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Business News/ Companies / BMW India plans to source engines from Force Motors
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BMW India plans to source engines from Force Motors

The move will help BMW pare its import bill and offer its cars at a more attractive price

Imported luxury cars in India attract a duty of 120% while a completely-knocked down unit attracts less than 30%. Photo: BloombergPremium
Imported luxury cars in India attract a duty of 120% while a completely-knocked down unit attracts less than 30%. Photo: Bloomberg

Mumbai/Chennai: BMW India Pvt. Ltd, India’s third largest luxury car maker by sales, plans to procure engines manufactured by Pune-based Force Motors Ltd for its car models. Force Motors, which is also a supplier of engines to Mercedes-Benz India Pvt. Ltd, will be setting up a plant in Tamil Nadu to service BMW, according to two people with direct knowledge of the company’s plans.

The move will help BMW, which has been ceding ground to rivals Audi India Pvt. Ltd and Mercedes India, pare its import bill and offer its cars at a more attractive price.

“The board of directors of the company at its meeting held on 29 April 2014 has decided and approved, subject to receipt of necessary permissions, approvals and sanctions, to establish a manufacturing facility at village Anjur, taluk Chengelpet, district Kancheepuram, Tamil Nadu, to manufacture and assemble engine-gearbox for automobiles," Force Motors said in a filing to BSE on Tuesday.

The facility, in which Force Motors plans to invest 100 crore, will meet the engine and gearbox requirements of an “international passenger car maker", Prasan Firodia, managing director at Force Motors, said in an interview, without naming BMW. It will commence production by January 2015.

“The local manufacturing of engines will help BMW save import costs and price its models more competitively," said Puneet Gupta, a principal analyst at IHS Automotive, a sales forecasting and market research firm. According to Gupta, India is emerging as a preferred destination for sourcing small-capacity engines.

According to a person familiar with BMW’s plans, the move could have also been prompted by an investigation by Indian agencies into BMW’s imports.

A BMW spokesperson declined to comment.

WirtschaftsWoche, a German weekly magazine, published a report last September that Indian agencies claimed that BMW had for years declared imported car parts as part of larger assemblies rather than as separates, paying lower duties than it should have. The customs authorities have imposed a fine of at least $100 million on the company, the magazine reported, and this could grow further in a second stage. The magazine did not disclose its source.

Imported luxury cars in India attract a duty of 120% while a completely-knocked down unit attracts less than 30%.

BMW ended 2013 at the third spot behind Mercedes India and Audi India, selling 7,327 cars against 9,416 units a year ago. It assembles the 3-Series, the 5-Series, the X1 and the X3 SUV and other models at its Chennai plant. Its imported models include the 6-Series, the Gran Turismo, the M-Series and the Z4 Roadster.

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Published: 01 May 2014, 12:13 AM IST
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