Georg Bauer is pleasantly surprised, as BMW has got the requisite clearances for introducing financial services in India in a record time of six months. "It is a strong statement, things are changing," Bauer tells Sharmistha Mukherjee. The Indian economy is on a high-growth trajectory, so it would not be responsible leadership to hold back longer and not offer premium financial solutions to consumers in the country, he says. Edited excerpts:
With the downturn now behind us, how is the financial-services business looking globally?
The business has turned around in the United States, Asia and Australia. Europe is a mixed bag; Spain, Italy and Greece continue to be slow. Germany is showing strong growth rates. The UK has recovered but the growth there may not be sustainable. Capital markets overall have relatively normalised. We can still feel the consequences though, as funding rates have gone down. The risk situation has improved. As a financing company, we have refinance needs; we were impacted significantly during the recession but now the business is doing well.
How has the performance been so far this year?
We had a target to achieve 18 per cent return on equity. In the first half, the number stood higher at 27 per cent. Our pre-tax profit for the group stood at ¤1.8 billion, a third of which came from the financial-services segment. At the end of August 2010, we had a portfolio of ¤70 billion across 30-odd countries. We have three million customers worldwide for financial services.
BMW already provides financial solutions in over 30 countries worldwide. Why are you looking at India rather late in the day?
When we started operations in 2007, we offered customised financial solutions to our consumers by partnering with local banks and insurance companies. Today, we have knowledge of and insight into the market here. India is growing at such a dynamic rate, it would not be responsible leadership to evaluate the market conditions any more. It is no longer good enough to just have a production facility and sales network in the country. We introduced financial services today because the time has arrived.
How integral is the financial-services segment to your strategy in cornering a larger share in the Indian market?
In the Indian market, more than 80 per cent of the cars purchased are financed by institutions. If you have under your control the options available for financing those products, you gain a competitive edge in attaining the leadership position in the market.
Indian banks offer loans at a lower rate of interest; what would drive a customer to opt for your services?
We cannot guarantee that our rates would be the lowest but they will be competitive. With us, you would be able to walk out with a car on the same day, PSUs would not be able to do that. The convenience and service we provide to the premium clientele, who are very demanding in the Indian market, would be the key to our success.
How do you think the financial-services business will contribute to your growth in the country?
We are the first to be here with financing tools and this will have a major impact on volume development. History shows every time we have launched financial services in a new market, the sales volumes have gone up roughly 10 per cent. Today, every second BMW car sold worldwide is financed by us. Research shows the loyalty rate of a consumer availing of our financing solutions is higher at 70 per cent as compared to that of cash buyers at 50 per cent. I will be surprised, not nicely, if we do not record the same rates in India as well.