BMW Brilliance Automotive Ltd, the carmaker's key Chinese venture, recently announced that it will build a third plant in Shenyang city located in the province of Liaoning. The announcement was confirmed on China's cabinet website on Wednesday. The deal was previously discussed during a meeting between Chinese Premier Li Keqiang and BMW Chief Executive Harald Kruger a couple of months ago.
Many market experts are somehow wary about this recent development. BMW's expansion decision came in a time when China and the United States are embroiled in a bitter trade war. Many observers believe that because of this trade war, BMW will have difficulty importing and selling SUVs produced in the United States. The company later revealed its possible plan of shifting some of its SUV productions to China in order to offset the negative effects of the trade war.
BMW confirmed that it will invest an additional $4.2 billion on its joint venture. This move is a first of its kind for BMW, as China is starting to relax regulations and ownership rules on its domestic market.
With this massive investment plan, the German carmaker will raise its stakes of Brilliance China Automotive Holdings Ltd to 75 percent from 50 percent. The deal will close in 2022 at a time when rules for capping foreign ownership in all auto ventures will be completely lifted.
This latest deal also marks a major milestone for foreign carmakers in China. After many years, China has finally lifted the 50 percent cap to any China venture, in this case an automaker.
Mr. Kruger described the deal as a start of a "new era." He also thanked the Chinese Premier whom he said made personal efforts in order to put together the deal.
With the growing threat of the trade war and China's decision to slowly open up its domestic market, it will come as no surprise to many market analysts should BMW decide to shift some of its production to China. Many believe that this decision will help boost BMW's profit amidst the growing threat of the trade war.
As trade tensions between China and the United States continue to grow, the former is also slowly easing up regulations in order to attract foreign investors. China promised that it will open up its markets more, adding that the country will slowly cut taxes on cancer medicines, imported vehicles, and also a wide range of consumer goods.
