BMW sees up to US$9.1 billion boost from China stake purchase

[FRANKFURT] BMW said taking over its Chinese car-making joint venture will bolster earnings by as much as 8 billion euros (US$9.1 billion), sending a signal to peers that it pays to assume control of operations in the world's largest car market.

Chinese authorities gave BMW permission to raise its stake in the business with Brilliance China Automotive Holdings to 75 per cent from 50 per cent, the German company said on Friday (Feb 11).

The move will lead to a positive one-time effect of 7 billion euros to 8 billion euros for BMW's main automotive segment.

BMW is one of the first Western automakers to benefit from China's relaxed foreign ownership rules - a watershed moment for the industry.

China is BMW's biggest national market, accounting for about a third of global deliveries last year. Its venture there assembles BMW-branded models for sale locally and the all-electric iX3 sport utility vehicle for export to global markets.

Before the relaxed rules took effect this year, foreign manufacturers weren't allowed to own more than half of their Chinese joint venture and had to share profits with local partners.

Tesla was a notable exception, with government officials allowing it to fully control its local subsidiary.

"Today marks an important step, as we continue to expand our long and successful commitment to China," BMW chief executive officer Oliver Zipse said in a statement, adding the company extended its joint-venture agreement with Brilliance until 2040.

BMW said it plans to give investors more details on the effects of fully consolidating the business in its balance sheet when releasing its full-year earnings report on March 16.

Jefferies analysts led by Philippe Houchois estimated in November that BMW's free cash flow would increase 37 per cent to about 9 billion euros this year once the venture's figures are included. BLOOMBERG