Under rules set by China in 1994, foreign firms that want to make cars in the country must do so in partnership with a local company. BMW reached an agreement with Brilliance Auto in 2003 to form the BMW Brilliance Automotive (BBA) joint venture, which currently produces around 400,000 vehicles per year from two plants, Dadong and Tiexi, in Shenyang province.
China is in the process of relaxing its foreign ownership rules, with the joint venture requirement for car producers due to be phased out in 2022. BMW has now signed a new 22-year extension to its deal with Brilliance, running until 2040, during which time it will increase its stake in BBA from 50% to 75%, at a cost of £3.1 billion.
BMW will also invest more than £2.6bn in BBA’s production facilities, including the construction of a new plant on the current site in Tiexi that will increase its Chinese production capacity to 650,000 units. These upgrades will allow Tiexi to produce both combustion-engined and electric vehicles.
The Dadong plant will also be modernised and expanded, and become the sole global production location for the BMW iX3 electric SUV, which is due in 2020. The car's batteries will be produced at BBA's battery production facility at Tiexi.
Fully taking over BBA will give BMW much greater control of its expansion plans in the vital Chinese market, where it sold 560,000 cars last year – two-thirds of which were made at BBA plants. BMW is in the process of launching 16 new products in the country this year and has announced a second joint venture with Great Wall to produce the Mini Electric for the Chinese market.