BMW and its partner, the state parent of Brilliance China Automotive, will invest $735 million to expand their capacity in the world's largest vehicle market.
The total long-term investment of BMW and joint venture partner Brilliance Auto Group is expected to eventually exceed 5 billion yuan, BMW said in a statement.
Today, China is a global driver of growth in the automotive market, Friedrich Eichiner, a board member of the BMW Group, told reporters.
China will play a major role in the global automotive business, in the development of future technologies, he said.
The new investment includes expansion of an existing plant in in the northeastern Chinese city of Shenyang, where Brilliance, the country's eighth-largest automaker, and BMW now manufacture BMW 3-series and 5-series sedans.
Annual production at the current plant will increase to 75,000 units by the end of next year, from 30,000 units currently.
Construction on a second plant is scheduled to start in 2010 with a planned annual production capacity of 100,000 units, said Qi Yumin, the chairman of Brilliance Group.
China has been a bright spot for the world's auto market this year, thanks to a raft of government incentives, including aggressive cuts in sales taxes on small cars, which are slated to expire by the end of the year.
Even struggling General Motors Co [GM.UL] said its China vehicle sales in October more than doubled from a year earlier.