A new car factory in India has emerged as the most likely place to boost output of the MINI, the iconic small car that has been revitalised by BMW.

Sited 40 kms south of Chennai, the modest plant at Mahindra World City has suddenly become a hot candidate as a satellite production centre when demand finally outstrips supply from Oxford, the Mini’s spiritual home.

Though the official line from BMW AG is that a lift in capacity to 240,000 units should be sufficient to cope with the expected rush of orders for the latest line-up that will soon include the long-awaited Clubman (extended wheelbase wagon) version, the option of boosting output with supplies from the subcontinent is under active consideration.

After the roller-coaster ride that has already taken it to more than 70 global markets, the smash-hit model will soon reach showrooms here if a survey by the German group’s market planners proves the car to be a viable proposition.

“We are carrying out a market analysis for the launch of the Mini in India. If it is found to be viable, we could have it on sale here in 2009,” said BMW India president Peter Kronschnabl at a ceremony held to mark the opening of the factory, set up to assemble BMW 3 and 5 series sedans.

But in a further reference to the study, Asia region senior vice president David Panton explained that big tax differences – 114% on imported cars, compared with 60% on models assembled in India – would also have a bearing on its outcome.

“We started the analysis a month ago and we are keeping our options open to include both the completely built up (CBU) route and assembly from parts that are supplied from abroad (Completely Knocked-Down – CKD).

“Going the CKD route would call for a big investment, but of course, we have to take price positioning in the reckoning. It is too early to say what will happen…at this stage we don’t know what sales volume would be necessary to make it viable,” said Panton.

Asked if higher demand might prompt BMW to open another Mini source, group manufacturing chief Frank-Peter Arndt told just-auto: “We have no plans for further expansion at the moment because we can add more capacity if sales continue to grow. My personal view is that Oxford could be stretched to the 300,000 production level.”

Meanwhile, group chairman Norbert Reithofer was keeping faith with his winning formula for expansion when he cut the blue ribbon on the plant.

The former manufacturing supremo defended BMW’s cautious approach to growth with a facility that cost just EUR20m – a far cry from the EUR1.3bn that was spent on the group’s last European factory opening in Leipzig, Germany.

“Under promising and over delivering are always preferable to running into the problems of over-capacity, and we always like to exceed expectations,” he said.

With a total workforce of 150, the Indian assembly operation has been geared to produce 1,700 cars per year on single-shift working and is expected to create a further 600 jobs in the dealer and service network.

“What we are doing here is taking a conservative attitude. We feel it is important to use a plant as a market-entry tool. I would never say we’d never export out of here, but this is not the right point in time for us to do that.

“We are following a process that we started back in 1973 in South Africa – that plant set out with a capacity of 3,000 units and now produces 55,000 a year.

“At Spartanburg, the US plant we started in 1992, current output is six times greater than the original volume and we now need more production capacity at Shenyang, the assembly plant we opened in 2003, after selling 43,000 cars in China last year,” said Reithofer.

Last year, BMW Group car sales in Asia reached 136,000 units and volume for the region has been targeted at 150,000 by 2008. “After Europe and the US, Asia is another mainstay of our business. This is where we expect the most dynamic economic growth in the long term.

“Our assumption is that several Asian markets will show above-average growth rates in the years to come, especially in the premium segments. We want to be part of it and if we need more capacity in future, our modular layout means it can always be added,” said Reithofer.

Currently, the car market in India accounts for 1.2 million annual registrations and experts are predicting vigorous growth to swell the yearly sales total to 2.2 million by 2015. Significantly, the premium sector is developing at twice the rate of mass-market segments.

Kronschnabl is keen to challenge German archrival Mercedes-Benz, which established an Indian assembly outpost in 1993 and now accounts for 50% of the country’s luxury car sales.

“Mercedes sold 1,800 cars in the 12 months after starting out here but managed only 2,000 units last year. With a population of 1.1 billion and constant growth in the number of households able to afford a premium car, this market is on a roll and we see a lot of potential.

“We are confident we can do well. We are recognised as a leading premium brand but we have not been accessible here in the past because we had hardly any dealers. Things will be different under BMW India, which will have nine dealers by the end of this year and a total of 12 to serve 10 metropolitan cities by 2009,” said Kronschnabl, who is aiming for 1,200 sales this year, rising to 1,500 in the medium term.

According to Forbes magazine, India has 36 billionaires worth a total of US$191bn and more than 83,000 people with financial assets of more than US$1m.

It’s hardly surprising that Audi, Porsche and Lamborghini are setting up assembly lines or sales networks in a bid to tap all that wealth.

Maurice Glover