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Luxury car brand BMW may have fallen behind its two German peers, Audi and Mercedes, in sales volumes, but the company's chief executive in India says he is not losing sleep over it as he is not interested in playing the market leadership game.
"We are focusing on models that can deliver better profit," Philipp von Sahr, president, BMW Group India, says.
Sahr is walking the talk on moving away from "short-termisms like monthly sales figures". While net sales dropped, BMW profits in India increased almost 10 times to Rs 107 crore in 2013-14 as compared to Rs 10 crore in 2012-13.
Sahr says his brief is simple: "We want to see the business case behind every car, otherwise we take them off." He admits BMW was also part of this heavy sales push and keeping high stocks earlier, but over the years, the company realised that it doesn't make any business sense. The change in strategy - from pushing sales number to long-term sustainability and profit - happened three to four years ago.
It was in 2013 that BMW lost its leadership in the Indian luxury car space to Audi and moved to third spot. The next year, BMW and allied brand MINI sold 6,812 units, as compared to 10,851 units of Audi and 10,201 of Mercedes. While Audi reported eight per cent growth in sales and Mercedes reported 13 per cent growth, BMW reported a seven per cent drop in sales.
Sahr doesn't mind taking a dig at his competitors. "One of our competitors has reported half his sales from small cars. I doubt he is very profitable," says Sahr. BMW has decided to stay away from small cars and focus on more high-end sedans and sports utility vehicles. The company launched i8 hybrid electric super car at Rs 2.29 crore and is planning 15 car launches this year in India.
These includes four models under the 'M' brand, which is expected to be priced above Rs 1 crore, as against both Mercedes and Audi's recently launched sedans which are priced at around Rs 30 lakh.
The company will have four new products, five face lifts and the rest are model updates. The company's focus will mainly be on 3 and 5 series and core models including X5, which are more profitable. The BMW Group introduced MINI as a premium small car brand in India in 2012. Presently, the MINI model range in India includes the MINI 3-door, MINI 5-door, MINI Convertible and MINI Countryman. MINI has established four exclusive outlets in India.
X6 is expected to be launched during the third quarter of 2015 and 6 series will be launched next year.
For better penetration, BMW is planning to increase the number of sales points to 50 from the current 40 and will give a big push to tier II and III markets. In the last three to four weeks, the company has opened three new showrooms and all of them are in tier II cities. One was launched in Vijaywada (Andhra Pradesh), Hutch (Gujarat) and Coimbatore (Tamil Nadu). In terms of sales growth, BMW will grow in mega cities, but dealership-wise, the growth will be more in tier II and III cities.
Sahr says these are the markets that have tremendous growth potential and the company is focused on the rich and young upcoming entrepreneurs. There is a large number of people who are rich but still don't drive premium cars and spend money on marriage, education, jewellery or real estate. "That's the segment we are going to tap in a big way", he says.
Abhay Dange, director, Press and corporate affairs, says unlike its competitors who seem obsessed with Bollywood, BMW has four major brand building activities including BMW India Bridal Fashion Week, BMW experience stores for potential customers, association with golf and cultural events.
The group's activities in India also include marketing of motorcycles, as well as financial services for its premium clientele. The company has increased its investment from Rs 390 crore to Rs 490 crore in India.
The BMW plant in Chennai started operations in March 2007 with eight models. The current capacity of the plant is 14,000 units a year, which Sahr says, is enough to cater to the current demand. In any case, to reach optimum capacity utilisation, the company needs a volume of around 30,000 units a year, which is a long journey.
Localisation level of the cars is currently at around 50 per cent, compared to 20 per cent earlier, which helps the company to produce more efficiently and reduce complexity and cost. Localisation would help bring down the time of manufacturing, considering imports of parts take more time. The plant, which has been producing two-litre diesel engine, will start rolling out three-litre engines from next month.
