BMW launches India facility

Bayerische Motoren Werke AG, the world's largest maker of luxury cars, today opened its first factory in India to assemble the 3-Series and 5-Series models. The plant has a capacity of 1,700 units a year.

It will expand capacity at its Indian factory as the demand increases in a nation where the number of millionaires has risen by more than a third.

"Our philosophy is production capacity will follow market demand and right now, it's only an entry strategy for India,'' Norbert Reithofer, the company's CEO, said in Chennai, India.

"India will be a very important market in Asia in the future. So if we need more production capacity, we can always add.''

Luxury carmakers such as Volkswagen AG's Audi AG unit plan to set up new factories in India as the affluent class grows, helped by the fastest salary raises in Asia and the world's second-fastest economic growth. Munich-based BMW had record sales in Asia last year, helped by increased demand in China and southeast Asian markets such as Singapore.

``The growing wealth in India is a big attraction for luxury carmakers,'' said K.K. Mital, who helps manage 2 billion rupees of stocks, including those of local automakers, at Escorts Asset Management in New Delhi. ``Salary rises and wealth in the stock market are giving rise to consumerism in India.'' The government estimates that the economy may grow 9.2 per cent in the fiscal year ending March 31. The country presently has 36 billionaires with a total wealth of $191 billion, more than in Japan, the world's second-biggest economy, according to Forbes magazine's latest annual survey of billionaires.

The nation is also home to an estimated 83,510 people with financial assets of at least $1 million at the end of 2005, up 37 per cent from two years earlier, according to the 2006 World Wealth Report published on June 20 by Merrill Lynch & Co. and Cap Gemini SA. The benchmark Sensex stock index has risen in each of the past five years.

To tap that growth, BMW, Audi, Porsche AG and other luxury carmakers such as Lamborghini are setting up factories or opening local dealerships. DaimlerChrysler AG, the world's second-biggest luxury carmaker, already has a factory in western India that assembles the C-Class, E-Class and the S-Class cars.

BMW's India factory is the company's fifth Asian plant. The company is investing 20 million euros through the end of the year on the plant, which will put together pre-assembled kits shipped from Germany. BMW spent 1.3 billion euros on setting up its most recent factory in Leipzig, which employs 5,500 people.

A local production unit would also help BMW to sell cars cheaper in India compared with exporting into the country through dealers. The government has an import duty of more than 100 per cent on new vehicles brought into the country. The cheapest car from the India factory will cost Rs 2.67 million ($61,420), the starting price of the 3-Series.