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BMW Group just bolstered its business partnership in China after extending its joint venture contract until 2040. This was made possible after the Bayerische Motoren Werke AG German automaker was given a license to do so.
As per Reuters, the Chinese authorities permitted BMW to increase its stake to 75% from 50% in its joint venture BMW Brilliance Automotive in China. The luxury vehicle maker revealed late last week that the license is effective immediately.
With this, the company said that the increased stake would improve the financial results of its automotive by around €7 to €8 billion, which is around $8 to $9 billion. Free cash flow will also go up by about €5 billion. Now, as BMW Brilliance Automotive will own the majority of shares, its Chinese partner Brilliance China Automotive Holdings Ltd., will be retaining the remaining 25%.
It was previously revealed that Munich, Germany headquartered carmaker is expanding its vehicle production in China by adding its X5 models. This unit was previously being imported from the United States, and in the second quarter of this year, BMW Brilliance joint venture, which was founded in 2003, will now make it in the country.
“Today marks an important step, as we continue to expand our long and successful commitment to China. We firmly believe that our continued success in the world’s largest automotive market can only go hand in hand with the growth and further development of our BBA joint venture,” BMW AG’s chairman of the Board of Management, Oliver Zipse, said in a press release.
He added, “The joint venture contract has been extended until 2040 and lays the foundation for sustainable business success, creating growth and prosperity in the province of Liaoning and beyond.”
At any rate, BMW will be investing €3.7 billion or $4.2 billion to acquire the additional 25% stake and take the majority control of its joint venture in Beijing. The company was able to obtain the necessary license for the acquisition, and this is part of the company’s efforts to keep up with and secure its place in the car market worldwide.
