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BMW takes control of China joint venture

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German premium carmaker BMW said it planned to acquire a further 25 percent stake in its venture with Brilliance China Automotive for €3.6 billion ($4.2 billion), bringing its total stake to 75 percent, reported Deutsche Welle (Germany).

Foreign carmakers have long been restricted to holding no more than a 50 percent stake in their China operations, but Beijing decided to relax ownership caps this year.

The changes in ownership rules are a boon for foreign automakers who will gain a greater share of control and profits from their China business, hurting prospects for their Chinese partners.

Brilliance China's shares in Hong Kong have taken a dive this year and were suspended from trading on Thursday.

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"Our joint venture is the cornerstone of the BMW brand's sustained success in its largest single market," BMW Chairman Harald Krüger said in a statement.

The Munich-based company said it would be focusing even more on the development and production of electric vehicles in China.

The carmaker indicated it would invest €3 billion in a new plant near its Tiexi facility in China to double its capacity on the ground.

Together with Brilliance, BMW aims to produce a total of 650,000 units annually by 2020.

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Chinese automaker Geely and Daimler, the maker of Mercedes-Benz vehicles, are talking about a joint venture for ride-hailing and car-sharing services in China, reported Handelsblatt Global (Germany).

Sources told Handelsblatt that the venture, first reported by Bloomberg, is still under discussion. The idea is to take on market leader Didi Chuxing in a sector many see as the future of automobiles as individual ownership fades.

The joint venture would be the first concrete result of strategic talks between the two companies since Geely took a 10-percent stake in Daimler in February. It was clear from the outset that this was a strategic investment on the part of the Chinese company and part of China’s effort to become the global leader in the industry.

Who is in the driver’s seat?
The new venture has a certain logic to it, but it will do nothing to alleviate the apprehension investors may feel about who is in the driver’s seat at Daimler. Longtime CEO Dieter Zetsche announced last month that he will retire next year and Ola Källenius will take his place. Last week, longtime CFO Bodo Uebber also quit after being passed over for the top job.

Mr. Zetsche hinted at the Paris Motor Show last week that something concrete was in the works. He called himself “very optimistic” and found the dialogue with Geely “very constructive.” The partnership “offers more opportunities than possible risks,” he said.

Be that as it may, it won’t be Mr. Zetsche or Mr. Uebber, Geely’s two main interlocutors at Daimler, who will be taking that partnership to the next level. Rather, it will be Mr. Källenius and the executive board member responsible for China, Hubertus Troska.

Daimler attaches the utmost importance to another Chinese partner, however. It has been making Mercedes cars in China since 2005 with the government-owned BAIC. Industry sources cautioned Daimler to be careful. “Daimler has to watch out not to cross BAIC,” they said, because China has become the company’s biggest market.

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Reporter: Denes Osvalt
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Category: Politics, Business
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