BMW doubles its capacity in China to take the niche

BMW launches its second plant in China on Thursday. It doubles its capacity in China. The niche of high end is the most attractive part of all market segments.

BMW and its Chinese partner, Brilliance China Automotive (华晨汽车), inaugurated on Thursday the second plant of German automotive group in China. “We will increase our capacity to 200,000 vehicles a year,” said Norbert Reithofer, the CEO of the Munich company. A doubling. This new factory is located in Tiexi (铁西). The first was located in Shenyang (沈阳). At the ceremony, the head of BMW has announced an additional “500 million” to bring this plant a potential to “300,000 units in the medium term” and “400,000”. In total, BMW and Brilliance Automotive have invested in the country 1.5 billion euros since 2009. BMW now produces the BMW 3 and 5.

Production of a compact 4×4

The Tiexi plant, near Shenyang, starts to prepare for the assembly of small compact 4×4 X1. An extended version of the BMW 3, popular with Chinese customers. Moreover, the Bavarian manufacturer has started production of engines 2 liters in Shenyang. The site has an engine capacity of 200,000 units per year initially. Over 2,000 jobs will be created in five years, which will add to the 8,000 people already employed in Shenyang.

Sales up sharply

BMW sold 107,211 vehicles in China (+35%) in the first four months of 2012. And the group expects a “double-digit growth” throughout the year, said Chief Executive. Last year, sales reached 233,630 (+37.7%). On total sales for the group of 1.67 million. The high end is in vogue in China. “The Chinese are getting richer. The segment will continue to grow rapidly and faster than the overall market,” explained BMW China president, Ivan Koh, at the last show in Beijing in April, adding that: “there are 250 cities in China, which will soon become the first country in the world for the high-end”. Customers buy vehicles with an average selling price higher than in Europe.

BMW is not the only one to break. Sales of Swedish Volvo, which now belongs to China’s Geely Group, rose 57% last year (to 47,000 units) and another 24% in the first quarter. Audi (Volkswagen), the undisputed leader in the high end in China, saw its quarterly figures grow by 40%. The segment of “luxury” has grown an average of 21% over the quarter. This is the niche market in China which records the largest gain.

Multiplication of plants

And it’s not over. “Volvo will open a factory in Chengdu in the second half of 2013”, stated last April its vice president in charge of Volvo operations in China, Shen Freeman. As for Audi, it will get “a production capacity of 300,000 units in 2011 and 700,000 in 2015,” said Dietmar Voggenreiter, President of Audi China.

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