The German company said Thursday that it will pay €3.6 billion ($4.2 billion) to take control of its business in China. It's the first international carmaker to announce this kind of deal since the Chinese government moved earlier this year to relax ownership restrictions.
The deal is expected to close in 2022, the year when China will lift the ownership limit on car manufacturing operations.
The move will dramatically deepen BMW's involvement in the world's largest car market and help protect it against disruptions caused by trade conflicts and tariffs.
BMW sold 560,000 cars in China last year — more than the United States and Germany combined.
But that business has come under threat after Beijing placed new tariffs on American vehicles in July in retaliation for US taxes on Chinese exports worth tens of billions of dollars.
"We are now embarking on a new era," CEO Harald Krueger said during a speech in China on Thursday. "China is quickly becoming an important development and production base for BMW new energy vehicles."
As part of the deal, BMW said it would invest up to €3 billion ($3.5 billion) to build new facilities and upgrade existing operations in Shenyang. It said annual production would hit 650,000 units by the early 2020s.
Yale Zhang, managing director at Shanghai-based consultancy Automotive Foresight, said that the slowdown should be temporary. By taking control of its China business, BMW would be in a better position than its competitors when the market rebounds, he added.
"The car market, especially premium segments, will still grow fast when more people try to replace or upgrade their ... family car," he said.
Daniel Shane contributed reporting.