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BMW in India

Date: Feb 21, 2005
Contributor: Darren Ovitt

BMW scouts for India plant to drive Asia sales

German luxury car maker BMW may build a car plant in India, a market it views as undeveloped, to help it hit an Asian sales target of 150,000 cars within three years, its chief executive said on Wednesday.

The Munich-based firm, battling DaimlerChrysler's Mercedes-Benz to be the world's top maker of premium cars, forecast group sales in Asia to grow 10-15 percent this year.

BMW, whose stable also includes the Mini and Rolls-Royce brands, said it sold 95,500 cars in Asia last year, around 8 percent of its total sales. It aims to raise that to 150,000 by 2008, BMW Chief Executive Helmut Panke said.

Panke, speaking to reporters on a two-day trip to Singapore, said a BMW team of experts was in India to scout for possible locations for car production. BMW sold only 122 imported cars in India last year from outlets in Bangalore, New Dehli and Bombay.

"There's no decision yet and we have no specific time frame. Perhaps we'll enter a joint venture similar to the one in China," Panke said.

He insisted that China, BMW's second-biggest market in Asia by sales after Japan, would see above average long-term growth and dismissed last year's 15 percent drop in mainland group sales as a one-off.

"We will grow in China (in 2005 from 2004)," he said, adding it was "not important if it's 5 or 6 or 8 percent" sales growth.

Panke said January had not been a good month in China.

Last month, BMW cut prices for the 3-Series and 5-Series cars it makes locally in a joint venture with Brilliance China Automotive by up to 15 percent to lure buyers.

"I think we have in principle reached the bottom (in pricing)," Panke said. "Perhaps (we will cut prices by) another 1 or 2 percent."

BMW, which also vies with Volkswagen's Audi to sell high-end sedans to an increasingly wealthy and style-conscious Asian middle class, only began assembling sedans in China in 2003.

Asked about its new multi-purpose-vehicle, which BMW has dubbed the "space functional concept" and claims defies traditional description, Panke said details would be announced in the first half of this year.

He said the vehicle -- neither minivan, estate nor off-roader -- would go on sale in 30-36 months. He said no decision had yet been made on whether to make the new car in Germany or the United States.

Depending on the parts used, the car could be made at an existing German plant or in its U.S. factory at Spartanburg, Panke said, adding foreign exchange would be a factor.

BMW has hedged over half its foreign currency exposure for this year.

The group's exposure to a falling dollar -- it sold nearly 300,000 vehicles in the United States last year -- and rising prices for raw materials such as steel and oil-based components such as plastics has concerned investors. Some analysts expect those factors to hit profits this year.

BMW will give a 2005 profit outlook next month.

Panke acknowledged that selling just 792 ultra-luxury Rolls-Royce limousines last year had been disappointing, but he maintained a sales target of 1,000 units this year.

BMW has forecast record sales for all three brands this year, driven mainly by next month's launch of its revamped, best-selling 3-Series saloon.

With expected sales of 120,000-150,000 units of its 1-Series hatchback, launched in September, BMW hopes to overtake Mercedes-Benz as the world's most popular premium brand.

Last month, BMW said global 2004 revenue rose 6.8 percent to 44.3 billion euros ($56.9 billion), with revenue from its core auto division up 11 percent.

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