There’s gloom in Motown as car sales are slowing down. But German luxury car maker BMW is going strong. It has already sold Rs70% more cars over its last year sales and is expanding operations to remain a dominant player in the luxury car segment in India. Andreas Schaaf, president, BMW India, shares the company’s plans with Yuga Chaudhari. Excerpts from the interview:
With the market slowing down, do you still aim to achieve the target of selling 10,000 cars this year? How has it been for BMW India so far?
We had a relatively good October, given the fact that the overall market had significantly dropped in the same month. For us, it was a good month as we sold almost 890 cars, which was a phenomenal number, given the fact that our competitors were around 500.We have to see how November and December will be. The market has dropped and is getting much tougher. We have sold over 8,000 cars this year, which is a very good number.
The growth rate is about 70% this year so far against the last year, when we sold 4,741 cars in the Indian market. I think this year will not just be our most successful year, but most likely the India operations will become our most successful operations in the world this year. We are going to be the fastest growing market for BMW globally. The target of selling 10,000 units is still in reach. It’s difficult to predict, but I am not getting too nervous about it.
Some BMW dealers are offering discounts to push sales...
We have promotional schemes in place from the company, which are very few and only on two models. Everything else is in the dealers’ hands. If I look at the promotional schemes offered by our company as against the market, our schemes are almost half of what our other two competitors are offering. Our finance arm has been operating for a year now and is doing very well. The percentage of customers we are financing today is around 40%, which means almost every second or third customer gets financed through the BMW financial service. We have not reduced the interest rates. We have plenty of options for designing a suitable finance scheme for a specific customer.
What are the different business models you are focusing on?
We are currently working on a leasing scheme as well, which will be an attractive scheme for an individual customer. The scheme will offer three-year lease with a guaranteed residual value. Leasing does exist in India, but mainly at the corporate level. It doesn’t really exist on the end-customer side. I am not sure how many people would look at it seriously. We have to start developing it; a lot of Indians know it from abroad and we are looking at successfully implementing it. We plan to launch this product sometime in December this year. We will have a good leasing product and we will make a noise about it. Apart from this, we will also launch our used car business in the coming week.
This will be premium used cars. It is going to be an extremely well developed concept, which will differentiate us.
You have been talking about used car business for quite sometime now. What took you so long?
Used car business is a complicated business. Before we start any business we wanted to make sure that it is bringing enough returns to our dealers because this business can burn a lot of money. It is one of the critical areas of the business because the financing cost structure is also high. It is important to know what the right price for a specific model is and if that does not happen, you will end up making losses on a car.
To understand the market, we started used car operations on a small level through our three dealerships in the beginning of this year. It was important for us to gain experience and to get to know what will Indian customers accept as a resale value, what should be the finance options, service, etc.
We wanted to incorporate every aspect in our business, which we have done now. We had to develop it on our own because it is a completely new business model in India and we did not have any guidelines as such to follow. For the used car business, we will operate through our current dealers. Some of them will also set up separate centres for the used cars. There is already one in Pune. We will see around 10 used car centres in India in a year.
What are your dealer expansion plans?
We are expanding in almost every part in India, even in Tier IV and V cities. I have been to Orissa, Bhubaneswar, Siliguri and we are getting into small cities step by step. We are trying to roll it out as fast as possible. The growth in India will come from smaller cities and we will be the first to develop the premium business in all those cities. There will be no other premium competitor who will start developing the business in any of these cities before BMW.
Currently, we have 26 touch points in the country and by the next year we plan to take this number to 40. We have a plan to go over 60 in another two years. The metro sales account for 60-65% today, which is still the largest. But it will drop to almost 50% in the next two years. This increases the importance of the smaller cities.
Are there any plans of localising the content for BMW in India?
India will not be a small operation for BMW; it will become bigger in the future. There are a lot of scenarios when it comes to production. It all depends on how fast the market is going to grow. Hopefully, someday we will produce cars in India or look at exporting cars from here. We are evaluating a lot of options, but we see this happening within the next 10 years and not anytime soon. We need to reach at least somewhere between 50,000 and 100,000 units a year to start local manufacturing.
Mini is expected to see India launch next year? What are your plans with the new product?
Mini will be launched next year. There is a very big excitement for the launch in India. The car will be launched during the Auto Expo in January and bookings are likely to begin before the launch. The car will be a CBU (completely built unit). We have asked all our dealer partners whether they want to be Mini dealers as well. All our dealers are keen on investing in this. For Mini, we will have one showroom in Mumbai, two in Delhi, and then we will add Pune, Chandigarh, Chennai, Hyderabad and Bangalore.
Do you have plans for launching small car—1 series?
We are evaluating 1 series, which is a hatchback. We asked our dealers, what is the priority — Mini or 1 series. We showed them both cars in Munich. They all said the Mini was the first priority. That is why we have kept 1 series on hold. We are not sure whether the concept of premium hatchback will work.
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