Tuesday Oct 30 2001 | Updated 0008 hrs IST 1338 EST
BMW seeks foray into China luxury car production
SHANGHAI AUTOMAKER BMW aims to produce its luxury cars in China by teaming up with a domestic carmaker to make its first major foray into the potentially lucrative market, company officials said on Monday.
BMW has submitted a joint venture proposal with Brilliance Automotive Holdings of Shanghai to produce premium cars for local consumption, even as rivals like General Motors and Volkswagen target the more affordable, small family car segment.
"BMW is the first to consider making premium, high-end cars in China," said Ma Qingsheng, a spokesman for BMW's Beijing representative office. "We think there's potential in this segment of the market, because in past years our performance has been quite good."
Analysts agreed, saying a small but wealthy group of consumers can support BMW's venture, and BMW can capitalise on its strong brand name.
The German carmaker's higher-end vehicles are currently imported with expensive customs tariffs.
"It is this (wealthy) community that really requests cars, and they will request the better cars," said Yale Zhang, an associate with Automotive Resources Asia in Beijing.
"If they can control the price to just about 500,000 yuan ($60,410) or thereabouts, that market will still be there. BMW will do it, because the name of this car in China is highly respected," he said.
BMW delivered 4,663 cars to China in the first nine months of this year, although that figure includes wealthier Hong Kong.
BMW and Brilliance officials declined to elaborate on the type of vehicles to be produced or the venture's specific form, saying the project was still awaiting government approval.
"We first have to decide if it's even feasible to move ahead with the project," said Ma. "We've already submitted our project proposal to the authorities, but approval is still pending. The project is still subject to change."
RACING AHEAD Based on its track record marketing high-end vehicles, BMW is confident.
"We therefore have every reason to believe that we will achieve a very good overall sales result in China throughout the whole of 2001 -- that is, well over 5,000 units," BMW Chairman of the Board Joachim Milberg said in a statement on Friday.
"It is our objective to become the number one premium manufacturer also in this country," he said.
Sales of cars in China are racing ahead, spurred on by government incentives like easy loans and tax cuts. Individual buyers account for roughly 40 per cent of car purchases at present, but Beijing hopes to boost that to 70 per cent over the next 10 years, according to state media.
China's auto sales rose a year-on-year 18.94 per cent in the January to August period of this year to 1.56 million, according to the China Automobile Industry Association.
But the rosy numbers cloak price wars and intense competition. First half profits for FAW Car -- a unit of industry leader First Automobile Works Group -- tumbled more than 70 per cent to 72.32 million yuan ($8.74 million).
China's vast numbers of automakers also hampers the fragmented industry's long-term development. The country boasts more than 100 manufacturers, some of which turn out fewer than 100 vehicles a year.
China's impending entry to the World Trade Organisation, expected later this year, is expected to invite formidable new competition. Beijing will slash import tariffs on foreign cars to 25 per cent within five years, from 60-80 per cent now. (Reuters)
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