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We don’t run our pricing strategy based on the market economy: BMW India president

Hans-Christian Baertels says right now, there is a perception in the market that luxury cars have a very high cost of ownership and BMW hopes to change that.

, ET Bureau|
May 16, 2019, 07.10 PM IST
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BMW Group India acting president Hans-Christian Baertels (R) and Sachin Tendulkar during the launch of X5
There is a perception in the market that luxury cars have a very high cost of ownership and BMW hopes to change that, BMW India president Hans-Christian Baertels told ET's Sobha Mathur in an interview.
Edited Excerpts

What are your expectations from the fourth generation X5 SAV?
The X5 has always been a leader in its segment and an important part of our brand. And looking at this car, its design, and its product substance, I have no doubt about its success in India. It sold 5,000 units since 1999 till now. We are doing roughly half of our sales volumes in our X models – the X3, X4, X5, and X6 models. The X5 is going to be made in Chennai; all vehicles except for M vehicles and MZ4 come out of our Chennai plant.

What is the significance of the X5 launch?
To continue the success story of the X5 at a higher level.

Which are the new products that you will be launching in India during 2019?
We will be launching 12 models – the first car that we launched this year was the X4, then the Z4 a few weeks ago, third car is the X5. Next to come will be the CKD X7, the all-new X6 will come as a CBU (completely built unit) besides the new 3 Series and 7 Series. Also in the pipeline is the X1 model. We have already launched the Mini John Cooper Works this year.

What will be the pricing strategy for the new models considering that the market is subdued?
We don’t run our pricing strategy based on the market economy. It won’t make sense. So, the way we determine the prices is looking at the market, customers and price positioning, and giving ourselves a minimum profitability compared to competition. Typically, BMW has the ambition of being a little more aspirational than its competitors. And that gives us the opportunity of a tiny premium over the price point. So, you play along these rules and the model substance and the service quality will make the difference and not the price.

Compared to competition how is BMW maintaining its exclusivity in its models? What are the new features and technologies you are bringing to the market?
Whatever this car can have (X5) it has. Whether the competition has it, or does not have, does not influence my strategy. So, I don’t even look at what the competition is offering. We are customer and product centric and don’t look at competition.

So, are you not trying to regain the top position in the luxury-car market from Mercedes-Benz?
That’s a by-product. I am gunning for customer satisfaction, I am gunning for growing the market, bringing excellent products to the market. Rest will come by itself. Segment leadership may happen this year or next year or the year after. I don’t know and I don’t care. Doing our job is our focus.

What about electric cars. What are BMWs plans in this regard?
We are selling electric vehicles massively in the European markets, and in California for a reason. We have the technology and all the information to sell them. But the technology is very expensive and the other thing is the mindset of the customer. In markets like Malaysia, Europe, and many other places, hybrid is a technology that prepares the mindset for solely electric vehicles. But this is not happening in India for whatever reason. So, this makes it difficult to forecast when electric vehicles will hit the Indian market. I cannot talk of having electric cars in production at Chennai when I have [only] 10 cars on sale. I must have a minimum market for it to become a business. So, this is a matter of mindset that needs to be supported by the government through communication and infrastructure, and many other things that a single player cannot influence. But there must be something happening around us to make it possible.

What will be the growth drivers for BMW going forward?
Let’s look at the X3 that was launched last year and X4, which was launched this year – they are definitely not volume models but may become growth drivers. These cars can be visual and aspirational models. So, basically the X portfolio will have a very strong growth contribution. It is already contributing 50% of the total products and will grow further.

Right now, there is a perception in the market that the luxury cars have a very high cost of ownership. We hope to change this perception. We have grown against the market in Q1 and keep growing as we speak. So, I am not looking at what is happening in the market but more at the new opportunities coming for us in the market in terms of new products and the ecosystem.

Recently you launched the new Mini John Cooper. Last year this brand sold 160 units. Do you think BMW needs to increase its penetration further for the brand?
Of course we are looking at it but I feel very comfortable with not growing our dealer network too quickly. We have 37 sales outlets for BMW and 9 for Mini which is healthy. We have to grow our dealer business in a sustainable way.

Obviously, we will also look at tier II, III and IV markets as the customers there are also growing, but the speed at which we do this must be sustainable.

How do you see the luxury-car market growing this year?
In the long term, India has the potential to grow in the luxury car segment. I don’t know at the speed at which it will happen.

Will the conversion to BS-VI emission norms be an obstacle for BMW car sales?
It is a nice challenge to have. Let’s work on it and make the best out of it. Everyone has to have new engines. Force Motors is locally developing the BS-VI engines for us.

Also Read

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