Expanding market
May 27, 2012
Automaker BMW aims to boost sales in China's booming market and is scaling up its production in the country. Chief Financial Officer Friedrich Eichiner expects a sales increase of 25 to 30 percent for 2012 in the world's biggest automobile market. With a new factory in Tiexi in northeastern China, which opened on Thursday (May 24), the carmaker's production capacity is expected to increase by 300,000 units per year.
Depending on how the market develops, Chief Executive Officer Norbert Reithofer said even a volume of up to 400,000 cars could be produced locally. In 2003, BMW began a joint venture with local Chinese carmaker Brilliance. Together, the two manufacturers plan to invest a further 500 million euros ($626 million) in China. CFO Friedrich Eichiner spoke with DW about the plans.
DW: You are CFO of the BMW Group and also on the board of the joint venture BMW-Brilliance. How important are international investments like those you are making in China?
Friedrich Eichiner: They are extremely significant for our business development because we cannot just import cars here. We also have to show our commitment locally. There are big expectations that we will be able to increase our capacities and create jobs. And that's exactly what we're doing now with our expansion here in Tiexi.
Does China have certain aspects or peculiarities for BMW, or is this an investment like all others - for example, in Latin America or Europe?
China certainly stands out because of its extraordinary growth dynamics, which are to be found nowhere else in the world right now. And we also know that in China's premium goods sector, we can implement good prices. So China is an important leg for us to stand on.How many difficulties have you encountered in working together with Chinese companies - specifically in terms of your joint venture and the topic of intellectual theft?
Yes, we certainly had some stormy phases at the beginning. But for many years now, we have a good understanding with one another. We treat each other very fairly. And we agree on strategy issues and have achieved a good co-operation, which isn't to be taken for granted.
Is it not frustrating when - let's say - you build a car and then see a very similar model rolling out of the factory next door a couple of years later?
Structurally, they are not very similar. We can go ahead and get that out of the way. Very different technologies are being used. The cars that our partner is producing are positioned for the mass market and not for premium markets. As such, they present no real competition for our products.
Everyone is talking about the boom in China, but at some point it will come to an end. What are you doing to minimize risks associated with a decline or end to growth?
Well, just because things are going well in China doesn't mean we can ignore other regions of the world. That's the most reasonable strategy. That means we want to capitalize on opportunities in the US, for example. And we want to grow in a balanced way so as to avoid a one-sided dependency.
Can you quantify how you divide up the regions of the world in terms of your sales or profits?At the moment, China is less than 20 percent of our sales. Now this year, China is going to come into the same magnitude as the US or Germany. In terms of sales, our focal point remains on Europe, which accounts for around 50 percent of the sales volume, with the rest being fairly evenly distributed around the world's regions. That is to say, our emphasis is still on our home market and not on China.
As an investor, is it easier for you to work with a country with centralized governmental control rather than a democracy like in India, for example, where many different problems can come up? Is it easier to work with a communist government because you have a better sense of where you stand?
I wouldn't put it that way. Each country has its own qualities. I think it's more about whether one is welcome, whether this investment and engagement from a company like BMW is wanted or not. In places where it's desired, we typically get the support we need. That was the case in India, and it's definitely also the case here in China.
Interview: Thomas Neufeld / gsw
Editor: Neil King