BMW building 2nd China plant with partner

By Fang Yan and Jacqueline Wong

SHANGHAI (Reuters) - BMW and its partner Brilliance Auto are building their second manufacturing plant in China, where demand for luxury sedans remains solid despite a steep downturn in mature markets, a senior official at the Chinese automaker said on Monday. The BMW-Brilliance venture plans to increase annual capacity by 75,000 to 80,000 units by the second half of next year, up from its capacity of 30,000 at end-2008, Yufei Wan, the chief of Brilliance's international trade arm, told reporters on the sidelines of the Shanghai Auto Show.

BMW issued a statement, however, saying no decision had been made on a second plant.

Wan did not specify what BMW models would be made at the plant and acknowledged some details were not yet finalised.

"The specific amount of the investment has yet to be approved by the board, but a plant like this would cost 1.5 billion to 2.0 billion yuan ($220-293 million)," he said.

BMW, the world's largest premium car maker, currently manufactures BMW 3 series and 5 series sedans at a plant in the northeastern Chinese city of Shenyang. It sold 16,580 cars in China in the first quarter, up 13.8 percent from a year earlier, company data showed.

EXPORTS

Brilliance, which makes sedans, vans and light trucks, aims to be producing 500,000 to 800,000 vehicles per year in three to five years, Wan said.

That is an apparent step back from an annual sales target of 1 million units in 2012, presented by Brilliance Chairman Qi Yumin in April 2008.

The company sold 285,242 vehicles in 2008, ranking eighth among Chinese automakers, data from the country's official auto association showed.

Brilliance, parent of Brilliance China Automotive Holdings, has been shipping its BS6 and BS4 mid-sized sedans, developed in-house, to Europe since 2007. Both models scored poorly in initial crash tests although improvements were subsequently made to the BS6 model.

Wan blamed the poor test results partly on changing standards in Germany.

"We have run into some obstacles there and we are working actively to adapt to the new standards. We are not giving up on the European market," he said, adding that roughly 4,000 Brilliance sedans had been sold there so far.

Brilliance, which is selling in more than 60 countries, mostly in emerging markets, aims to be generating roughly one-fifth of its vehicle sales from exports in the next three to five years, up from 7.7 percent in 2008. Most of those sales will be coming from developing markets, he said.

The firm is also developing batteries for clean-energy automobiles jointly with Johnson Controls Inc, he added.