China Balks at BMW Factory Expansion Request

China's Ministry of Environmental Protection has rebuffed BMW AG's application to boost annual capacity at its second assembly plant in Shenyang by one-third to 400,000 vehicles. The ministry says the company must rework its proposal to address environmental concerns.

BMW says the request for additional documents is routine. The company adds that it remains hopeful the project will win government approval.

BMW and Chinese partner Brilliance China Automotive Holdings Co. already plan to increase annual capacity at the factory, which makes the BMW X-1 crossover vehicle, by 50% to 300,000 units by year-end. The venture's first assembly facility in Shenyang has capacity to make 100,000 3 Series and 5 Series sedans per year.

The ministry complains that the expansion proposal fails to meet its air-pollution targets and requirements for wastewater analysis. The environmental agency adds that it has not yet approved the original phase of the second assembly plant. The application also needs the approval of several other government bodies.

Analysts say China's resistance to expansion of an existing facility is rare. They also note a growing hostility in the country toward foreign luxury carmakers that are reaping huge profits there. Environmental Minister Zhou Shengxian tells the state-run People's Daily that, "Driving a BMW while drinking polluted water" doesn't fit China's industrialization policy.