Manufacturing News

BMW to double engine output in China to close gap with Audi

BMW AG is expanding engine production in China to potentially double capacity as it seeks to close the gap with Audi AG.

BMW and its joint-venture partner, Brilliance China Automotive Holdings, plan to make as many as 400,000 engines a year at a new plant in the northeast China city of Shenyang, the Munich carmaker told Bloomberg News.

The expansion includes a foundry as part of its push to increase local content in its Chinese-made vehicles.

BMW, the best-selling luxury-car brand globally, trails Audi in China.

Lower shipping costs
The additional capacity will help BMW cut shipping costs and avoid taxes on imports. It also will reduce exchange-rate risks for the German manufacturer. Last year, BMW's sales in China rose 20 percent to 391,000 vehicles, while Audi's increased 21 percent to 492,000 cars.

The new factory will be next to a BMW assembly plant in Shenyang's Tiexi district and replace an existing facility there. It will produce four-cylinder gasoline engines for locally built cars and start production in 2016 with initial capacity for 200,000 units, BMW said.

Capacity will rise to 300,000 units a year in the "medium term" and can be expanded to 400,000 if needed, the carmaker said.

The engine expansion roughly mirrors plans for auto assembly in China. BMW plans to increase production capacity there to as many as 400,000 vehicles in the coming years from 200,000 this year.

Chinese-made engines
BMW restricted engine production to Europe until 2012, when it established an engine plant in Shenyang. The plant supplies engines to the BMW's joint-venture assembly plants in Shenyang.

Other German carmakers make engines in China. Daimler AG's Mercedes-Benz opened its first engine plant outside its home country in November.

The Mercedes plant cost 400 million euros (3.4 billion yuan) and can produce up to 250,000 engines per year. It manufactures four- and six-cylinder engines.

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