BEIJING -- BMW AG signed a deal on Thursday to produce the German luxury cars in China, one of the world's fastest-growing car markets.
"China is one of the most important stepping stones in our strategy," BMW Chairman Helmut Panke told reporters. "Many of us believe China will be the largest market in the world."
Under the long-awaited deal, BMW and Brilliance China Automotive Holdings, China's largest van maker, will invest 450 million euros ($480 million) in the venture by 2005, with each holding a 50 percent stake, the companies said.
The venture -- formalized at a signing ceremony in Beijing's Great Hall of the People -- will make cars at a Brilliance factory in the northeast city of Shenyang, with production starting in the second half of this year.
It would make some 30,000 3 Series and 5 Series cars a year in the "medium term", Panke said.
Executives did not discuss a wrangle over ownership of a big chunk of Brilliance with its former chairman Yang Rong, who has been sought by mainland authorities for alleged economic crimes.
Once one of China's richest men, Yang has denied any wrongdoing and has filed suit in Bermuda contesting the sale of a 39.45 percent stake in Brilliance to a firm controlled by the Liaoning provincial government at a more than 90 percent discount to its market value at the time the deal was announced. Panke did not address the lawsuit, but said; "Brilliance has a clear track record of having the same philosophy, process and management strategy as within BMW Group."
China's red-hot car market saw sales soar 60 percent last year to 1.2 million, becoming the world's fourth biggest automotive market behind the United States, Japan and Germany, according to market research firm Automotive Resources Asia.
Foreign giants have rushed to get a slice of the China market, with Ford Motor Co. of the United States and Japan's Toyota Motor Corp. among the latest to start rolling cars out of domestic factories.
BMW exported about 6,800 cars to China in 2002, a rise of 60 percent from the previous year, Panke said. He added that sales this year were expected to rise even faster, thanks in part to the new venture.
But BMW faces stiff competition from Volkswagen AG's Audi, which has dominated the luxury market with a venture with First Auto Works, China's top automaker, which makes about 35,000 cars a year.
While China's auto sector has been boosted by a spurt of new economy models hitting the market, more Chinese are eyeing up-scale cars.
Of the 70,000 cars China imported last year, about two-thirds cost around 400,000 yuan ($48,300), showing a strong appetite for high-end models, said Automotive Research analyst Yale Zhang.
And BMW's reputation for melding performance and luxury was making inroads with Chinese consumers, Zhang said.
"Chinese are similar to people in the United States or Europe as to how they perceive this brand. BMW's performance, the fun of driving, and the quality make them really well received by Chinese," Zhang said.
The move is the latest expansion into Asia by the German carmaker, which has factories in Malaysia, Vietnam, the Philippines, Indonesia and Thailand, and aims to double its Asian sales over the next five years.