At BMW India, 50% of the car's price is just taxes, says Vikram Pawah

Vikram Pawah took charge as president of BMW Group India in March this year after spending close to two years as managing director at Harley-Davidson India. In an interaction with Ajay Modi, he talks about the need to expand the small premium car market in India so that every player can benefit. 

Q) From Harley to BMW and bikes to luxury cars, how do you see the transition?

A) Excitement is the word that comes to my mind. BMW Group has BMW, Mini and Motorrad (leisure motorcycle) brands here. India is a rapidly growing market and still at a nascent stage when you look at the premium car market. The sub-two per cent share of luxury cars is small compared to the five-ten per cent in leading economies. Sooner or later, five per cent of our market should be luxury. I want to steer the business in that direction. As a group, we have completed hundred years globally and a strategy has been decided for next hundred years. We will define tomorrow’s premium mobility solutions.

Q) What will be your priorities at BMW?

A) In India, we completed ten years of plant operations. Now we are thinking about next ten years. I strongly believe that our strategy is going to be about power to lead. It involves the mindset and has nothing to do with numbers and timeline. No matter what we do, we will be a benchmark in the industry. That will be our aim. To be a leader in that sense, I need to look at expanding the market. In 2007, the market was 2,000 units and it is now at 35,000. We have created the market and sold 66,000 units in last ten years. 

Q) You wish to expand the market alone? Should the industry not come together?

A) Yes. The industry should look at expanding the market. It is good for everyone. I totally believe in that. India is a market where you should look at expansion instead of fighting. There is plenty of room for everyone. Let us talk about number one, two and three when the market gets bigger. I want to be a leader in creating the market now.

Q) Should entry prices for luxury cars come down to expand the market?

A) The component of pricing in India includes manufacturing cost and taxes. We have been constantly localising. Of our 16 models, eight volume products are locally produced and have an average 50 per cent localisation, including engine. Tax is a big component. If you compare premium and normal cars, the tax differential is big and puts us at some degree of disadvantage. Fifty per cent of the price is taxes and when they come down the price will come down. 

Q) How do you ensure that operations remain profitable even as you expand sales? 

A) At BMW group, we are known for our profit-oriented approach while having volumes. We are efficient in what we do and focus on what customer wants. It is not rocket science. You focus on both volume and profitability. There may be some growing pains in our kind of economy.

Q) The Indian government is drawing ambitious plans for electric mobility by 2030. How does BMW wish to approach this?

A) We welcome the move. That is a fantastic idea. But we need to discuss the road map towards it. The charging infrastructure takes time. Then there is the issue of a customers’ transition in adapting to the electric technology. Customers’ biggest worry is getting stranded on the roads. If India wants to move towards electrification, plug-in hybrid is a great stepping stone. But plug-in hybrid has not been classified as electric vehicles in GST and that is disappointing. We have an electric line up globally. But we need answers to many questions before we start planning about products here.