German car maker BMW has demonstrated its confidence in a relatively new luxury car market by choosing to base construction of one of its most popular makes in India. Iconic British brand Mini, which boasts models such as the Clubman and Cooper, has proven immensely popular in the country and as a result will begin manufacturing the Countryman model later this year.
The Indian market has become somewhat lucrative for car makers in recent years, as the recessions and financial issues which troubled Europe and the USA had little impact there. Economies in countries such as India, China and Russia grew whilst more Western financial structures entered a period of contraction – and, with each country boasting a growing middle class, luxury items became more in demand than ever before.
BMW first began operations in India in 2007 with the launch of its own sales company. It introduced the Mini brand to the country five years later in 2012 selling just over 300 Minis in the first year.
At present, Minis are constructed in commercial plants in the UK and Austria, and BMW were quick to point out that neither site would be affected by the decision. BMW also owns a plant in Chennai, India, where several BMW models are already produced for the Indian market. Mini is expected to join this same plant in coming months.
According to BMW, the move is in line with its “production follows the market” strategy, although market analysts have questioned whether the German company has a different, more financially-motivated reason. In order to import a fully built car into India a 100 per cent tariff must be paid, yet cars assembled at a plant within the country will attract only a 30 per cent fee – even if each of the component parts have been imported.
Therefore, by domestically manufacturing Indian vehicles, BMW will save greatly on import duties and increase their profit margin.
Should all go to plan, BMW could see sales growth multiply several times over in one of the world’s fastest growing economies – with only 1.5 cars per 100 people and rapidly growing disposable income, the car industry is likely to experience a boom sometime in the next few years. Simultaneously, this could prove to be a gamble at the wrong time, as the latest figures released indicate a sharp slow-down in growth is on the horizon.
Sales fell by 6.7 per cent in the past 12 months according to the Society of Indian Automobile Manufacturers; a fact which has caused domestic brands to cut prices and production in a bid to remain profitable. The first fall in a decade took many by surprise – and unfortunately for BMW, there is no guarantee that demand for luxury cars will pick up again this year.
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