Automakers focus R&D investment in China

International carmakers are investing heavily to localize their research and development operations in China, the world's largest automobile market.

BMW's Chinese venture, BMW Brilliance Automotive Ltd, expanded its R&D center earlier this month in Shenyang, the capital of Liaoning province. The facility is now BMW Group's largest outside Europe.

The new center, spanning more than 40,000 square meters, is five times the size of the first phase of development, put into use in 2013.

"The new R&D center is a testimony to BMW Brilliance's commitment of 'In China, for China'. Innovation is the critical foundation of our corporate strategy, and the center is the connection between innovation and the application," says Johann Wieland, president and CEO of BMW Brilliance Automotive.

BMW Group's sales in China, including BMW and Mini branded vehicles' deliveries, were up by 18.4 percent in the first half of the year.

This strong increase is largely due to full availability of the BMW X1 and the popularity of the new BMW 1 Series sedan, a car designed exclusively for China, according to the group's news release.

According to John Shen, Accenture Strategy Greater China's managing director, "International automakers have to expand their local R&D capabilities to accelerate their product development, while boosting the correlations with the local demands.

"Considering the world's largest market's scale, the international carmakers are focusing more on China, so they are empowering the companies in the country," he adds.

Yale Zhang, managing director of Automotive Foresight (Shanghai), says BMW is among the international automakers expanding their R&D capabilities in the Chinese auto market, together with Volvo Car Group and Volkswagen AG.

Volvo Car Group is to set up a new joint venture with Geely Holding to share existing and future automobile technology, according to a memorandum of understanding that the two parties signed on July 20.

The 50-50 joint venture will have headquarters in China, with a subsidiary in Gothenburg, Sweden.

The partnership will enable Volvo Car Group, Geely Auto and Lynk & Co - all of which are controlled by Geely Holding - to share technologies via license agreements.

Whichever company leads the development will own the technology, and the other group companies will have full access to it through a license, reducing overall development costs.

Local media reports said Volkswagen AG, which entered into a joint venture with JAC Motors called JAC Volkswagen, also has a plan to build a new R&D center for new energy vehicles with a total investment of 6 billion yuan ($910 million; 780 million euros; ??700 million).

Shen says: "The digital evolution is reshaping consumer demand and competition, and the situation in China is ahead of that in the United States and Europe. As a result, the R&D centers in China are necessary, given the expectation it will grow to one of the leading powers in autonomous driving, mobility, digitalization and so on."