Foreign luxury brands continue to up the stakes

BMW Group's long-term plan for a seven-fold increase in its China production capacity announced last week is expected to further intensify competition in the country's growing luxury vehicle market.

The German carmaker's strategic plan is to increase annual production to 300,000 units with local partner Brilliance China.

Its joint venture with Brilliance now has a 41,000-unit plant in Shenyang, capital city of northeastern Liaoning province. The facility's capacity will be expanded to 75,000 units next year.

The two parent firms will also build a new 5-billion-yuan plant in Shenyang with a planned capacity of 100,000 cars a year by 2016 or 2017. It will have an initial capacity of 25,000 units in 2012.

BMW's aggressive plan comes two months after Audi, the current luxury market leader in China, opens a new 100,000-unit assembly plant in its joint venture with FAW Group Corp in northeastern city of Changchun, doubling its overall production capacity in China to 200,000 cars a year.

Industry sources said another major luxury carmaker, Mercedes-Benz, will boost capacity at its joint venture in Beijing to 80,000 units annually in the near future from the current 30,000.

Friedrich Eichiner, board member and chief financial officer of BMW, said the expansion plan indicates that BMW is strengthening its long-term commitment to the Chinese market.

"We believe in the potential of the Chinese market for BMW Group," Eichiner said.

Christoph Stark, president and CEO of BMW Group Region China, last week denied recent rumors that the luxury carmaker was in talks with SAIC Motor Corp, partner of General Motors and Volkswagen, to assemble its 7 Series sedans in China.

BMW's tie-up with Brilliance now makes the 3 and 5 Series sedans.

BMW plans to launch the all-new 5 Series sedans with extended wheelbase at the joint venture at the end of 2010.

Analysts said BMW is expected to localize a range of new models in China by increasing its production capacity in the country.

Its X3 mid-side SUV, X1 compact SUV and 1 Series subcompact cars will be possibly part of BMW's China production in the future to woo young elite motorists, according to analysts.

Chen Zhenggao, governor of Liaoning province, last week even said that he hopes BMW will produce the 7 Series sedans in Shenyang.

BMW Group's sales on the Chinese mainland jumped by 36.7 percent year-on-year to almost 72,000 units in the first 10 months of this year. In October alone, it moved 9,558 vehicles on the mainland, an all-time monthly record.

In the first three quarters of this year, Audi's sales in China rose by 20 percent to 110,000 units. Audi expects its 2009 sales in China to grow more than 15 percent from 120,000 units last year.

Mercedes's mainland sales surged by 52 percent to 44,300 units from January to September.

China sales from smaller luxury carmaker Volvo, which also has local production, rocketed by 57 percent in the first 10 months year on year, but the company didn't reveal how many cars were sold.

Volvo is making the S40 and S80 at its parent Ford Motor Co's joint venture with Chang'an Motor Corp.

In contrast, Japan's Lexus, the only major luxury car brand without local production, is suffering a sales plunge in China.

In the first three quarters of this year, Lexus's sales in China tumbled by 28.6 percent to 18,779 units.

Audi plans to launch a locally made Q5 SUV in January, which will go head-to-head with the BMW X3, Mercedes GLK and Volvo XC60. According to market sources, Volvo will produce the XC60 in China in the near future.

Mercedes will launch the new long-wheelbase E-Class sedan at its joint venture in Beijing at the end of next year. The new E-Class will compete with BMW 5 Series and Audi A6.

(China Daily 11/16/2009 page6)