Interview: Peter Kronschnabl

Some Tier 2 cities in India are springing pleasant surprises for manufacturers, in terms of sales. How has BMW’s experience been?
I can vouch for that. Take Jaipur. It was for me a wonderful example for our sales in March. In Jaipur, we usually sell 30-40 cars in a year. But we sold 13 cars in March alone. In one month alone, we sold 30 percent of the market’s total BMW sales. Having said that, I wish to say that we were the first auto player to bring luxury car dealerships to Tier 2 cities.

Apart from a booming economy, what are the other factors that are driving OEMs into India?
It is the prospects of the future. When you look into the car segment, out of a market of two million cars, the luxury car segment is 9,000 cars going by 2009 estimates. That’s negligible. Look at any other car market the size of India’s and its luxury car market is much bigger than India’s. Therefore, we expect there is a lot of pent-up demand. That demand doesn’t only come from Tier 1 cities. It also comes from Tier 2 cities. Having said that, the customer anywhere in India expects service that will match what is offered in the bigger markets.

The road network plays a very important role in the growth of the car market, not to mention the luxury car market. Are you happy with the rate at which the highway network is growing in India?
You can never be happy with the existing road network. But on the other hand, we have to accept that India is a big country. Things cannot change overnight. You cannot expect India to become a developed country only five years after investing in highway infrastructure. When I came to India in 2006, not a single airport in the country was in good shape. Now, you have a brand new airport in Hyderabad, in Bangalore and new domestic terminals in Mumbai and Delhi. In two to three months, a brand new airport will come up in Delhi. These are some examples that show the country is moving ahead. But we can always debate whether or not the speed at which it is happening is good enough. I am confident that the Indian government will continue to invest in infrastructure. Not only in airports but water and electricity as well.

You are moving from one BRIC country to another. How do you see Russia compared to India?
These are two different markets. Moscow in Russia is an European city. Most of the sales in Russia happen in its European part. Russia, for BMW, is a six times bigger market than India. Our operations there are 13 years old and well established. We are the number one there. I am going into a market where I have to defend the position. It’s a different ball game; different challenges.

BMW has talked about a ‘Megacity’ car. Will India also be a market for the car when it is launched?
We are launching an electric car by 2013-14. We haven’t decided yet (about the India launch). We have not decided which markets will get the car. There are two issues that matter when we talk about electric cars. Firstly, is electricity generated by renewable energy and secondly, do we have energy? Because if you have a diesel generator to charge an electric car, then there’s no point in bringing the car. Well, we are still the number one. During the first quarter, we were number one. We have phased out the earlier 5-series and did so without a dip in sales because we planned it (the phase out) properly. With the new 5-series, I am even more confident that we’ll sustain our leadership. Finally, it is the customer who has to choose. I am confident that with all that we have in the pipeline, we’ll stay number one. We are not only launching new products or new variants into production but will launch the X1 by the end of the year.

Do you plan to increase the local content in your cars?
At present, it is 10 percent. No, it doesn’t make sense to increase local content in a small series production. The vendors don’t get attractive prices.But we do have an International Purchasing Office within BMW India. We have done a lot of sampling and pre-selected vendors. But that’s for the future generation of cars. It is a process that will take years. Localisation is currently nominal and will be so for the next couple of years. But after that, it will increase as new models come into production.