UPDATE 2-BMW extends joint venture with Brilliance China to 2028

Mon Jun 23, 2014 5:15am EDT

* BMW move follows similar steps by rivals

* Analysts say will help both firms increase market share

* BMW expanding in China to diversify sales away from Europe (Adds details)

By Edward Taylor

FRANKFURT, June 23 (Reuters) - BMW said on Monday it had extended its joint venture with Brilliance China Automotive Holdings until 2028, a move which analysts say would help both companies continue expanding in the world's largest car market.

BMW declined to comment about the details of the contract extension between the two companies, or say whether this entailed more ambitious expansion plans. Brilliance China Automotive Holdings also declined to comment.

The Munich-based auto maker has been working with Brilliance since 2003, and builds the X1 offroader as well as long-wheelbase versions of its 3-series and 5-series cars in plants run by BMW Brilliance Automotive in China.

"Having a strong partner and long-term visibility regarding the relationship is very important in order to safeguard BMW's position in China," analysts at ISI Group said in a note on Monday.

Despite a gentle easing in national economic growth in 2013, China's auto sector grew 15.7 percent to 17.9 million passenger vehicles, according to the China Association of Automobile Manufacturers.

BMW is aiming for 2014 sales of 2 million or more, after it delivered a record 1.96 million cars in 2013. Of the 1.96 million BMW and Mini cars sold in 2013, 20 percent were sold in China.

The German firm is expanding its China operations because it wants to cut its dependency on the sluggish European market, which last year accounted for 44 percent of group sales.

In China, BMW Group sold 390,713 Mini and BMW branded cars in 2013, a 19.7 percent rise from the year earlier.

BMW has been broadening its footprint in China. Earlier in June it placed yuan-denominated asset-backed securities, a move which helps pay for expansion plans in local currency.

BMW's effort follows on from Daimler, which last year restructured its joint venture with BAIC Motor as a way to gain a tighter grip of its sales and distribution network in China.

European and U.S. manufacturers are eager to increase their presence in China, but have been limited to owning 50 percent or less of joint venture companies run together with Chinese state-owned enterprises.

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. (Additional reporting by Shen Yiming; Editing by Erica Billingham and Keiron Henderson)

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