For German luxury car maker Bayerische Motoren Werke AG, 2007 is the year of India. BMW opened its factory in Chennai last month and plans to sell a range of offerings in the country—from the 3-series sedan to X5 sports utility vehicle. Michael Ganal, a member of the management board of the company, is in India to study the market and spoke to Mint about BMW’s India plans. Excerpts:
Do you think that BMW is late in coming to India and has missed a trick?
Well, I think we are late and at least not too late; I am of the belief that it is the right moment. What we need is a certain size of the market and the reforms to operate an automotive business in your country, the preconditions and pre-requisites to establish a plant, to import the car and parts, and have a reasonable trade system. This was well developed in India over the past years and it finally encouraged us to establish, not just a sales company, but a plant as well, which is a unique approach from a worldwide point of view.
We have a three-step strategy when it comes to opening markets: First, we start selling cars via imports, depending on the size of the market. Then, we establish our own wholesale entity and next step is to finally have a plant. We did this in the US the same way. In India, we established both the sales company and factory. All this compared to where the market for the time being stands in matureness, I think this is the right moment.
Still, you are more than 10 years behind Mercedes-Benz...
I don’t think it is a bad time to enter the market. For historic reasons in many markets, Mercedes was to some extent ahead. Over the years, we caught up and in the end, we have taken the lead. Now, as you know, we’re global No. 1.
How are you going to tackle this competition and increase your market share? What kind of growth do you see?
We have strong products. On a global scale, we are quite successful. In India, we have an extraordinary task to succeed in all fields—dealer development, brand building and creating a superior customer experience. The Indian market is difficult to forecast. We have estimated that the premium market, which has a volume of 5,000 cars a year, might exceed 10,000 in an foreseeable period of time. It could be far more. We are prepared for whatever might happen.
Our target is to grow faster than the competition all over the world—grow not only the volumes, but also the segment and segment shares. This is the starting point of this story.
Clearly, it’s our approach to become No. 1. This means that in a certain period of time, we have to beat Mercedes; this means, one day we’ll sell more than 2,000 cars (Mercedes’ sales in 2006). But it will take some time. We should not just push volumes, but grow dealer network accordingly to offer superior customer service.
What about further investments? How fast can you scale up?
In a matter of months. We can produce 1,700 units in single shift. We just need to introduce another shift. For the time being, there is no further investment needed on the production side; it is needed on the dealer side. We see around $30 million (Rs129 crore) invested by dealers in the next two years. We have eight dealers. What we see is a $2-3 million, my rough guess, investment by dealers. This will allow us to grow the business according to market potential.
If there is no investment needed on production, why have you bought such a huge plot of land in Chennai?
We prepare for the future. When we started our production in South Africa in those days, it was a small plant. Today, South Africa has become a prominent player in the BMW production network. So, we are in the long-term business. We are relying on the future growth of India.
What about sourcing auto parts for your global network from India?
We are in the middle of setting up a purchasing office in Chennai. We’ll go step by step.
Don’t you think that the Mini is a brand suited for the India?
In the long run, yes. For the time being, we are short of Minis due to high demand. It is not the top priority here.