BMW to up prices by 10% from Jan

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SummaryReversing the recent spate of aggressive price wars seen in the luxury car market, automaker BMW has said that it will instead increase prices by up to 10% from January.

Reversing the recent spate of aggressive price wars seen in the luxury car market, automaker BMW has said that it will instead increase prices by up to 10% from January. The move is aimed to protect margins that are under threat from competitive pressures, while preventing brand dilution.

"Indian premium market is successful but what worries us is the competitor’s price policy. We will increase our prices and don’t 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 year—while 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

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