"Indian premium market is successful but what worries us is the competitors price policy. We will increase our prices and dont want to go into the discounted pricing route," Philipp von Sahr, BMW Group's month-old new India chief told FE. On Thursday, the company launched the 6 Series Gran Coupe priced at R86.40 lakh.
Higher prices will help offset the negative impact of the weakening rupee (versus dollar) and help the company increase spends on brand building. BMW also sells cars under the Rolls-Royce and Mini brands.
We want sustainable leadership and it means that we have to keep a price premium. If we go down to the level of the volume manufacturers then we are no longer a premium car maker, von Sahr said.
But, this does not mean Philipp von Sahr is willing to give up the top spot to Audi, or Mercedes-Benz. Taking the volumes battle further down to the luxury hatchback territory and creating a new segment, the German firm will launch a new entry model 1 Series by next year end. Assembly at BMW's Chennai plant would mean prices likely in the R15-20-lakh range.
The flagship BMW 7-series will also be assembled locally by March increasing its margins by avoiding the high import duties currently paid on fully-built car imports. Currently, the 3 and 5 series sedans, apart from the X1 and X3 SUVs are assembled at Chennai.
This strategy around the 1 Series is not new to BMW. Back in December, 2010, the launch of the X1 compact SUV (R24.5 lakh) also created a new entry segment in the luxury car market aimed to feed the growing aspirations for a premium brand among Indians with fast-rising incomes. The competition soon responded Audi locked horns with the launch of the Q3 (R27.2 lakh) this yearwhile Mercedes followed with the petrol B-Class Sports Tourer (R21.49 lakh).
In a domestic luxury car market of about 20,000 units/year, BMW maintained its three-year market lead with sales of 4,384 units in the first six months of 2012-13. Audi came in second on sales of 4,292 units, followed by 2,919 units sold by Mercedes. The popularity of Audi's Q3 has given it a significant volume jump, pulling it from the third position to the top in monthly sales. Volkswagen is also planning to launch the A3 sedan and hatch in the next two years to keep ahead of the pack.
Meanwhile, Mercedes-Benz, the oldest among the three with a two-decade long presence in India, is not sleeping either. The B-Class diesel variant will be launched in early-2013, followed by the sporty A-Class hatchback at a sub-R20 lakh pricing. Numbers will further get a boost from subsequent launches such as the GLA compact SUV and CLC compact sedan.
Tata Motors-owned Jaguar Land Rover is expanding local assembly of models (currently only Freelander 2) in a bid to lower prices and increase volumes. Chinese-owned Swedish carmaker Volvo is also mulling an assembly plant in India to tap on to this growth.