BMW keen to tap more premium buyers

When Philipp von Sahr believes this is an M year for BMW India, he is not entirely off the mark.

It was barely a couple of months back when the carmaker set up its first M studio in the country with Infinity Cars of Mumbai bagging the mandate to become an exclusive facility for the M brand. “We want to have more M studios and wrap up 2016 with Delhi, Ahmedabad, Pune, Chennai, Hyderabad and Bengaluru adding to the list,” the President of BMW India said in a recent interview.

As he puts it, the company has a good product range of M models which began three years ago with the M5 Sedan. This was quickly followed by the BMW M3 sedan, M 4 Coupe and M6 Gran Coupe with the X5M and X6M completing the portfolio.

With barely three weeks to go before the year draws to a close, von Sahr will have reasons to feel pleased with BMW’s showing in India. The premium car market was not in the best of shape when he took charge in ’12 with discounts being the order of the day. “This was not good for a premium brand and we cleaned up our act. We invested in the future like localisation and today the mantra is profitability,” he says.

According to von Sahr, BMW’s headquarters in Munich is committed to a long-term play especially for the BRIC economies where India seems the most stable right now. Brazil, in contrast, is a bit of an economic disaster at least for now while Russia is “disappointing and China is growing but slowing down”.

“Even in the case of India, we need to be prepared for some volatility which is characteristic of emerging markets. We invested already in production/localisation and today we are investing in the brand,” says the BMW India chief.

One key contributor to this growth story has been the role of BMW Financial Services India which has been around for five years now and has seen operations grow substantially. At that point in time, it was the first captive NBFC for premium makers and has now recently increased its equity to support future growth for dealerships and customers. “Our part comes in realising the dream of driving a BMW and our vision is to make it as hassle-free as possible. It should be a one-stop shopping experience where you can drive out the car in a day,” says Stefan David Schlipf, MD and CEO.

His priority is to make things easy for the customer seeking to buy this brand. Today’s car park clearly shows that roughly 50 per cent is funded by BMW Financial Services which shows that the business is growing. “The volumes growth is seven per cent this year which shows that our portfolio is growing and needs these investments to secure future growth,” says Schlipf.

What has been more encouraging is that market penetration rates have increased over the years and the company has now come one full cycle over the last five years when it kicked off operations. The first customers are starting to come back and the job on hand is to provide the “360 degree experience” to those finishing their loans.

Schlipf says the proportion of salaried individuals seeking loans is still very small with the majority being businessmen. Going forward, he believes the rising middle class will also come into the picture as they will be able to afford these cars.

“This is where solutions from BMW Financial Services are the key to attract this category and make them affordable. Over the last five years, we have provided very flexible solutions,” he says. For instance, agriculture income is seasonal with boom and lean months. Loans to this user community factor in this pattern and payment schedules are adjusted accordingly.

Von Sahr chips in to say that there are a number of high net worth individuals still not driving premium cars as they prioritise other assets like a home for instance. “Likewise, the growing middle class could even start with a used BMW and move upwards,” he reckons.

The used car business in the premium market is still in its early stages and not developed though it has a lot of potential. This could especially gain traction as customers seeking new cars after the five-year loan cycle may just choose to trade in the models they have been using. By the end of the day, a refurbished BMW becomes affordable and still remains a status symbol for those aspiring to own it.

There has been a lot of talk lately on young buyers in India choosing not to own a car especially with mobility solutions like Uber and Ola cabs. Von Sahr admits that this may well be happening with the next generation keen on experiencing a car but not necessarily owning it. He cites examples of big metros like Berlin or London where the DriveNow initiative allows someone to drive a BMW even though they are not the owners. “It is cheaper than a taxi and a good marketing instrument to attract young people,” he says.

From the India business point of view, BMW is sitting pretty as localisation has made things a lot easier.

“We do not have to wait any longer for a gearbox to land up from the US or Bavaria. All this helps in greater flexibility and profitability,” declares von Sahr.

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