Last updated on September 2, 2018
Whether shareholding ratios in Chinese-foreign joint ventures will change is forming the focus of widespread attention as China gradually eases its curbs on shareholding in auto companies. Bayerische Motoren Werke will be the first to up its shareholding in its JV to up to 75 percent per Chinese government media.
Neither BMW nor its local JV BMW Brilliance Automotive has commented on these reports, but an official article confirms that BMW’s shareholding in BMW Brilliance will top 50 percent.
“BMW is to lift its shareholding in its Chinese joint venture to over 50 percent,” claims the article, titled [Premier] Li Keqiang Brings Back From Germany More Than Just USD30 Billion in Deals, posted on China’s national government website on July 12.
The stock price of Brilliance China Automotive Holdings [HK:1114], BMW’s Chinese partner, nonetheless dropped almost 20 percent that same day.
“Since details of national policies remain undeclared, how can they know the detailed ratio?” Qi Yumin, board chairman of Brilliance Auto asked dismissively.
Lids on shareholding by foreign capital in the special and new-energy vehicle manufacturing sectors will also be scrapped under the Special Management Measures (Negative List) for the Access of Foreign Investment (2018) that China’s commerce ministry and development and reform agency jointly issued June 28.
Beijing plans to likewise lift caps in the commercial vehicle sector in 2020, and the passenger car area by 2022, as well as axing the rule that the number of passenger car JVs may not exceed two, also in that year.
BMW and Brilliance Auto Group had already signed a framework agreement for the long-term development of their BMW Brilliance JV before word spread that the German carmaker was to jack its holding.
BMW Brilliance will keep upping its investment and expand production and its development and cooperation in third-party markets. It will also market the MINI model the Great Wall Automobile-BMW JV produces.
“The cooperation between Brilliance and BMW has deepened. BMW offered generous favors to Brilliance in their new partnership, and the increase of its shareholding is precisely the bargaining chip,” Zeng Zhiling, the general manager of Shanghai-based LMC Automotive Consulting told Yicai Global.
Because BMW Brilliance is the main contributor to Brilliance’s profits, it will not willingly sell its shares unless an offer is too attractive to resist, concludes a research report issued last week by Germany’s Deutsche Bank.
If BMW does increase its stake, the company will speed the release of new localized products and will even mull stamping China as its export production base, the German central bank report also predicts.