BMW and Brilliance sign second-phase agreement

Gasgoo.com (Shanghai June 25) - BMW's single brand strategy has been attributed for its success in China. According to a report from China Business News this week, BMW last week announced the signing a second-phase cooperation agreement with Chinese partner Brilliance Group.

The agreement saw Sun Wei, head of Brilliance BMW's PR operations, appointed to the post of vice president of BMW China. His appointment will begin on September 1. Meanwhile, Wu Yanyan, vice president of BMW China's PR affairs, will continue to work with the company's government operations. BMW has also announced that its sales directors for China's key five areas will be promoted to sales vice presidents.

According to BMW China Region CEO and Chairman Karsten Engel, the agreement with Brilliance has already been successfully signed. According to the agreement, the two parties' joint venture agreement will be extended for another ten years until 2028. This extension adheres to BMW's goals to double its sales volume in China within the next nine years.

According to BMW and Brilliance's prior first-phase agreement, the Brilliance BMW JV had four years before its termination. According to Chinese regulations, JVs are usually extended six months before their termination. When asked why they chose to extend their JV so early, Mr. Engel answered that both BMW and Brilliance have voiced their commitments and are focused on expanding on their partnership.

According to Chinese regulations, durations for JV companies are typically between 10 and 30 years, with the longest not exceeding 50 years. Although Brilliance BMW's growth has been exceptionally fast, it is still a ways off from the likes of Shanghai VW and FAW-VW, whose partnerships have been extended for 20 years.

Both BMW and Brilliance have yet to release official details regarding the extension of their partnership, and as such Mr. Engel was not willing to share more specifics. The decision to extend the partnership for ten years will bring it into line with other JV enterprises, whose partnerships are also expiring around the same time; Shanghai VW's partnership is scheduled to expire in 2028, FAW-VW's in 2032, Guangqi Honda's in 2028, Beijing Hyundai's in 2032, Dongfeng Yueda Kia's in 2032 and FAW Toyota's in 2030.

Also worth mentioning is Ministry of Industry and Information Technology Chief Miao Wei's announcement to disregard policies governing the ratio of stakeholders' shares in JV companies for a so-called temporary period of time. Many figures in the industry, including Fu Yuwu, deputy head of the Society of Automotive Engineers of China, and Zeng Qinghong, president of GAC Group, believe that this time period will last approximately ten years, up to around the year 2030.

BMW AG sold 390,000 BMW and Mini branded vehicles in China last year, with 207,400 of those sales coming from its Brilliance BMW JV. A total of 116,200 Brilliance BMW vehicles were sold over the first five months of this year. The JV managed to obtain year-on-year sales growth of 33 percent over that period of time, compared to the 25 percent for all BMWs sold in the country. Brilliance BMW has made impressive strides in the country, with its annual production capacity reaching 300,000 vehicles at the end of last year.

Mr. Engel expects advances in its network, product offerings and production capacity to help BMW achieve average annual sales growth of ten percent in China. He explained: "BMW's current GDP growth is approximately 7.5 percent; growth in the automobile market is usually around the same level as the GDP growth rate. In turn, the growth rate for the luxury automobile market is slightly above that of the automobile market as a whole. If looking at current growth rates, [our] sales volume should double nine years from now."