BMW Brilliance CEO sees promising future for China’s auto market

Olaf Kastner, president and CEO of BMW Brilliance Automotive, spoke with reporters at Auto China 2014, in Beijing on April 20. [Photo provided to Chinadaily.com.cn]

Olaf Kastner, president and CEO of BMW Brilliance Automotive, spoke with reporters at Auto China 2014, in Beijing on April 20. The interview went as follows:

Q: What are the highlights for BMW Brilliance at this year’s Beijing Auto Show?

A: We bring the BMW 3 Series xDrive and 5 Series xDrive to this year’s Beijing auto show. Both models will be launched on the Chinese market within the year. This is the first time that xDrive system has been equipped on the locally produced BMW sedans. The xDrive is the most advanced all-wheel drive system, which ensures the right distribution of engine torque under all driving conditions. The xDrive models will further expand the line-up of BMW Brilliance and enhance the competitive edge in the premium segment.

Another highlight is BMW X1 Customization Edition with Harman/Kardon HIFI and lumbar support. BMW Customization Service follows the purchasing trend of individuality, and helps offer various options for customers to better meet their demands. BMW Customization Service includes: M Sport Package, Head-up Display and Harman/ Kardon HIFI etc, covering requirements concerning business, entertainment and safety. The BMW Customization Service is now available for all line-up of BMW models among all BMW dealers to meet diversified and personalized customer needs.

Q: Luxury cars in China’s auto market still maintain rapid growth against the overall car market slowdown. How do you foresee China’s premium car market in 2014? Will BBA make adjustments to its development strategy?

A: As far as I can tell, China’s economy will continue to stabilize in 2014, with GDP expected to grow by 7.5%. Moderating growth engineered by the government will be driven by infrastructure investment, industry restructuring and upgrading, urbanization etc. The long-term scenario is very buoyant. Tremendous demand of premium cars will be unleashed with accumulation of wealth and market-oriented reform initiatives by the government. The days of ultra-rapid growth have gone, but it’s reasonable to expect a moderate and steady growth in 2014.

Global Insight said the sales of premium vehicles in China will reach 1.5 million units by the end of 2014, a 15 percent increase. The growth of the passenger vehicle market will be moderate in 2014 and the premium segment will outperform the passenger vehicle market. We believe China will become the largest premium car market - with a growth of possibly 10 percent.

We will stick to our long term development strategy and further deepen localization and customer-orientation. We have a “production follows the market” strategy, and we are continually expanding our local production in China. The total production capacity of our joint venture has reached 300,000 units in 2013 and it could be enhanced to 400,000 units, depending on market demand.

ZINORO, the new brand owned by BMW Brilliance, was launched last year and its first brand showroom was opened in February 2014 in Beijing. Its first product - ZINORO 1E - started rental operation on April 15.

Q: So how is the progress of the new engine plant and when will it go into production? What percentage do the locally produced models contribute to the overall sales volume of BMW?

A: The BMW Brilliance new engine plant, which will have BMW Group’s first foundry workshop outside Germany, is now under construction in Shenyang. It will start production in 2016. Its production capacity could be adapted, depending on demand.

The new BBA R&D center was opened in September 2013. By the end of 2013, BBA R&D team has over 500 engineers, and a majority of them are Chinese.

We pay utmost attention to the Chinese customers’ requirements. More new products will be introduced for local production in our joint venture BBA over the next few years to leverage our state-of-the-art plants in Shenyang. Tiexi plant is one of the world’s most advanced and sustainable plants; Dadong plant has just celebrated the roll-off of the 500,000th car built there.

Future growth will be mainly driven by locally produced models. Over a long run, locally produced models will take two thirds of the total volume.

Q: How is the dealership profitability status? How do you guarantee dealers' profitability while continuing to expand?

A: Our dealer partners have built up a strong foundation over the years, and they are strong enough to overcome the temporary period. On average, the profitability level of our dealers is healthy and positive at present.

We are the industry benchmark in terms of brand strength, quality of services, and other indicators. In particular, we are sincere and authentic in our belief in win-win partnerships. This is why we consider the healthy development of dealerships to be one of our top priorities.

As has been proven in mature markets, stable after-sales revenue will make the dealers’ business healthier and more resilient. We have been supporting our dealers to increase the role of after-sales service in their profit base, and used car business and financing service as well. We will continue to enhance competitiveness of our dealerships in the first-, second- and third-tier cities, and closely monitor local demand and carry out detailed market evaluation before deciding to set up a dealership.

Q: Could you share with us your sales outlook for 2014?

BMW Brilliance had a strong sales performance during the first quarter of this year with delivery of 62,494 units in the Chinese market, 44.3 percent more than last year. The demand for our locally produced X1, 3 Series and 5 Series has also continued to grow. More than 10,000 units of BMW 5 Series Li are sold every month. This gives us confidence about the outlook for the full year.

However, sales volume is not our sole objective. We will focus on quality covering all aspects of our business. Quality will be the decisive factor of the future success.