BMW revs up backing for Chinese joint venture to seek long-term growth

BMW AG is to expand its joint venture with Brilliance Automotive Group Holdings as part of efforts to bolster its continued success in China's increasingly competitive premium car market.

The joint venture, BMW Brilliance Automotive, will scale up the combined capacity of its car plants in Shenyang, Liaoning province to 520,000 vehicles in 2019, according to a long-term framework agreement signed by both parties in Germany on Monday.

The deal outlines BMW's further investment in the joint venture as well as localizing its first electric model, the BMW iX3 SUV, for the international market.

"Today's signing represents a new chapter in the success story of our BMW Brilliance Automotive joint venture," said Harald Krueger, chairman of the board of management of BMW AG in a statement.

"Our agreement sets a long-term framework for our future in China - a future involving continued investment, further growth and a clear commitment to the development and production of electric vehicles," Krueger said.

The joint venture, established in 2003, has spent up to 52 billion yuan ($7.85 billion) since 2009 on its manufacturing facilities - two car-producing plants and one engine plant - in Shenyang.

It produced two-thirds of all the 560,000 BMWs delivered to customers in China in 2017 - more than the next two largest markets, the United States and Germany, combined.

With the addition of the X3 SUV, the joint venture currently has six BMW models in its local portfolio.

BMW Brilliance is planning to produce the all-electric BMW iX3 by 2020.

"The next chapter of our cooperation has the potential to go beyond our existing motto - in China, for China. The all-electric BMW iX3, produced by BBA from 2020, will find customers around the world," Krueger said.

Analysts said the move of making cars in China for the international market, which has been rare so far in the country's automotive industry, signals the joint venture's growing importance in BMW's ACES strategy, which stands for automated, connected, electrified and services.

BMW has long paved the way for localizing production of new energy cars in China, with its research and development center, which has a special focus on such cars, established in 2013.

It built a battery plant in Shenyang last year, which is the first battery-making facility by any premium automobile manufacturer in China, and construction of the plant's second phase started in May this year.

Jochen Goller, president and CEO of BMW Group Region China, said the deal will see BMW and Brilliance Automotive deepen their cooperation and thus better promote BMW's development in China.

"Our joint venture BBA, deeply incorporated into the global strategic layout of BMW Group and Liaoning, BMW's home base in China, will now play an even more important role in the successful implementation of our worldwide new energy vehicle as well as ACES strategies."

China has been the world's largest market for new energy vehicles since 2015, with their sales continuing to rise rapidly.

Statistics from the China Association of Automobile Manufacturers show that sales in the first five months reached 328,000 units, a 141.6 percent increase on the same period last year.

The association said it is confident in new energy cars and expects sales this year to exceed 1 million units. China sold 777,000 such cars last year.

Nicolas Peter, a BMW board member responsible for finance, said the joint venture's success is the result of the two partners' concerted efforts over the past 15 years.

"The tremendous growth we have achieved over these years is only possible due to our strong and reliable partnership with Brilliance. Together we have set the foundation for future growth."

Qi Yumin, chairman of Brilliance Automotive Group Holdings, said, "BMW Brilliance Automotive is a unique success story and stands out as an example of trusted partnership."

He added that the joint success is also driving the economic development of Liaoning province, increasing jobs and helping to improve the industrial chain in the region.

Currently BMW Brilliance employs over 800 professionals in its research and development facilities, three-quarters of whom are Chinese.

In total, it offers nearly 17,000 jobs in the province.

The joint venture has some 350 tier-one suppliers, of which a fifth are from Liaoning province.

From 2009 to 2016, it spent about 500 billion yuan on procurement in China, with two thirds of which spent in Liaoning.

lifusheng@chinadaily.com.cn