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      05-10-2011, 10:45 AM   #1
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Post BMW Investing $1.4 Billion to Tap China Market Growth

BMW Investing $1.4 Billion to Tap China Market Growth

(Reuters) - BMW said on Monday it will invest around 1 billion euros ($1.44 billion) to expand production capacity in China as it seeks to capture surging sales growth in the world's biggest auto market.

BMW is almost doubling its initially planned investment and production capacity at the new plant in Tiexi in the Shenyang will rise to around 200,000 euros over the medium term, BMW said on Monday.

Together with capacity improvements at its Da Dong facility, this will result in potential to make 300,000 vehicles in the long term, it added.

German luxury carmakers including Audi and BMW enjoyed a bumper April of high demand in China ahead of the expected onset of rising fuel prices and tighter registration rules.

Audi, the premium car brand of Volkswagen , sold 13.2 percent more cars in April than a year earlier, helped by a 21.2 percent gain in vehicles sales in China, now the world's largest car market.

Luxury carmakers have racked up eye-popping sales in China, where a growing army of super-rich is fuelling demand for everything from Gucci handbags to Rolls-Royce cars.

But China's car market is expected to cool this year after surging by a third to a record high in 2010.

Daimler, the German maker of Mercedes-Benz cars, said last week it had no indication that demand in China would ease in coming months, though.

BMW -- which last week outshone its rivals with a sharp increase in quarterly sales -- sold 17.9 percent more cars globally in April, helped by about 67 percent growth in China and growing demand in the United States.

China has become BMW Group's third-largest market worldwide. In the first four months of 2011 BMW sales in China rose 70.1 percent to 79,306 automobiles.

Together with joint venture partner Brilliance, BMW will fund a paint shop and a press shop at its Shenyang facility. Additionally, it will expand infrastructure at its plant in Tiexi, Shenyang.

The two markets account for about a third of BMW's group vehicle sales, and BMW has said it expects U.S. sales to continue growing this year while Chinese demand slows.

"We are on track to reach record sales of significantly more than 1.5 million vehicles as well as records for our three brands BMW, Mini and Rolls-Royce," BMW's sales chief Ian Robertson said in a statement.

The U.S. market is lending extra support to the industry with U.S. vehicle sales up nearly 18 percent in April and nearly 20 percent in the first four months of the year.

As gasoline prices in the United States near $4 a gallon, consumers there opt for smaller, more fuel-efficient cars, and a push by German carmakers such as BMW and Porsche to lower fuel consumption in luxury cars is paying off.

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