BMW to source seats, door panels from India

German luxury car marker BMW has finalised the first phase of component sourcing from India for its cars that will be assembled at its plant coming up in Chennai.

Keeping the level of localisation at bare minimum levels, the company has identified door panels and seats as two items that will be sourced from India to fit in models that it proposes to assemble in India.

Further, the first phase of dealer network development programme has identified 10 cities where the company will have retail presence.

Apart from four major metropolitan cities, the company has identified Chandigarh, Ahmedabad, Pune, Hyderabad, Bangalore and Cochin as cities where it will set up its dealer outlets.

BMW has also targeted sales in excess of 2,000 units a year once its plant is ready for commercial production. The new plant is expected to roll out the first car by early 2007.

BMW is building its assembly plant at the Mahindra Industrial Park with an investment of Rs 180 crore where it is expected to assemble 3 and 5 series cars to start with.

While the level of localisation of components would remain low at the start of its operations, it is learnt that scope for increasing the local content will be under investigation, with plans to even start a local BMW group sourcing office.

The focus of BMW Group's sourcing activities in India will not be local sourcing but global sourcing. The BMW group believes that growth potential in the Indian automobile component sector is not in the Tier-1 group but in the 'value chain'. Hence largest sales market for Indian component makers are in the Tier-1 global automotive suppliers.

This is based on the fact that wages constitute a larger percentage of total cost for Tier-2 and downward suppliers while parts purchases constitute a major part of Tier-1 suppliers. India being a low cost producer in terms of wages, the scope for cutting overall cost lies more in the lower end of the value chain.

BMW considers India as a future strategic sales and sourcing market in the long term. In terms of volumes, BMW managed to sell in India 227 units in 2005, nearly twice the units sold in calendar 2004.