FRANKFURT (Bloomberg) -- BMW is expanding engine production in China to potentially double capacity as it seeks to close the gap with Audi in the world's largest car market.
BMW and its joint-venture partner Brilliance China Automotive Holdings plan to make as many as 400,000 engines a year at a new facility in Shenyang, BMW said. The expansion includes a foundry as part of its push to boost local content.
BMW, the best-selling luxury-car brand globally, trails Audi in China. The additional capacity will help BMW lower shipping costs and avoid taxes on imports. It will also reduce exchange-rate risks for the German manufacturer
BMW's sales in China rose 20 percent to 391,000 vehicles, while Audi delivered 492,000 cars, a gain of 21 percent.
The new plant will be located 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.
BMW restricted engine-making to Europe until 2012, when it established the first production facility in Tiexi. The plant supplies engines to the car-assembly facilities of BMW's joint venture with Brilliance in Shenyang's Dadong and Tiexi districts.
Other German carmakers have also moved to make engines in China. Daimler's Mercedes-Benz opened its first car-engine factory outside its home country in November. The plant cost 400 million euros ($550 million) and has initial capacity to produce 250,000 motors per year. It manufactures four- and six-cylinder engines.