BMW to Buy Out Chinese Joint Venture Partner
German car-making giant Bayerische Motoren Werke, aka BMW, has announced it will take control of the BMW Brilliance Automotive (BBA) joint venture company in China and is set to pump billions into ramping up its production capacity in the country.
Currently, BMW owns about 50% of the partnership it has with Brilliance Automotive, but is set to increase this to 75% by buying US$4.16 billion worth of shares. The company, which also owns such brands as Mini and Rolls-Royce, is set to invest a further US$3.5 billion to expand its existing production capacity in China.
Since 1994, if you wanted to build cars in the People’s Republic of China, you had to have a local joint venture partner and you were limited to a maximum foreign ownership of 50%. These rules frustrated many big global brands as it prevented them from gaining full access to the world’s largest car market, allowing the fledgling Chinese market to benefit from protectionism. There was also a requirement to ‘share’ technology, which seems to have lead to some very familiar vehicles being produced by Chinese joint venture partners.
The Brilliance A3 (left) bears striking resemblance to the BMW X1 (right); if not from the front, then from the side:
These rules on ownership are now being relaxed and from 2022, the BBA partnership will in effect cease to operate. The BBA arrangement has very much been the cornerstone of the BMW success in China and BMW will continue to be based in Shenyang, in China’s northern Liaoning province, where North Korea is its neighbour. The plan is to increase production to more than 650,000 cars per year.
BMW has also announced a new partnership in China, this time with Great Wall Motors to build all-electric Minis. This is probably a result of the Chinese government’s desire for electric or hybrid cars to amount to 20% of all new cars sales by 2025. All of the cars built under this new partnership will be destined for the Chinese market.