Almost 90% of buyers of BMW’s Chinese-made 3 and 5 series cars want theirs painted white or silver compared with the darker colours more popular in Europe and North America.
“As a European, I don’t have an explanation for that,” BMW-Brilliance president Heinz-Juergen Preissler told Reuters beside a production line in the chilly northeastern city of Shenyang, a few hours drive from the North Korean border.
The report said demand for the cars is exploding, and there is a waiting list several weeks long of car-crazy Chinese, despite prices from $US48,000 to $84,000 that put a BMW beyond the reach of all but the wealthiest.
Executives have admitted to Reuters that it is now more costly to make BMWs in China than elsewhere but the company hopes to bring expenses down as its seven-month-old factory expands and gains scale, begins making engines, and rides growing domestic demand.
“We are successful all over the world, so why should China be an exception?” Preissler reportedly asked, as half-built cars slid by on robotic arms and chestnut-coloured leather seats awaited fitting.
According to the news agency, BMW’s popularity in China is driven by its brand power and the fact that it faces no direct, locally made luxury competitor.
Its closest rivals are Volkswagen ‘s Chinese-made Audis, although BMW’s main German rival, Daimler Chrysler, plans to produce Mercedes-Benz cars in China, Reuters said, adding that, in the first four months of the year, the joint venture between BMW and top mainland minibus maker Brilliance China Automotive Holdings moved 3,877 cars.
Though Merrill Lynch analyst Grace Mak told Reuters that early sales were slower than some had hoped, the BMW plant is still in the ramp-up stages after production started late last year.
But, in a sign of the venture’s profit power, Mak reportedly expects that by 2005, BMWs will account for 40% of earnings at Brilliance – which also makes the Zhonghua sedan that has proven a poor seller.
Reuters said the factory, at the end of a bumpy road on the outskirts of Shenyang, is designed for initial capacity of 30,000 vehicles and the local government expects it to reach that level next year, though BMW is more cautious.
“We’re pretty confident that the luxury segment will continue to grow,” Preissler, who joined BMW in 1969, told the news agency.
That, Reuters said, is why BMW and Brilliance plan to invest €450 million ($US549.8 million) in the venture to 2005, counting on demand from increasingly cash-rich, style-conscious and self-made Chinese, especially in the booming coastal regions.
“I think the middle class, self-employed people, architects, bankers and so on are the traditional BMW target groups,” 59-year-old Preissler told the news agency, adding: “I don’t think there is a major difference between European, American or the Asian markets.”
Reuters noted that the venture is now pondering an engine plant and an expansion of its existing facility – the site already features a paint shop with capacity to spray 100,000 BMW or Zhonghua cars a year.
The government of Liaoning province, where Shenyang is located, hopes the plant will roll out 100,000 BMWs a year by 2010 though BMW stresses nothing has been decided, the report noted, adding that the cachet of the BMW in China is such that the company says it attracts 30 to 50 applications for each job vacancy, and well over half its workers hold university degrees.
About 1,600 people, dressed in blue BMW logo T-shirts and overalls, work in the plant now, including 60 foreign engineers, and that workforce is set to almost double to 3,000 by the end of 2005, Reuters said.
The report said the challenge for the shining white BMW plant and adjoining showroom, located alongside the Brilliance car factory, is now to lower costs to compete with imports.
Under China’s World Trade Organisation entry commitments, import permit quotas will lapse next year, while tariffs will fall to 25% in July 2006 from about 40% now, Reuters noted.
“At the end of the day, either you become competitive, or you have to leave the market,” Preissler reportedly said.