BMW expects its China sales to grow
SHANGHAI: The top executive of BMW A.G. said on Thursday he expected its China sales to grow this year after a 16 percent slide in 2004, as its mainland venture raced toward making the new 3-Series in the second half of the year.
Chief executive Helmut Panke told reporters he was confident of growth this year in Greater China — which includes Hong Kong and Taiwan — despite a near 7 percent drop in first-quarter sales in the region and a 10 percent fall in sales in 2004.
He said he did not believe the German premium car maker would trim prices further in China this year after prices for locally built 3-Series and 5-Series sedans had been cut by 13 to 15 percent in January.
Chinese car sales grew just 15 percent in 2004, after almost doubling in 2003. Analysts expect sales in the world’s third-largest vehicle market to grow by 10 to 15 percent this year.
“Our objective is to grow faster than the competition. I believe we will see growth over 2004,” Panke said on the sidelines of the Shanghai auto show.
“The price reduction was a unique decision to follow the competition, but I think that reduction is over. There are some signs of a price increase for some products, and I don’t believe there will be further price reductions this year.”
The Munich-based firm manufactures cars in China with partner Brilliance China Automotive Holdings Limited in the icy northeastern city of Shenyang.
The plant has an annual capacity to make 30,000 cars. On Wednesday, the head of BMW’s mainland venture said he expected China’s premium car segment to generate slower growth than lower-priced downmarket models this year.
Still, the head of Ford Motor Co.’s Volvo Car Corp. told Reuters he expected China’s premium car segment to probably triple over the next five years, thanks to breakneck economic growth and an increasingly cash-rich middle class.
Beemers in icy north: There is clearly scope for growth. Premium brands make up just 5 percent of China’s car market — where 2.3 million sedans were sold in 2004 — versus more than a 10th in a developed market such as the United States.
BMW is targeting annual sales of 30,000 units from the venture in northern China, just a few hours’ drive from the North Korean border, but executives declined to set a timetable. Cars made by that venture accounted for 8,660 unit sales in China last year.
The cost of making cars in China remained higher than in Europe, Panke said, and the firm’s current lack of scale meant BMW could not squeeze suppliers. “Our demand is currently too small to justify broader supplier development,” he said.
Thus BMW plans to boost its Chinese dealership network to 60 by the end of this year, up from the current 44, said Christoph Stark, the firm’s China chief executive. reuters