BMW India sees a strong potential for an increase in market share of the luxury segment and is gearing up to tap into it.
“At present, the luxury car market accounts for less than 2 percent of the overall passenger vehicles segment. In any other developing country, it is 5-7 percent. So, there is plenty of headroom for us to expand," Vikram Pawah, president, BMW Group India, told Autocar India.
What will help this further is the cutback in taxes under the recently implemented Goods and Services Tax (GST), which has made luxury cars far more affordable.
To tap the potential, BMW India is ramping up its investment this year by Rs 130 crore to Rs 1,250 crore. The carmaker also aims to expand its dealer network, not heavily but in a sustainable manner to ensure dealer profitability. It plans to increase its sales outlets to 50 by 2018, up from the present 41.
"We are putting in place a strategy, called 'Power to Lead' under which, for the next couple of years, we will focus on being a leader in aspects such as profitability, dealer network and customer engagement," Pawah said.
Along with growth expansion, BMW also sees itself reclaiming the No. 1 spot to become the highest selling luxury carmaker in India. However, Pawah maintains the company's focus is on achieving sustainable growth rather than get into the sales volume race. The German carmaker lost out on the leadership position in 2012 and has found it difficult to recover in the face of rising competition.
However, recent sales figures reveal the carmaker has registered significant growth so far this year. Volumes during January-June 2017 rose 11.5 percent year-on-year to 4,589 units. The carmaker could see a further acceleration in sales in the second half of 2017 on the back of upbeat demand post rollout of GST.
"We led the market when we entered India and we will attain sales lead again with time. But our aim is to tap the potential within the luxury car segment," Pawah said.
The German luxury carmaker recently launched the all-new 5-series in the country and is banking on it to expand its position in the luxury sedan space. The 5-series has been the company's biggest volume contributor, accounting for nearly 30 percent of its overall sales of around 66,000 units. Pawah stated that despite the rising demand for SUVs, the executive sedan space continues to be popular among corporate clients.
Interestingly, the carmaker also plans to introduce the all-new 6-series GT in India with a launch scheduled at the 2018 Auto Expo. BMW recently revealed the all-new 6-series GT that will replace the 5-series GT globally. It is more spacious on the inside and offers a higher level of comfort.
Hybrids key to full electrification
The Indian government has set a target to sell only electric cars in the country by 2030. While the target is laudable, it is overly ambitious, given the host of challenges such as the lack of charging infrastructure and high prices of EVs. Pawah believes plug-in hybrids will play an important role in making the transition to full electrics easier until the infrastructure is fully set up.
"In order to achieve full electrification, charging infrastructure is the key. However, getting the customer on board for electric cars will be challenging since they will experience range anxiety. According to our experience in various countries that are going towards full electrification, a plug-in hybrid enables easier customer transition until the infrastructure is gradually set up," he said.
However, hybrids cars are likely to have a challenging future going ahead as the tax incidence on such vehicles has gone up under GST. Hybrids have been put in the highest rate bracket of 43 percent, up 13 percent from before. This has resulted in a hike in prices of hybrids as most automakers have passed on the higher tax to customers.