The first joint venture automobile enterprise that broke through the limit of 50% share ratio of foreign capital has finally settled.
On February 11, BMW Group officially announced that it would “strengthen cooperation in China and extend the joint venture contract until 2040”.
It is reported that from now on, the new joint venture contract of BMW Brilliance Automotive Co., Ltd. (hereinafter referred to as “BMW Brilliance”), a joint venture of BMW Group in China, has officially come into force, and the joint venture cooperation between BMW Group and Chinese partners has been extended to 2040. BMW Group’s stake in BMW Brilliance was changed to 75%, and its partner Brilliance China Automobile Holding Co., Ltd. indirectly held the remaining 25%.
BMW Brilliance has therefore become the first joint venture with a foreign share ratio of more than 50%.
Public reports show that BMW Group has long been willing to increase its holdings. On October 11, 2018, on the occasion of the 15th anniversary of the founding of BMW Brilliance, BMW Group announced that it would acquire part of the equity of BMW Brilliance at the price of 3.6 billion euros, and the shareholding ratio would be increased to 75%. Brilliance also announced that it would sell a 25% stake in BMW Brilliance to BMW. The two sides also jointly announced that they would extend the joint venture agreement of brilliance BMW until 2040 (from 2018 to 2040). At the same time, BMW Group also announced that its investment in brilliance BMW will increase by 3 billion euros for the reconstruction and expansion project of Shenyang production base in the next few years. According to the national industrial policy at that time, BMW holding Brilliance will take effect after 2022.
It is worth noting that BMW can become the first enterprise to break through 50% share ratio, which is closely related to the strength of its partner Brilliance group. From multiple perspectives such as enterprise management, brilliance group is undoubtedly very dependent on BMW.
It is reported that brilliance group is in the process of bankruptcy and reorganization. The enterprise has announced many times that brilliance BMW will not be affected. After the share ratio is reduced by 25%, the profits obtained by brilliance group from the joint venture will shrink significantly.
On December 27, 2021, the national development and Reform Commission and the Ministry of Commerce issued the Special Administrative Measures for foreign investment access (negative list) (2021 version), which shows that from January 1, 2022, the restriction on the proportion of foreign capital in passenger car manufacturing and the restriction that the same foreign investor can establish two or less joint ventures producing similar vehicle products in China will be abolished.
Previously, China has lifted the restrictions on the proportion of foreign shares in new energy vehicles in 2018 and commercial vehicles in 2020. The cancellation of the restrictions on the share ratio of passenger cars means that China’s automobile industry has fully opened to the outside world.
So far, BMW Group has become the first beneficiary of China’s relaxation of the restrictions on the share ratio of foreign investors in the automotive industry.
In this regard, BMW said that this move reflects the BMW Group’s long-term confidence in China’s economy and its long-term commitment to China and work together with China.
As a specific measure of BMW’s continuous investment in China, brilliance BMW will usher in another capacity increase this year.
It is understood that its existing factory in Dadong District of Shenyang is under comprehensive expansion, and a new factory in Tiexi District is also under construction. Thanks to this, the production capacity of BMW Group in China will be expanded, the varieties of locally produced models will be further increased, and more pure electric vehicles will be introduced for domestic production.
According to the plan, BMW Group will put into operation the second BMW pure electric vehicle – pure electric 3 Series in Shenyang in 2022, and further enhance China’s position as one of the three major new energy vehicle production bases of BMW Group in the world.
Moreover, this year, BMW will launch 26 new products at one go, covering the main BMW brand, BMW I and BMW M, mini and motorcycle market segments. Among them, BMW’s new energy products will be expanded to 7 models. In addition to the ix3 and IX already on the market, BMW will also launch I4, BMW ix3, pure electric 3-series, a pure electric flagship model and two plug-in hybrid models in the Chinese market. In addition, the first batch of mini electric vehicles for the Chinese market may be produced in the beam automobile factory in Zhangjiagang,
It is expected that by the end of 2023, BMW Group will provide 13 pure electric products in the Chinese market. By 2025, a quarter of its sales in the Chinese market will be pure electric vehicles.
“In the transformation process of BMW Group towards electrification, digitization and sustainable development, China, as a leader in these aspects, is our best choice and best partner.” Gao Le, President and CEO of BMW Group in Greater China, said, “BMW Group will continue to take China as its home, peer with China and joint venture partners, and will continue to invest in the future to make long-term contributions to China’s economic growth and social development.”
Data show that since its establishment in 2003, BMW Brilliance has become the largest tax paying enterprise in Shenyang for 15 consecutive years, with a tax amount of 38 billion yuan in 2020 alone. Last year, BMW Brilliance purchased nearly 33 billion yuan in China.
According to the view of the industry, BMW Brilliance set a precedent after the restriction on share ratio was lifted, and there should be joint ventures to follow up in the future. Shi Jianhua, Deputy Secretary General of China Automobile Industry Association, said that after the full liberalization of the share ratio, there may be some changes in China’s automobile market, but ultimately it depends on the contribution and ability comparison of Chinese and foreign sides in the joint venture. “On the one hand, China’s auto enterprises have grown rapidly in recent years and already have considerable confidence and strength; on the other hand, foreign companies want to increase their shares in their joint ventures in China. Both in terms of capital and considering localization development, the difficulty and challenge are not small.”
