BMW plans to take control of China joint venture

BMW headquarters in Germany

BMW headquarters in Germany

"With continuous investment, as well as the development and production of electric vehicles, we underline China's importance as a dynamic growth market for us", said Harald Krüger, Chairman of the Board of Management of BMW AG. This will be good for BMW and good for China, but it risks pouring oil on the already fiery politics of globalization.

By 2020 foreign companies will be able to wholly own a commercial vehicle manufacturer, with the restriction on general automakers lifted from 2022.

The German firm will spend €3.6bn ($4.16bn; £3.14bn) to up its stake in Brilliance Automotive from 50% to 75%. It will eventually consolidate the lucrative entity, which made an 11.1% operating margin past year, into. He thanked Chinese Premier Li Keqiang who he said had "personally supported" the plan.

The country is BMW's single largest sales market, with 560,000 vehicles sold there past year.

Mr Kruger said in Shenyang that the joint venture planned to add a new plant at its site in the city, spending over 3 billion euros on a large-scale expansion of the existing production facility.

"Others will follow over time, but the divorce schedule depends on how strong or capable the local partner is", he said.

He said control of the joint venture could spur BMW to bring production of models like the BMW X4, X5 and X6 sport utility vehicles, which are now built in the United States, to China.

But if the move is a big win for BMW, it spells a diminished role for its Hong Kong-listed partner. Cars made under than partnership are aimed at the Chinese market.

But Chinese demand for mass-market passenger cars has fallen, increasing the dependence of some local players such as BAIC on income from ventures with premium brands like Daimler.

In August, China's new vehicle sales continued to fall, following a drop in July.

BMW reached an agreement with Brilliance Auto in 2003 to form the BMW Brilliance Automotive (BBA) joint venture, which now produces around 400,000 vehicles per year from two plants, Dadong and Tiexi, in Shenyang province.