BMW: Expand in China to Meet 25% Increase in Demand

TOKYO, Jan 31, 2008; Chang-Ran Kim writing for Reuters reported that BMW , the world's biggest premium carmaker, said on Thursday it aimed to boost sales in Asia by a quarter over the next five years and unveiled plans to expand production capacity in China to catch up with demand.

Through its three brands -- BMW, Mini and Rolls-Royce -- the German automaker targeted sales of 200,000 vehicles in the rapidly growing Asian region by 2012, up from 159,365 cars sold last year.

For this year, BMW is targeting growth in the "higher one-digit percentage range", representing a slowdown from the 12 percent rise in 2007, but a top executive said he anticipated an overshoot.

"This is a conservative target, because we like to exceed expectations," sales and marketing chief Stefan Krause told a media conference in Tokyo, noting the high-volume BMW 1 Series will be launched in more markets in the region, including China.

Sales growth has been especially brisk in China, prompting BMW to announce plans to lift output capacity at its joint venture factory in the northeastern city of Shenyang by 45 percent to 44,000 cars a year over the next few months.

BMW currently has capacity to build 30,000 BMW 3 and 5 Series cars at its factory operated with Brilliance China Automotive Holdings Ltd . Chinese media had reported the venture was building a second, 20,000-units-a-year plant.

"It's too early to say what will happen in the next three or five years," said Christoph Stark, head of BMW's China operations. "As and when market demand grows, we will look again into how to proceed with an expansion."

BMW boosted its sales by 42 percent in mainland China last year to 51,588 cars, while in the Greater China region including Macau, Taiwan and Hong Kong, it moved 61,098 vehicles, up 37 percent.

"In 2008 we expect further substantial increases in retail volume in China, despite increasing competition in the market," Krause said.

He added that he was "very happy" with BMW's profitability in Asia, especially at a time when the dollar's weakness against the euro has hit margins in the United States, the world's biggest luxury car market.

BMW also has big hopes for India, another market of rapid motorisation, Krause said. BMW sold nearly 1,400 cars there last year, easily surpassing its target of 1,000, and will add more products through the M series and set up three more dealerships to bring the total to 12 by the end of this year.

Globally, the Munich-based automaker said on Wednesday it expected another year of record sales volume for all three group brands in 2008.

Last year, it sold 1.5 million vehicles, up 9.2 percent from the previous year, to keep its title as the world's top premium carmaker, with sporty models like the 3 Series cabrio, X5 offroader and new Mini Clubman fueling sales.

By 2020, it aims to sell more than 2 million cars globally, and lift the core automotive division's operating margin to 8-10 percent by 2012. That margin was at 5.5 percent for the first nine months of 2007.