BMW meets environmental protection “roadblocks” in China

A few days ago, the Chinese Ministry of Environmental Protection issued an announcement and returned the application for the third phase project of the Brilliance West Tie Xi factory. The project may be postponed. The person in charge of BMW Brilliance said that the company will supplement the materials according to the requirements of the Ministry of Environmental Protection and the application will continue. The foreign media believes that the rejection of BMW has become a signal that the government's environmental standards for production companies will become increasingly stringent, and the difficulty of expansion of foreign-owned car companies in China will increase.

Reason: Insufficient material?

On July 26, the Ministry of Environmental Protection issued the "Publicity for Approval of Opinions on Construction Project Environmental Impact Assessment Documents for July 2013", and made a "return of construction project environment" for the third phase of the expansion project of Brilliance West Tiexi Plant. The main reason for the handling of the "Impact Report" was that the report was not sufficient for some of the environmental arguments.

The reason given by the Ministry of Environmental Protection was that Brilliance BMW had insufficient analysis of the sources and production quantities of the project's coating wastewater, and the project did not comply with the requirements of the 12th Five-year Plan for Prevention of Atmospheric Pollution in Key Areas. 2 times reduction of alternatives; sodium nitrate in the wastewater body exceeds the standard, no environmental capacity.

In addition, at present, the first phase of the project has not passed environmental protection acceptance of the project, and the second phase has not yet been completed. The feasibility of the Phase III project relying on the wastewater treatment facilities of Phase I and Phase II projects and the reliability of discharge of waste gas and wastewater to meet the standard must be further demonstrated. The opinion also pointed out that the project to invest 9.23 billion yuan, the new capital in environmental protection measures is only 70.30 million yuan.

The head of the BMW Brilliance Public Relations Department stated that the Ministry of Environmental Protection has asked the company to provide more supporting documents. This is part of the normal application process and will not have a material impact on the company's project planning. He said: "We will further supplement and improve the materials according to the requirements of the Ministry of Environmental Protection. The project will not be postponed. The Tiexi plant is our most technologically advanced factory, and we believe that our environmental protection level must meet the requirements."

In the face of intensified competition in the luxury car market in China and a slowdown in sales growth, BMW Motors is trying to maintain its position in the Chinese market. Industry analysts said that the key to BMW's business in China depends on the company and Brilliance China Automotive Holdings Limited. Max Warburton, an automotive analyst at Bernstein Research, said in a recent report that the entire growth of BMW's business in China has come from the company’s car production with the Brilliance China joint venture. Brilliance China’s Hong Kong-listed stocks fell 2.2% on Tuesday, as the above-mentioned veto by the Ministry of Environmental Protection was announced on the same day.

Influence: The threshold increases?

Although this environmental "roadblock" may be temporary, the Ministry of Environmental Protection has approved the flagship investment project of one of the world's top luxury car manufacturers, highlighting the debate triggered by the real cost of China's rapid economic growth over the past 30 years. Earlier, China’s Minister of Environmental Protection, Zhou Shengxian, said in an interview with the media: “It is obviously not the industrialization and modernization that we are looking for when we drive a BMW cart and drink polluted water.”

BMW Motors stated that the Chinese government’s application for returning the company will not significantly postpone its plan to double its production capacity in China. The company plans to expand its annual production capacity in China to 400,000 vehicles, but did not disclose the time frame for reaching this capacity target. Analysts and overseas media believe that this will make foreign car companies more anxious, and that the approval of projects in China in the future will be even more difficult.

Foreign media such as Bloomberg and others linked this incident with the Chinese government’s potential for setting limits on luxury cars, arguing that foreign car makers, especially luxury car brands, have gained a lot of profits in China, leading the government to consider raising the threshold and limiting expansion. According to Zeng Zhiling, the director of the analysis agency LMC Automotive, the Ministry of Environmental Protection's application for the extension of BMW's vehicles indicates that the government’s environmental protection regulations have become increasingly stringent. This is also part of the efforts of the new Chinese leaders to achieve economic rebalancing.

At the same time, Bill Russo, president of Beijing Synergistics Automotive Consulting Co., also stated: “Overseas auto companies’ expansion in China will not be as easy as in the past.” Bill Russo has been living in China for the past 10 years. He said that the government used to China has never rejected overseas expansion projects in China. Booz&Co. Analyst Peng Bo said that the profits of the auto industry are high, and the government's move will force major auto makers to increase their spending on environmental protection.

Although the approval of BMW Brilliance's project may be a matter of time, it is not difficult to see the signal sent by the Ministry of Environmental Protection. China is reflecting that “development cannot be done at the expense of the environment” in the context of rapid industrial development. “Cars driving a BMW and drinking polluted water” reflect both the environmental issues that need to be solved and the current economic problems that are extremely unevenly developed. Modernization should be the coordinated development of various relationships between the economy, society and the environment. In this regard, the government should pay attention to it and car companies must pay more attention to it.