HONG KONG (Bloomberg) -- Brilliance China Automotive Holdings Ltd., which makes cars in China with Bayerische Motoren Werke AG, said it may expand its venture with the German company as growing wealth in the country boosts demand for luxury cars.

Brilliance Chairman Wu Xiaoan said the company wants to hold talks with Munich-based BMW because demand in China for BMWs has expanded faster than expected since the venture started production last year. It sold 4,300 BMWs in China in 2003.

"We thought we would sell 30,000 BMWs in 10 years, then we revised that to five," Wu told analysts at a briefing in Hong Kong. "We now think it will be three years."

China's auto sales are forecast to increase 30 percent this year as an increasingly affluent population buy more luxury items such as cars and apartments. Average annual disposable income exceeded $1,000 per capita for the first time last year as China's economy expanded 9.1 percent.

Brilliance China's second-half net income fell 34 percent to 362.4 million yuan ($43.8 million) as the start-up of the BMW venture sent costs surging. The venture, which is based in the northeastern city of Shenyang, lost more than 120 million yuan last year.

Brilliance China predicts the venture will sell 18,000 BMW 3 Series and 5 Series sedans this year. Prospective buyers face a wait of up to two months for the cars, Wu said.

Zhonghua Boost

The company plans to raise capital spending 40 percent this year to 1.4 billion yuan, about 70 percent of which will be used to expand the sales network for its Zhonghua-brand sedans and increase the number of models. The rest will mostly be spent on expanding its minibus unit.

"The Zhonghuas aren't really making much money, so it should really focus on the BMWs," said Alex Fan, a Hong Kong- based analyst at Daiwa Institute of Resarch.

The company, plans to sell 25,000 Zhonghuas this year, a similar number to 2003, said Chief Financial Officer He Tao. Brilliance released a cheaper version of the Zhonghua last year and reduced the price of the sedans by 13 percent.

Profit margin on the Zhonghua will fall this year because of increased competition from other automakers in China, which include Volkswagen AG., the largest automaker in China, General Motors Corp. and Toyota Motor Corp.

The company said it expects to make between 83,000 and 85,000 minibuses this year. Brilliance is China's largest minivan maker.

For the full year, the Brilliance China's profit rose 44 percent to 936.4 million yuan, or 0.2533 yuan a share, compared will 650.9 million yuan, or 0.1775 yuan a share, the company said. Sales rose 38 percent to 10.1 billion yuan. It will pay a final dividend of 1 Hong Kong cent a share.

Brilliance China's shares, which trade in Hong Kong, rose 3.1 percent to HK$3.325.