Market Developments
BMW CRUISES INTO CHENNAI
In a sign of India’s growing appetite for luxury goods, German carmaker BMW opened its first assembly plant in early April in Chennai, India to cater exclusively to domestic customers.
Most Indian car makers focus on affordable, compact models for the Indian market and Tata is even attempting to build a factory to produce cars that will cost as little as Rs 100,000.
Yet BMW believes there is a strong potential demand for luxury cars in India. “Production follows the market,” said Norbert Reithofer, BMW Chairman. “Particularly in the premium automobile segment, India offers big opportunities for growth.”
BMW sold 257 cars in India in 2006. The US$27 million assembly plant near the southern city of Chennai is expected to put together about 1,700 cars annually from imported kits. Capacity could expand to 10,000 cars per year.
India produced 1.4 million cars in 2006 and that number is expected to grow to 2.4 million by 2012. Premium cars are still a niche market with about 3,800 such vehicles sold last year.
But as wealth increases and consumer tastes become more sophisticated, premium sales could grow to 15,500 units by 2012, according to Global Insight, the market research firm.
BMW which has had a dealer in New Delhi for 10 years, set up a local subsidiary in early 2007 to expand operations. Domestically assembled cars will sell for 40 per cent less than heavily taxed imports. The company plans to set up dealerships in 10 Indian cities.
Other automotive companies such as Ford, Hyundai and Indian truckmaker Mahindra & Mahindra are building and expanding factories near Chennai, making the state of Tamil Nadu a manufacturing hub.
Chennai has become attractive as a car manufacturing centre because it is near ports and has reasonable road and airport connections. The presence of multiple manufacturers has created a network of car component suppliers in the region.
“The strategy of local production allows us to exploit the opportunities available for opening up markets with long-term potential for growth,” said Frank Peter Arndt, production director at BMW.
Source: Financial Times