BMW to pay €3.6bn to increase stake in Chinese JV

December 2018 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

December 2018 Issue

Strengthening its commitment to its successful business development in China, the BMW Group has agreed a long-term extension to its joint venture (JV) BMW Brilliance Automotive (BBA) with Chinese automaker Brilliance China Automotive Holdings (CBA).

BMW intends to pay €3.6bn to increase its stake in BBA from 50 to 75 percent and both BMW and CBA have signed a corresponding agreement. The extended contract is valid for 22 years – from 2018 to 2040 – and is expected to lead to extensive investment and a further expansion of production capacity in what is the world’s largest automobile market.

The BBA JV extension is subject to the approval of the relevant authorities and the consent of the CBA shareholders’ meeting.

Over the past 15 years, BBA has become a cornerstone of the BMW brand’s success in China, its biggest single market. In 2017, around 560,000 BMW brand vehicles were delivered to customers in China. Two-thirds of all BMW vehicles sold in China last year were produced by BBA at the two automotive plants in Tiexi and Dadong.

“We are consistently following our growth strategy for China,” said Harald Krüger, chairman of the board of management of BMW AG. “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. Our success story goes hand in hand with the success of the joint venture BBA. Together with our partners, we contribute to the sustainable development of the Chinese market.”

In the context of the 15th anniversary of the BBA JV, BMW and CBA also announced an investment of more than €3bn in new and existing plant structures over the coming years. In Tiexi, a new plant on the existing plant ground will double the site’s capacity, while extensive remodelling and expansion measures will target the neighbouring plant in Dadong (the Tiexi and Dadong automotive plants produced almost 400,000 vehicles in 2017). Production capacity in Dadong will remain the same, but the structure of the plant will gradually be expanded for future BMW model variants and the expected market growth.

As a result of the expansion, the total annual production capacity of BMW automobiles at the BBA plants will gradually increase to 650,000 units from the early 2020s and will create 5000 new jobs.

“As well as celebrating 15 years of a strong and reliable partnership with CBA, we are also laying the foundation for further growth of the BMW brand in China,” stated Dr Nicolas Peter, member of the board of management of BMW responsible for finance. “BBA is a unique success story and provides an outstanding example of a strong partnership built on trust,” added Yumin Qi, chief executive of Brilliance Automotive Group Holdings.

Going forward, the BMW Group anticipates strong growth in demand for electric and electrified vehicles in China. As a leader in electromobility, the company is systematically gearing its production towards this trend. Indeed, from 2020, the fully-electric BMW iX3 is expected to roll off the production line at the Dadong plant, its sole production location, and be exported from China to markets worldwide.

“15 years of BBA is a joint success story that we share with our partners and over 18,000 associates,” said Dr Johann Wieland, president of BBA. “With this additional investment, innovation and job creation, we will continue our high-quality development and drive economic growth.”

Fraser Tennant