BMW AG stands to become the first foreign car manufacturer to own a majority in a Chinese joint venture (JV), showing Beijing is following through on a pledge to increasingly open up the economy to global corporations.
BMW plans to unveil the new ownership structure in its joint venture with Brilliance China Automotive Holdings Ltd (華晨中國汽車控股) soon, a person familiar with the plan said.
BMW now holds 50 percent of the venture. CEO Harald Krueger was in Berlin at the start of the week during a summit between Chinese Prime Minister Li Keqiang (李克強) and German Chancellor Angela Merkel.
Photo: EPA
Among discussions were opportunities to open up China to more foreign investment. As part of corporate deals signed at the meeting, chemicals company BASF SE agreed to invest as much as US$10 billion in a new factory in China that it would wholly own, also a first for that industry.
BMW declined to comment on the state of its discussions with Brilliance.
The German firm is set to boost its stake in the venture to at least 75 percent, Manager Magazin reported earlier.
Brilliance now owns 40.5 percent of the venture.
Owning a larger slice of BMW Brilliance Automotive would come at an opportune time for BMW. The company is heavily reliant on output from its factory in the US, where BMW makes sports utility vehicles (SUV) for the global market.
That strategy risks coming under strain as a trade war between the US and China starts escalating, potentially raising the prices of vehicles exported from the US.
Daimler AG issued a profit warning a few weeks ago, citing the risk of falling demand from Chinese consumers for US-made SUVs.
Companies such as Volkswagen AG, General Motors Co, Ford Motor Co and Toyota Motor Corp also work with local partners in China.
A move by BMW would follow plans outlined by China in April to ease foreign-ownership restrictions in the country, with the possibility that foreign automakers could eventually buy out their local partners.
Global companies have for decades sought better access to the Chinese car market, now the world’s largest.
China in April said it is scrapping the current 50 percent ownership cap for electric-car ventures as soon as this year.
The cap for commercial vehicles is to be eliminated in 2020 and the one for passenger vehicles is to end in 2022.
The Chinese Ministry of Foreign Affairs on Tuesday said in a statement that China and Germany “for the first time reached the agreement on increasing the share of German automobile companies in the jointly invested projects in China.”
BMW this week said it signed an agreement with Brilliance to expand their joint venture BMW Brilliance Automotive. The pact was one of dozens signed by German and Chinese companies during Li’s visit to Germany.
The remaining 9.5 percent of BMW and Brilliance’s venture is held by Shenyang City.
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