MUNICH: BMW is counting on China's new leadership to inject enough fresh stimulus into the slowing economy to sustain double-digit growth in premium car sales, its finance chief told a news agency.
The once-in-a-decade transition in Beijing's highest echelons of power poses both risks and opportunities for German premium brands like BMW, which analysts believe earn anywhere between a third to as much as half of their profits in China.
" We continue to forecast double-digit growth in the mid-term," BMW CFO Friedrich Eichiner said in an interview published on Tuesday.
BMW's once stellar margins in China are being squeezed due to a higher overall level of incentives and discounts in the premium car market as well as an increasing shift towards smaller models like the X1 compact SUV.
Eichiner said the recent increase in incentive-spending by BMW and its competitors in China should abate as policies enacted by likely incoming President Xi Jinping accelerate economic output.
Five years ago, mainland China accounted for less than 4 per cent of BMW's group vehicle sales. Now it is its single largest market, with almost 18 per cent of group sales volume so far this year.
More importantly, sales of high margin cars like the flagship 7 Series saloon built in Bavaria are disproportionately high, with this model alone accounting for more than 14 per cent of volume in China versus just 4.1 per cent worldwide.
German brands have so far dominated the premium car market in China, which is about 1 million vehicles in size and is still growing.
Roughly eight out of every 10 cars sold carry either a BMW, Audi or Mercedes emblem on the hood.
Morgan Stanley argues that BMW has an advantage over its two German rivals thanks to its larger dealer network in China.
It is the only premium carmaker present in 18 large Chinese cities, which alleviates competition and preserves its pricing power.
In August, BMW even went so far as to open a showroom in Lhasa, Tibet, calling it the first premium car dealership at the "top of the world" as it expands the number of retail outlets to 350 across China by the end of this year.
The carmaker hopes further economic stimulus could help underpin demand after China's economy grew at the slowest rate in the third quarter since the financial crisis, forcing Beijing to cut its full-year growth target to 7.5 per cent.
indiatimes.com
The once-in-a-decade transition in Beijing's highest echelons of power poses both risks and opportunities for German premium brands like BMW, which analysts believe earn anywhere between a third to as much as half of their profits in China.
" We continue to forecast double-digit growth in the mid-term," BMW CFO Friedrich Eichiner said in an interview published on Tuesday.
BMW's once stellar margins in China are being squeezed due to a higher overall level of incentives and discounts in the premium car market as well as an increasing shift towards smaller models like the X1 compact SUV.
Eichiner said the recent increase in incentive-spending by BMW and its competitors in China should abate as policies enacted by likely incoming President Xi Jinping accelerate economic output.
Five years ago, mainland China accounted for less than 4 per cent of BMW's group vehicle sales. Now it is its single largest market, with almost 18 per cent of group sales volume so far this year.
More importantly, sales of high margin cars like the flagship 7 Series saloon built in Bavaria are disproportionately high, with this model alone accounting for more than 14 per cent of volume in China versus just 4.1 per cent worldwide.
German brands have so far dominated the premium car market in China, which is about 1 million vehicles in size and is still growing.
Roughly eight out of every 10 cars sold carry either a BMW, Audi or Mercedes emblem on the hood.
Morgan Stanley argues that BMW has an advantage over its two German rivals thanks to its larger dealer network in China.
It is the only premium carmaker present in 18 large Chinese cities, which alleviates competition and preserves its pricing power.
In August, BMW even went so far as to open a showroom in Lhasa, Tibet, calling it the first premium car dealership at the "top of the world" as it expands the number of retail outlets to 350 across China by the end of this year.
The carmaker hopes further economic stimulus could help underpin demand after China's economy grew at the slowest rate in the third quarter since the financial crisis, forcing Beijing to cut its full-year growth target to 7.5 per cent.
indiatimes.com
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