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BMW Will Take Majority Stake In China Joint Venture Amid Trump Trade War

BMW (BMWYY) will take control of its main China joint venture, becoming the first foreign carmaker to take advantage of looser ownership rules in the country's auto sector. It comes as the German luxury-car maker faces Beijing's rising import tariffs amid President Trump's China trade war.

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BMW will pay $4.2 billion to hike its stake in Brilliance China Automotive Holdings from 50% to 75%. The pact also extends the joint venture contract from 2028 to 2040.

The joint venture simultaneously said it will expand its production capacity in Shenyang in northeast China over the coming years.

BMW won't boost its ownership stake until 2022. In April, Beijing eased auto regulations that limited global automakers to owning 50% at most of a joint venture with a local partner. But for most carmakers that will kick in as of 2022. BMW imports key vehicles, such as its luxury X5 SUV, from the U.S. for the Chinese market.

Trump Trade War Hits BMW

The U.S.-China trade war has hit BMW especially hard. The carmaker imports many key vehicles from the U.S. for the Chinese market. Tuesday's move could offset some of the impact.

China cut import tariffs on cars from 25% to 15% in July. But it later slapped an additional 25% tariff on cars built in the U.S. in response to new Trump tariffs.

Other foreign automakers with significant Chinese joint ventures have said breaking up is complicated.

General Motors (GM), Ford Motor (F) and Fiat Chrysler (FCAU) all manufacture in China via joint ventures. In fact, GM and its Chinese JVs sold a record 4 million vehicles in 2017.

Tesla (TSLA) complained of punishing China tariffs in its recent Q3 deliveries report. Tesla plans to build a Shanghai plant, aiming to take advantage of new rules that let foreign automakers take full control of companies that build electric vehicles.

BMW shares edged up 0.5% to 28.68 on the stock market today, stemming a five-session slide to new lows. GM fell 0.9%, Fiat Chrysler rose 0.4% and Ford dipped 0.1%. Tesla retreated 1.8%. Recent IPO and China electric-car maker Nio (NIO) sank 7.4%.

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