Beijing - German carmaker BMW AG and its Chinese partner Brilliance Automotive Holdings Ltd on Thursday said they planned to invest 5 billion yuan (735 million dollars) to expand joint-venture production in China. BMW said the investment, which is split 50-50 between the two firms, would be used to build a second plant in the north-eastern city of Shenyang to increase its annual production to up to 300,000 vehicles in China.
BMW's chief finance officer Friedrich Eichiner hailed the agreement as an "important strategic step" that would also help BMW to reduce the effects of fluctuations in currency exchange rates.
The two firms currently produce several BMW Series-3 and Series-5 models in Shenyang, where they are scheduled to start building the second plant next year with production lines operating from early 2012.
Production capacity in Shenyang would rise from 41,000 to 100,000 vehicles but could eventually reach 300,000 units if the market supported such expansion, BMW said.
Eichiner said Brilliance had proved a "reliable joint-venture partner" over six years, during which BMW invested some 450 million euros (670 million dollars) in the joint-venture.
BMW's agreement represents the largest single foreign investment in China, Chinese state media said.
It comes as China's total vehicle production and sales are forecast to reach 12 million units this year, making it the world's largest car market.
BMW and other foreign car firms are drawn by statistics showing that China's 1.3 billion people still own just 34 vehicles per 1,000 people, compared with more than 500 cars per 1,000 people in many developed nations.
More than 90 Chinese and foreign vehicle brands are already competing in China, offering about 400 models, according to US car analyst JD Power.
But with most major manufacturers of passenger cars planning rapid expansion of production, officials have warned that the excitement in China's auto industry might encourage overexpansion that could lead to a glut of cars.
