Booming luxury car market boosting BMW operations

Before German auto industry veteran Daniel Mller came to China he had little idea that Shenyang, capital of Liaoning province, was becoming a globally renowned car manufacturing center.

Mller worked in Stuttgart for an car component company until 2005 and then moved to its Shanghai branch for several years, taking charge of supply operations for BMW, Daimler and other luxury brands.

In July, he took a new job as general manager at Lear Automotive Seating and Interior systems Co Ltd in Shenyang, which supplies components to BMW's joint venture in the city.

As he became the general manager, Lear was planning to expand because BMW is building a second plant in Shenyang.

"The expansion is a very good opportunity for us. I'm confident about Liaoning's auto industry," said Mller.

Zhao Xuelin, new general manager of Shanghai GM (Shenyang) Norsom Motors Co Ltd, has the same positive outlook of the area's auto industry.

"I think Shenyang will produce 1 million vehicles annually in five years," Zhao said. "Since the local government has provided a favorable business environment, all we need to do is to produce more good vehicles. Shanghai GM has recognized the great potential here and is negotiating with local authorities to expand its industrial chain so more suppliers to set up plants here."

Booming industry

Shenyang has four auto companies - BMW Brilliance, Shanghai GM Norsom, Brilliance Jinbei and Brilliance Zhonghua - that in the first half of the year produced 275,132 cars valued at 26.33 billion yuan.

Luxury car giant BMW's second plant in Shenyang, to be built at a cost of 2.5 billion yuan and scheduled to go online in 2012, will have an initial capacity of 100,000 vehicles and is expected to grow to 300,000 units over the long term.

The expansion has instilled new vitality into the local auto industry. Michelin, Lear, ZF Lemforder and other companies all plan to expand in the wake of BMW's move.

"Since BMW came here, our development zone became known to the world," said Zhang Jianqiang, deputy director of the Shenyang Economic and Technical Development Zone.

According to Zhang, the reasons that BMW and many suppliers choose the city include a solid industrial foundation, rich human resources and developed facilities.

"We appreciate the cooperation with BMW, because, while contributing more revenues, it continues to introduce cutting-edge technologies to Shenyang," Zhang added.

While BMW is pushing the local auto industry to a higher level, the company itself has benefited from its partnership with Shenyang and links to China's rapid growth.

Before Brilliance BMW was founded in 2002, BMW sold only 6,700 cars on the mainland. The number climbed to 90,000 by the end of 2009.

"For economic growth, few countries in the world are comparable to China," said Norbert Reithofer, chairman of BMW Group.

In fact the nation's robust growth has brought prosperity to the German business community in general, which has been growing ties with China.

Lifting Germany too

According to the Wall Street Journal, because of the sales boom of luxury cars in China, Germany's automobile industry has continued to grow rapidly despite the global recession and helped in the country's economic recovery.

Germany's Audi, BMW and Mercedes-Benz are the top three brands favored by China luxury car buyers.

Last year, the luxury car segment in China increased more than 30 percent and BMW in China grew at record-breaking 40 percent. "We see a big growth potential in the premium segment in China," said Olaf Kastner, president and CEO of Brilliance BMW. "Its share of the overall market is sure to increase along with economic development."

BMW Brilliance estimates 60 percent of the parts and components it needs will be provided by local production when cars begin to roll off its new production line in 2012.

In addition to satisfying the demands of the domestic market, cars produced at the new plant will be exported to the international markets, an unprecedented step for China-made luxury cars.

By Wu Yong, Liu Ce and Liu Guodong

(China Daily 09/14/2010 page24)