BMW's China JV allowed to buy equity in local EV battery maker-Sino-US

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BMW's China JV allowed to buy equity in local EV battery maker

The BMW all electric i Vision Dynamics concept car is displayed at the Los Angeles Auto Show on November 29, 2017. Photo: Reuters

BMW Brilliance Automotive, a joint venture company between Germany's BMW and China's Brilliance Automotive, has been allowed to make an equity investment of up to 2.85 billion yuan in a leading Chinese electric car battery marker, in another sign of the German automaker's heightened interest in the Chinese electric car market.

Recently, BMW Brilliance Automotive signed a strategic cooperation agreement with Contemporary Amperex Technology, gaining the right to participate in the latter's future fundraising plans. Last month, Contemporary Amperex Technology, which aims to become the world's largest electric car battery maker by 2020, completed its initial public offering at the Shenzhen Stock Exchange.

According to the agreement, BMW Brilliance Automotive will make a prepayment of 2.85 billion yuan as part of a long-term contract to purchase designated battery cells from Contemporary Amperex Technology. The carmaker will also buy an 815 million yuan battery production project from the Chinese electric car battery manufacturer, said the agreement.

It is not the first attempt by BMW to tap into China's booming electric car battery industry. Earlier this month, BMW announced plans to invest in a battery cell manufacturing base which Contemporary Amperex Technology is building in the eastern German state of Thuringia.

BMW is among the first foreign automakers such as Volkswagen and Daimler which will place orders for the battery cells produced in the Thuringia-based plant. According to a procurement contract, BMW will purchase battery cells valued at 4 billion euros from Contemporary Amperex Technology, with the battery cells worth 1.5 billion euros being produced at the Thuringia-based factory.

The Thuringia-based facility is scheduled to start operation in 2021 and achieve a production capacity of as much as 14 gigawatt hours of battery cells in 2022.

With the Chinese government promoting the use of new energy cars and implementing a strict policy that requires automakers doing business in the country to enhance the production proportion of pure electric cars and plug-in hybrid vehicles, a number of big foreign automakers have strengthened their ties with the local partners mainly by means of establishing new joint venture companies focusing on the building of Internet-connected, electric cars.

Compared with other foreign carmakers, BMW has reportedly taken a step further by announcing plans to boost its stake in BMW Brilliance Automotive to at least 75 percent.

The BMW proposal has been welcomed by Chinese Premier Li Keqiang, who said during a recent tour of Germany that the Chinese government would support the expansion of foreign ownership in Chinese automobile companies.

If the plan is approved, BMW would become the first foreign automaker to take a majority control of a joint venture in China, thus having a greater say in the future development of the joint venture with Brilliance Automotive.

Last month, the Chinese authorities rolled out a new version of the negative list to fully lift the foreign ownership limits on new energy vehicles. The restrictions on foreign ownership in joint ventures manufacturing commercial cars and passengers cars will be removed by 2020 and 2022 respectively, according to the new negative list, which will take effect on July 28.

Although some foreign media reports describe it as Beijing's compromise to the United States, which is fighting a trade war with China, the Chinese government says that the measures allowing wider market access for foreign investors are what it had planned to stick to the path of opening up and economic reforms.

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