BMW Unveils Plan to Boost Production in China

(Bloomberg) -- BMW AG is increasing manufacturing capacity in China in a move that will help the automaker lower its reliance on imports from a U.S. factory just as trade tensions between the two countries intensify.

BMW and Chinese partner Brilliance Automotive Group Holdings signed an agreement Monday to expand their joint venture BMW Brilliance Automotive, the German company said in a press release. The deal will boost the number of cars they produce annually at two facilities in China to 520,000 in 2019.

BMW declined to say how much the output increase will cost. The carmaker last year spent 1 billion euros ($1.2 billion) to lift China capacity to 450,000 vehicles a year from 300,000. About a third of the cars it sold in the country last year were imported, including sport utility vehicles made in the U.S.

BMW’s expansion in the Chinese market follows the imposition by President Donald Trump of a 25 percent additional tariff on $34 billion of Chinese imports including cars -- a move that triggered an immediate response from Beijing. The move by BMW also coincides with plans outlined by China’s April decision to ease foreign-ownership restrictions in the country, with the possibility that foreign automakers could eventually buy out their local partners.

Chinese Exports

“Our agreement sets a long-term framework for our future in China - a future involving continued investment, further growth and a clear commitment to the development and production of electric vehicles,” BMW CEO Harald Krueger said in the statement. He has previously said the carmaker is considering delivering other Chinese-made cars outside of the country.

BMW’s joint venture with Brilliance produces all of the carmaker’s models sold in China -- including 1,3 and 5-Series cars, as well as the 2-series active tourer and the X1 sports utility vehicle. The company started producing its X3 SUV in China in May and has laid plans for the electric version -- the iX3-- to be produced locally and exported globally starting in 2020.

The BMW agreement was one of dozens signed by German and Chinese companies Monday during a visit by Premier Li Keqiang of China to Chancellor Angela Merkel in Berlin. BASF SE unveiled plans for a $10 billion Chinese chemicals plant, while engineering firm Siemens AG said it would offer its Mindsphere cloud software in mainland China starting in 2019.

©2018 Bloomberg L.P.