Byton is interested in gaining access to FAW’s supply chains for automotive components such as EV batteries.
The size of the stake remains unclear but is likely to be below 3%.
A stake of that size would be worth $4.5 billion at current market prices.
This will be BMW's second JV in China. It has a joint venture with local carmaker Brilliance China Automotive Holdings.
New JV will be owned 25% each by Nissan and Renault and 50% by Dongfeng.
Geely Automobile Holdings Ltd too said on Wednesday it was not planning a bid for FCA.
Most of the money will be used for product development.
It is the latest in a series of investments Bitauto has raised from three of China's biggest technology companies.
"A car business is the world's toughest business to start."
Other potential bidders include Peugeot maker PSA , Suzuki and Renault SA.
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