BMW China venture plans to nearly triple capacity

BEIJING (Reuters) - BMW's (BMWG.DE) China venture plans to nearly triple capacity by 2012 to meet robust demand in the world's second largest auto market, where growing ranks of moneyed individuals are snapping up the premium models.

BMW's joint venture with Brilliance China Automotive Holdings (1114.HK) will raise its annual capacity to 100,000 units in four years from 35,000 units currently, the chairman of Brilliance China's state parent, Brilliance Auto, said on Sunday.

BMW has not made any commitment to a second China plant as it has yet to make a decision on whether to go ahead and which new models it might introduce to the venture, Qi Yumin told Reuters on the sidelines of the 2008 Beijing Auto Show.

"Plans for the capacity expansion have been laid out and it is unlikely to see such a big jump in capacity without a greenfield plant," Qi said.

Discussion with BMW on the plant continues, he added.

The world's largest premium car maker competes with Volkswagen's (VOWG.DE) among others in China and currently makes 3 series and 5 series cars in a facility in the northeastern city of Shenyang.

BMWs are particular popular among the nouveau riche in China, mostly self-made entrepreneurs.

Its car sales in mainland China jumped 43.2 percent to 14,574 units from January to March this year, after growing 42 percent in 2007.

Daimler AG's (DAIGn.DE) Mercedes-Benz Cars division moved 9,626 cars in mainland China in first quarter of 2008, up 40 percent.

AMBITIOUS PARTNER

Brilliance Auto, meanwhile, has also laid out an ambitious target to more than triple its vehicle sales to 1 million by 2012, up from 300,000 in 2007, Qi said.

To help get there, the firm will invest 6 billion yuan ($858 million) in expansion projects over the next three years and may consider raising funds in the capital market.

Qi declined to give details of the fundraising options, which industry analysts say may include an A-share initial public offering of Hong Kong-listed Brilliance China.

"We are still working on it. No decision has been made at this point," he added.

Brilliance made headlines in Europe last year when it received a rating of just one star out of five in a crash test for its BS6 sedan by Germany's ADAC auto club.

The carmaker said it immediately got to work to improve the car's safety standards, changing about 60 components. Three months later, another crash test showed results that would correspond to three stars under the official test, it said, adding it was aiming for the maximum 5 stars in the medium term.

Liu Pengcheng, vice president of Brilliance's international sales arm, said he planned to launch the three-star models in Europe in May or June this year.

He did not give a sales target. But Hans-Ulrich Sachs, CEO of HSO Motors Europe, Brilliance's importer for Europe, told Reuters in March he envisaged annual sales of 200,000 cars a year within 10 years.

Brilliance, which is already selling in more than 60 countries, mostly in emerging market, is also preparing to enter the United States, Liu said.

He did not give a timetable, but said the models they will one day ship to the United States are its mid-range, self-developed sedan, Zhonghua.

($1=6.993 Yuan)

(Reporting by Fang Yan; Editing by Quentin Bryar)