 "BMW creates roadmap for increase in local manufacturing in India")
Philipp von Sahr, BMW India’s president, told Business Standard the focus would be the higher-end models that deliver much better profit and it was willing to forgo the lure of high volumes.
In a few weeks, BMW will launch a limited volume ‘i8’ hybrid sports car. That will be followed by four models under the ‘M’ performance brand, all of which will likely be above Rs 1 crore. In contrast, both Mercedes and Audi recently launched entry sedans in the Rs 30-lakh range, the CLA and A3, respectively.
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“This is what our customers want as well, a focus on the premium image. Our rivals might discount heavily to clear stocks but we will not compromise on our prices. Our focus is on sustainable growth and we will focus on the higher-end models,” said von Sahr.
BMW has no entry sedan but sells the 1-Series hatchback in India. Audi also now plans to add the hatchback version of its A3 to the portfolio, while Mercedes already sells the A-Class hatchback.
The new strategy, to forgo high volumes for the sake of profit, cost BMW the crown of the luxury car segment in 2013, when it lost the leadership it had held for four years to Audi. The latter has since held the top spot for two years. In 2014, BMW and allied brand Mini sold 6,812 units, third behind Audi and Mercedes-Benz, both of which sold over 10,000 units. In 2014, the size of India’s luxury car market was 36,000 units.
However, BMW’s plan has worked on other fronts. In 2013-14, BMW India’s profits jumped several multiples to Rs 107 crore (from Rs 10 crore in FY13), though net sales fell 12 per cent to Rs 2,024 crore.
Localisation
BMW is now gearing towards complete manufacturing in India. In the first step, it has announced tie-ups with seven domestic suppliers for raising local value addition to 50 per cent from the earlier 20 per cent for cars assembled at its plant near Chennai.
“Higher localisation will reduce complexity and costs, while speeding delivery periods and giving us flexibility. We are now laying the foundation for full manufacturing. But that is some time away because we have to reach at least 30,000 units a year,” said von Sahr.
Force Motors, which already assembles engines for rival Mercedes-Benz, will now produce engines and gearboxes for BMW, while ZF Hero Chassis will make axles. Other suppliers are Draexlmaier India, Tenneco Automotive, Valeo, Mahle Behr and Lear.
BMW now assembles almost its entire range —from the 1-Series hatch and 3- and 5-Series sedans to the X1, X3 and X5 SUVs — at Chennai. The plant has capacity to produce 14,000 units a year and can go up to 20,000 units with small investments. To date, BMW has invested about Rs 390 crore in India.