BMW Starts Local Engine Assembly - Current Prices To Be Retained

BMW announced the commencement of engine assembly facility in its Chennai plant following the financial budget of year 2011-12. The move is aimed to knock off 20% customs duty from 30% as declared in the budget.

#-Link-Snipped-#As per the budget 2011-12 announced by Finance minister Pranab Mukherjee, the auto industry will have to pay 30% of custom duty for ‘Completely Knocked Down’ vehicles (CMD) vehicle’s pre-assembled engines, transmissions and gearboxes. This would mean an increase the cost of luxury car. The early commencement aims to retain the customs duty to 10% as per the current regulations. However the Company seems to be determined not to increase prices following hike in taxes.

Praful Patel, minister for Heavy Industries and Public Enterprises, present during an unveiling of BMW’s new hybrid concept sports car assured the automaker that he would talk with finance ministry to postpone the tax hike decision by another two years. This decision is also backed by ‘Society of Indian Automobile manufacturers’ (SIAM). It has been SIAM’s constant demand to increase time limit for implementation of decision or more directly, cancel the hike.

Andreas Schaaf, President of BMW, India expressed deep concerns over the issue. He said that even though the company and prevailing market conditions were in a good state of bearing the expenses, still it would be better if such decisions are done by the Government while taking the company in confidence. It should be noted that, already half of the assembly is done in India. The second time market leader in terms of sales, BMW aims to shift entire operation of manufacturing its luxury cars to India to make it a local produce. This would also reduce a lot of taxes and extra costs. The current starting price for both BMW’s sports utility vehicle and its 3 series model is Rs. 2.24 millions while that of 5 series model is about 3.76 millions. BMW sold 427 units more than rival Mercedes Benz which is shelling out 30% tax for assembly in its Chakan plant. In coming few weeks, the cost of Mercedes is going to increase by about Rs. 0.8 millions.

Schaaf opined that shifting the production to Local market would be a very good idea. BMW plans to reach a sales target of 10,000 in the fiscal year 2011, considering the fact that they could reach 80% of target in last 4 months.

Apart from this news, BMW is also planning to launch an all wheel drive model next year in 2012. The car, according to company will be most probably equipped with current 4.4 liter engine and would produce a 550 hp power. With its launch, BMW will try to compete with recently launched Mercedes E63 model. In current scenario, BMW is determined to retain its market leader position despite cut-throat market competition and conditions. It would be a very interesting thing to study, which auto maker succeeds.

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