1. Low margins, non-profitable nature deter BMW from entry level: Philipp Von Sahr

Low margins, non-profitable nature deter BMW from entry level: Philipp Von Sahr

German luxury car maker BMW is not in a rat race, says Philipp von Sahr, president, BMW India...

By: | Published: May 7, 2015 1:25 AM

German luxury car maker BMW is not in a rat race, says Philipp von Sahr, president, BMW India, in an interview with R Ravichandran. For the company, he says, it’s not about volumes, but quality and brand equity. Sahr says BMW India is about to step up its game by introducing more models and expanding the dealer network. Excerpts

You have been going through a rough patch with unit sales falling over the last 2- 3 years. What are the reasons?
First, I would reiterate that BMW India is not in a rat race. We are not looking at numbers; rather, we see India as a great market where just 1% of 3 million cars are represented by the luxury/premium segment. Over the long term, there is a huge opportunity for an iconic brand like BMW.

We look at our India investments through the prism of long and sustainable growth. We might have lost to competitors in terms of sales — more than 50% of our competitors’ volumes come from entry-level cars, where BMW is not prepared to go due to low margins and a non-profitable business model. We want a sustainable business model.

Don’t you think BMW could have made huge progress, in terms of both brand equity and unit sales, by selling entry-level cars in India?

BMW is known purely for premium quality and luxury globally. By stretching ourselves to the entry level, not only would we lose our global iconic brand image, but also ended up in a deep crisis. One cannot, and should not, stretch beyond a certain level.

With unit sales falling from 9,375 in 2012 to 6,409 in 2014, how do you plan to arrest the decline?

We underwent a poor period as we lost some good products and phased out others. We are the only luxury car maker in India to not only make eight cars locally (Chennai plant), but also have a localisation level of 50%, sourcing from over 30 vendors.

We have lined up 15 cars for 2015, including a few variants and new launches. There will be new models under Series 3, 5 and 6, with a clear focus on sedans and SUVs.

Can you share some details on your investments?

We just completed a Rs 100-crore fresh investment in the Chennai plant (total now Rs 490 crore). We also set up a skill development centre to localise more products and produce more cars should demand pick up.

We have a capacity to make 14,000 units in a single shift with two assembly lines, and can go for a second shift if needed.

We also ramped up our dealer network from 40 to 50 during the year, primarily in tier-II and tier-III cities. By May, we will start sourcing 2-litre petrol engines from Force Motors. We will also source other engines with a better localisation level.

We hope the decline will be arrested in 2015 and we will grow now.

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