Bayerische Motoren Werke AG (BMW)’s failure to win government approval to expand a factory in China is fueling concern global carmakers could find it increasingly hard to get projects approved by regulators in the country.
Shares of BMW partner Brilliance China Automotive Holdings Ltd. (1114) fell the most in almost four weeks in Hong Kong yesterday after China’s Ministry of Environmental Protection said it sent back an application, citing inadequate wastewater analysis and the plan’s failure to meet government anti-pollution targets. BMW rose 0.7 percent in Frankfurt trading.
“The ease of expansion is probably not going to be as easy as in the past,” said Bill Russo, Beijing-based president of automotive consultant Synergistics. Russo, who’s been in China for the past decade, said he can’t recall the government ever issuing a statement knocking back an automaker’s expansion plans for an existing project.
Alexander Bilgeri, a spokesman at Munich-based BMW, said the ministry asked for additional documents and that the government decision on the project wasn’t final. Such events are routine, Bilgeri said.
Turning down approvals to expand an existing project is “unusual” said Russo, a former Chrysler executive, reports Bloomberg.
In the statement, dated July 26 and available on the ministry’s website yesterday, the government said it didn’t approve BMW Brilliance Automotive’s plans for the third phase of a factory in the northeastern Chinese city of Shenyang. The first phase of the plant has yet to pass an inspection, it said.
The ministry approved the factory’s second-phase expansion in June 2012.
“Driving a BMW while drinking polluted water is obviously not the type of industrialization, modernization that we want,” Zhou Shengxian, minister for environmental protection, said in an interview with the People’s Daily, published today.
China will step up efforts to amend the nation’s environmental protection and air pollution laws to address the low cost of violations, Zhou said, according to the report.
The Economic Information Daily, one of the official Xinhua News Agency’s newspapers, reported July 29 that industry officials are increasingly calling for China to start an investigation into imported car prices. Profit from selling imported luxury cars in China was 30 percent higher than the global average, the newspaper said, citing the China Automobile Dealers Association’s executive vice president and secretary general, Shen Jianjun.
Getting lower-level bureaus to sign off on manufacturing projects is among the first regulatory steps for foreign companies before they receive central government approval.