BMW helping Brilliance China to develop new minibuses

Olaf Kastner, Chief Executive of BMW Brilliance Automotive, said the joint venture between BMW Group (GER:BMW) and Brilliance China Automotive Holdings Ltd (114.HK) had diversified beyond building BMW branded cars in the world’s largest car market.

The Munich-based auto maker is helping its Chinese partner develop engines and a next generation minibus as it seeks to deepen its foothold in China where restrictions prevent foreign owners from exerting full control over local manufacturers.

“This is a partnership, but not formalised,” Kastner said in an interview at China Auto, the motorshow in Beijing.

“This is a project that started a while ago, where we coached Brilliance on the minibus project. But they sourced and built it,” Kastner said, adding that the minibuses may soon be launched under a new brand but he declined to elaborate further.

“I can’t say yet. The name isn’t out,” Kastner said.

BMW has also been helping a Brilliance unit Mianyang Xinchen Engine Co., Ltd., which is also known as XCE, with engines, Kastner said.

“We deliver some materials to XCE, an engine manufacturer belonging to their group,” Kastner said.

Both deals are a sign of the BMW’s efforts to deepen ties with its Chinese partner despite formal rules that limit the influence of foreign car companies in China.

Foreign automakers are required to structure their China investments as joint venture companies with state-owned enterprises, and are limited to a 50 percent ownership cap.

In addition to the ownership threshold, the current policy calls for foreign automakers to set up a jointly-run technical centre in China and to transfer certain technologies to their local partners.

As a result, BMW Brilliance has launched an electric vehicle, the Zinoro, loosely based on a BMW X1, a four-seater with an operating range of around 150 kilometres.

For the time being, the Zinoro will only be available for rent of around 400 Renminbi per day or about 7,400 Renminbi a month if it is rented for a three-year term.

When asked whether BMW and Brilliance would consider modifying their ownership structure to mirror a similar deal done recently by rival Daimler (GER:DAI) and its partner Beijing Automotive, which allowed Daimler to take a 12 percent stake in a Hong-Kong listed unit BAIC (IPO-BAC.SS), Kastner said:

“I think you would have to ask my shareholders to answer that question. We had a very good run and in that respect we have a lot of discussions about how do we continue localisation. The rest can be answered by Hong Kong or Munich.

http://www.finance.yahoo.com
Reporting by Edward Taylor; Editing by Rosalind Russell

Christopher Macgowan
@chrismacgowan

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