BMW to get control of China venture in ‘new era’ for foreign automakers

by SpeedLux
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BMW will pay 3.6 billion euros ($4.2 billion) to gain control of its main joint venture in China, the first such move by an international automaker as Beijing starts to relax ownership regulations for the world’s biggest auto market.

The luxury automaker state on Thursday it would increase its stake in its venture with Brilliance China Automotive Holdings Ltd to 75 percent from 50 percent, with the deal closing in 2022 when regulations capping foreign ownership for all auto ventures are lifted.

The move will likely spur BMW to move more production to China, helping to safeguard profits amid a whipsawing trade war between Washington and Beijing that has raised the expenses of BMW importing cars manufactured at its U.S. plant located in South Carolina.

The deal also marks a milestone for foreign automakers which have been capped at owning 50 percent of any Chinese venture and have had to split profits with their regional partner, and could encourage competitors such as Mercedes maker Daimler.

“We are now embarking on a new era,” stated BMW Chief Executive Harald Krueger in a speech in Shenyang, northeast China, where the joint venture is based. He thanked Chinese Premier Li Keqiang, whom he said “personally supported” the strategy.

Evercore ISI analyst Arndt Ellinghorst regarded the deal a major breakthrough. “In the future, BMW will have the entire control over the biggest regional profit pool of its business,” he wrote.

Beijing has been keen for international automakers to spend more in China and has also eased restrictions that cap foreign ownership of electric vehicle businesses at 50 percent.

The joint venture thinks to add a new plant, investing more than 3 billion euros on a large-scale expansion of the existing production facility, Krueger stated.

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