BMW Group's official holding of BMW Brilliance is a win-win move

From February 11, 2022, the new joint venture contract of BMW Brilliance Automobile Co., Ltd. (hereinafter referred to as "BMW Brilliance") came into effect, and the bmw group's shares in BMW Brilliance were changed from 50% to 75%, and BMW Brilliance was formally controlled, and Brilliance China Automotive Holdings Co., Ltd. indirectly held the remaining 25% of the shares. The validity of the joint venture between the two parties will be extended until 2040. EV Century believes that BMW Group's formal holding of BMW Brilliance is a win-win move, although this means that Brilliance Auto's profits from BMW Brilliance will be reduced in the future.

In 2018, BMW Group and Brilliance Automotive reached an agreement to acquire a 25% stake in BMW Brilliance for 3.6 billion euros, and the BMW Brilliance joint venture contract was extended to 2040, and BMW Group's investment in BMW Brilliance will increase by 3 billion euros for the renovation and expansion of the Shenyang production base in the next few years. From 1 January 2022, China officially lifted the restriction on foreign ownership in passenger car manufacturing and the restriction that the same foreign company could establish two or fewer joint ventures in China to produce similar vehicle products, allowing the BMW Group to formally take control of BMW Brilliance.

Why is this a win-win? First of all, there is no doubt that this will further enhance the confidence of bmw group to increase investment in China, and build BMW Brilliance and its Shenyang base into the most important production and research and development base of BMW Group in the world. This is of great help to the BMW Group in its competition in both the global and Chinese markets.

BMW Brilliance will continue to expand its production capacity this year, and the existing plant in Shenyang's Dadong District is currently undergoing a full expansion, and a new plant in Tiexi District is also under construction, which will become BMW Brilliance's third plant. As the BMW Group expands its production capacity in China, the variety of models produced by BMW Brilliance will further increase, including more pure electric models.

BMW Brilliance's Shenyang Dadong plant, which was built after its establishment in 2003, is its first plant. In 2014, BMW Brilliance began to expand a new plant with a complete set of four processes in the northeast of the Dadong plant, and officially opened on May 19, 2017. In April 2019, the foundation stone for the expansion of the Dadong plant was laid, and the new project is expected to be completed in May 2022. Construction of BMW Brilliance's Tiexi plant began in June 2010 and was officially opened on May 24, 2012, with the first phase covering an area of more than 2 square kilometers. On April 1, 2020, BMW Brilliance started construction of its new Tiexi plant, which is scheduled to start mass production in 2022.

In addition to three production plants, the BMW Group has also built a powertrain plant and an R&D center in Shenyang. There is also a power battery center in the powertrain plant.

In 2021, bmw and MINI brands delivered a total of about 846,000 new vehicles in the Chinese market, an increase of 8.9% year-on-year, breaking the sales record since entering China in 1994 and becoming the only brand in the BBA to achieve positive growth. After holding BMW Brilliance, BMW Group is bound to let go of its hands and feet, which will also have an impact on the competitive landscape of the entire luxury car market.

Second, it contributes to local economic development and employment expansion. BMW Brilliance's contribution to Shenyang's economic development and employment is obvious to all. Since its establishment in 2003, BMW Brilliance has become the largest taxpayer in Shenyang for 15 consecutive years, paying 38 billion yuan in 2020 alone. In 2021, BMW Brilliance's total procurement in China will reach nearly 33 billion yuan. With BMW Brilliance as the center, Shenyang has also built an advanced automobile manufacturing industry cluster. Of course, these achievements are inseparable from the strong support of Liaoning Province and Shenyang City to BMW Brilliance.

With the further increase of investment after bmw group holding BMW Brilliance, there is no doubt that it will make a greater contribution to the economic development and employment expansion of Liaoning Province and Shenyang.

As Chiptze, Chairman of the BMW Group, said, "The success of the BMW Group in China is inseparable from the growth of the joint venture BMW Brilliance. The new joint venture contract has been extended until 2040, which will lay a solid foundation for BMW's sustainable business success in China, while also contributing to the development and prosperity of local and other interested parties in Liaoning."

Third, for Brilliance Auto, its profits from BMW Brilliance will be reduced in the future, but this is a reasonable choice under helplessness. Brilliance Auto's operations have deteriorated in the past few years and are currently in bankruptcy reorganization. In the policy environment of the liberalization of the joint venture share ratio, whether from the aspects of capital, technology, management and other aspects, Brilliance Auto has been unable to maintain 50% of the shares held by BMW Brilliance, and it is inevitable to become a minority shareholder.

The sale of a 25% stake in BMW Brilliance also allowed Brilliance Auto to receive substantial compensation. According to brilliance China Automotive Holdings Limited's announcement on February 11, the total consideration of these shares is approximately RMB2.794 billion.

Finally, it will also have some positive impact on the competitive landscape of China's auto industry. As more and more multinational auto companies plan to increase the shareholding ratio of joint ventures in China, the competition in China's auto industry will enter a new stage. Gone are the days when large state-owned enterprises relied heavily on joint ventures to contribute profits, which will spur them to work harder to develop their own brand businesses while increasing their contributions to joint ventures and maintaining their right to speak in joint ventures.