifted on Jan. 1 2022, according to the 2021 version of the Special Management Measures for the Market Entry of Foreign Investment issued by China's National Development and Reform Commission (NDRC). 

The caps on foreign ownership of local" new energy vehicles" (NEVs) ventures were removed earlier in 2018 and 2020. NEVs in China are classified as fully-electric or hybrid vehicles. Since Tesla produces only NEVs, it was the first U.S. automaker to fully own its factory and operations in China.

In 2020, BMW announced it was exporting its China-built iX3 electric SUV to 39 countries around the world. The first China-made iX3s built by BBW were shipped on Nov. 11, 2020 from the Port of Dalian to the countries and districts, mainly in Europe. It marked the first time that BBW exported vehicles on such a large scale. 

Eric Walz

Originally hailing from New Jersey, Eric is a automotive & technology reporter covering the high-tech industry here in Silicon Valley. He has over 15 years of automotive experience and a bachelors degree in computer science. These skills, combined with technical writing and news reporting, allows him to fully understand and identify new and innovative technologies in the auto industry and beyond. He has worked at Uber on self-driving cars and as a technical writer, helping people to understand and work with technology.