BMW plans new India offensive

BMW recently launched its new X5 in India, a key launch after the 5-Series in April. With these launches, the carmaker hopes to be back in the leadership position. While BMW prepares to bring in the X1, due for launch early next year, it is also testing the waters for BMW bikes. The company, which sold 3,300 cars till end-August, hopes to sell over 5,000 units by the end of 2010.

The company is also looking at widening its dealership network by adding another dealerships to the existing 18. It is also keen to ensure that its dealerships provide the best service possible. With this in mind, training has been accorded top priority with the addition of two new training centres. And finally, production capacity. The company wants to increase capacity at its Chennai unit from 3,000 to 5,400 units. “Our success so far has proved that our ‘production-follows-the-market’ strategy, which has already been successful in markets such as the US and China, is the right approach,” said Frank-Peter Arndt, member of the Board of Management of BMW AG, responsible for production.

In addition to strengthening capacity, a new vehicle logistics centre will also be set up at Chennai plant, for which BMW has already acquired land. In addition, BMW Financial Services will begin its operations in India towards the end of the year. BMW India’s president, Dr Andreas Schaaff admits 2010 has been a difficult year for the company as a result of the run-out phase of its core volume model – the 5-Series. Yet, with the launch of the car in July, three months after it was showcased in Mumbai, the company is confident that by the end of the year it will be able to regain its market leadership.

Says Schaaf: "If you have a run-out of your major volume model and you can’t sell your major volume model for three to four months in a row, then it should be no surprise that you fall back in volumes." Having sold over 450 cars in August, and with its sales of the 5-Series over the past two months, Schaaf is confident that BMW can get the numbers month by month. Asked about his outlook of the luxury car market, Schaaf reiterates that BMW has a very positive outlook of the luxury car market. "This year, it’s a bit of an exception because if 60 percent growth in the luxury car market. I do not really know if 60 percent growth can be sustained. But internally, we definitely expect double-digit growth for next year, may not be in the range of 60 percent. BMW is prepared to cope with the demands of market expansion," he says. He adds that an important statement from a company point of view is the showroom. “I would say it’s a consumer-friendly environment. You won’t find anything like this anywhere else in the country. The look, feel and touch of every aspect of this showroom is luxurious. Training people is another important aspect. That’s why we have put up two additional training centres. In the last few months, the sales of X5 were coming down as it was the run-out period. With the new X5, we expect sales will pick up significantly,” he signs off.

Interview

Dr Andreas Schaaf, president, BMW India

What are the three key pillars of your second wave of growth offensive?

We will focus on a product offensive, enhancement of dealer network and increasing of production capacity. The 5-Series is the dominant model and is a fantastic growth opportunity for us. We sold over 200 units per month over the past two months. Looking at our order book and the waiting time for the car in India, I am confident that the number would stay around that level even toward the end of 2010.

Again, the X1 will be a milestone for us. If you look at the success of the X1 throughout the world, we are sold out. There is huge pressure in our plant in Leipzig to cope with the worldwide demand for the X1. This car is the current desire of people throughput the whole world. The reason for this is that it has a unique mixture. It has four-wheel drive, fantastic looks and is reasonable in size. It has a new price positioning and will be the entry-level price of BMW in India. What are your plans for dealership expansion?

We have 18 facilities at present and will another four in 2011. We are a retail-oriented company. We think about our retail partners, so wherever we see a viable business case, we will set up a retail showroom.

How does BMW see India as a component sourcing base?

India will become one of the major production bases in the world. Already, it is the seventh largest market. Most likely, you’ll see it increasing in the future. For us, the strategy is to find services that we can source from India, not necessarily for India. We need to find people that qualify for the quality that we are looking for in the BMW network.

This is the focus of our strategy. We have to do so because this is going to be one of the biggest automobile production bases in the world. That’s why we have to invest right now to be able to leverage that.