Bayerische Motoren Werke AG said it has taken majority control of its Chinese joint venture, securing its grip on its operations in the world's biggest auto market.
The move is a further sign of Western auto makers using changes to Chinese rules to consolidate control over their businesses and boost profits in the giant market.
Under the deal, effective Friday, BMW said it is paying 3.7 billion euros, equivalent to $4.2 billion, to raise its stake in BMW Brilliance Automotive Ltd. to 75% from 50%, a move it flagged in 2018.
BMW's partner, Brilliance China Automotive Holdings Ltd., will retain 25% of the venture.
The German auto maker said the move would create a one-off financial gain of €7 billion to €8 billion as a result of the higher valuation of the asset, as well boosting its cash flow and earnings significantly.
In the wake of trade tensions between the U.S. and China during the Trump administration, Beijing said four years ago that it would phase out previously strict ownership rules on joint ventures with foreign auto makers by 2022.
In the past, foreign manufacturers weren't allowed to own their businesses outright or have majority control, but under the new rules this became possible.
When Tesla Inc., the leading electric-car maker, opened its Shanghai factory in 2020, its first plant outside the U.S., it was able to have full ownership from the start.
But other auto makers that have been in China for decades are still operating joint ventures with Chinese manufacturers, forcing them to share factories and profits with their partners.
"When Tesla exports from China they don't have to share profits," said Philippe Houchois, automotive analyst at brokerage Jefferies. "China could also be an interesting export base for BMW."
Stellantis NV, which owns the Jeep, Chrysler, Peugeot and Fiat brands, said last month that it was planning to boost its stake in Guangzhou Automobile Group Co., its vehicle joint venture in China, to 75% from 50%.
Stellantis didn't disclose financial details of the deal.
Some analysts say Western car makers need to take control of their joint ventures in China to boost profits and streamline decision making.
But Mr. Houchois said such a move would be costly for large manufacturers. He said he didn't expect foreign auto makers to rush to buy out their Chinese partners.
BMW said it delivered 846,237 vehicles from its BMW and Mini brands to customers in China last year, an increase of 21% from the previous year.
China accounts for about 40% of BMW's total auto sales. The BBA venture produced about 700,000 vehicles for BMW last year.
