Brilliance China plunges 30% after BMW takes over JV

14 Octobre, 2018, 17:57 | Auteur: Auguste Feret
  • BMW headquarters in Germany

Until now, foreign carmakers had been capped at owning 50 percent of any venture in China and had to share profits with local partners.

BMW's key Chinese partner, Brilliance Automotive, plummeted by nearly a third on Friday morning in Hong Kong, after it announced the German vehicle giant will pay €3.6 billion (US$4.2 billion) to take control of their joint venture.

The German auto manufacturer and its Chinese partner, Brilliance China Automotive, announced on Thursday a landmark deal to change the balance of equity in their joint venture.

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"We are now embarking on a new era", BMW chief executive Harald Kruger said in a speech in the northeast Chinese city of Shenyang where the joint venture is based.

The world's biggest auto market is fast becoming a major development and production center for plug-in hybrid and electric vehicles, BMW said. The BMW-Brilliance deal is scheduled to close in 2022, the year the requirement ends. The policy is expected to increase the number of electrically powered vehicles in the world's largest auto market in coming years.

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As a result of the joint venture contract, the new agreement is valid for 22 years until 2040 and will further deepen the current successful collaboration between the two companies.

"BMW will gain a competitive edge in the China market", said Yale Zhang, managing director of Shanghai consultancy Automotive Foresight to the Wall Street Journal. BMW said the changes to its joint venture would come into effect in 2022, in line with the new regulations. Last year, the carmaker shipped more than 100 000 sport utility vehicles to China from its Spartanburg plant in SC.

Krueger said China will not only become BMW's biggest market but also an important manufacturing hub to make cars for export to other markets, according to a Chinese government website.

Alongside the deal, BMW will invest in new and existing plant facilities in Shenyang, increasing production capacity to 650,000 vehicles a year from the early 2020s. Production capacity there will remain the same, but the structure of the plant will gradually be expanded for future BMW model variants and the expected market growth.

BMW has been hit particularly hard by the US-China trade war with many of its SUVs imported from the US facing new 25 percent taxes, while cars imported from other countries have benefited from China's tariff cut for vehicles from 25 percent to 15 percent.

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