BMW Sees China as Top Market This Year on Smaller Cities

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A driver backs his Bayerische Motoren Werke AG (BMW) Mini Cooper out into traffic in Beijing. Close

A driver backs his Bayerische Motoren Werke AG (BMW) Mini Cooper out into traffic in Beijing.

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Photographer: Keith Bedford/Bloomberg

A driver backs his Bayerische Motoren Werke AG (BMW) Mini Cooper out into traffic in Beijing.

Bayerische Motoren Werke AG (BMW), the world’s largest premium automaker, said China will probably surpass the U.S. as its top national market in 2013 as the brand enters more communities and wins buyers with the 5-Series sedan.

Deliveries in China, which overtook the company’s U.S. sales in the first half, are likely to rise about 10 percent for the full year, Karsten Engel, head of BMW’s business in China, said in an interview in Beijing.

“Strong growth in future will come from the smaller cities, and the strong growth will also come especially from the western region,” Engel said. “There are 100 cities with more than a million inhabitants in China with no premium car dealers at all, so this shows the huge potential we’re having in this country.”

Researcher Nielsen estimated yesterday that 68 percent of China’s potential car buyers in the next 12 months will come from residents of smaller cities. Munich-based BMW, which trails Volkswagen AG (VOW)’s Audi brand in luxury-vehicle sales in China, has outgrown its competitor in at least the past three years, reporting a 40 percent delivery increase in 2013 against Audi’s 30 percent gain.

BMW isn’t concerned about moves by premium manufacturers such as General Motors Co. (GM)’s Cadillac and Tata Motors Ltd. (TTMT)’s Jaguar Land Rover to boost production and capacity in China, Engel said.

Photographer: Nelson Ching/Bloomberg

Dragon dancers perform near Bayerische Motoren Werke AG (BMW) 3-series automobiles at the opening of the BMW Brilliance Automotive Ltd. Tiexi plant in Tiexi, near Shenyang, Liaoning province on May 24, 2012. Close

Dragon dancers perform near Bayerische Motoren Werke AG (BMW) 3-series automobiles at... Read More

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Photographer: Nelson Ching/Bloomberg

Dragon dancers perform near Bayerische Motoren Werke AG (BMW) 3-series automobiles at the opening of the BMW Brilliance Automotive Ltd. Tiexi plant in Tiexi, near Shenyang, Liaoning province on May 24, 2012.

‘Enjoying Competition’

“We’re enjoying competition,” he said. “We always grew with competition.”

BMW fell less than 0.1 percent to 69 euros at the close yesterday in Frankfurt. The stock has declined 5.4 percent this year, valuing the company at 44.5 billion euros ($57.1 billion).

The manufacturer’s first-half sales in China, including deliveries by the Mini small-car brand, jumped 15 percent to 182,800 cars and sport-utility vehicles, BMW said on July 8. That compares with a 9 percent gain to 172,787 deliveries in the U.S. Ingolstadt, Germany-based Audi reported an 18 percent increase in Chinese sales to 228,139 cars and SUVs in the period, including figures from Hong Kong.

China’s premium auto segment will probably increase 7 percent this year, Engel said. BMW’s growth plans will focus on adding more than 60 dealerships this year to cover all of China’s provinces, Engel said. The distribution network in the country totaled 360 outlets at the end of last year.

Audi accounted for 29.6 percent of China’s luxury-vehicle sales in 2012, while BMW had 23.6 percent of the market and Daimler AG (DAI)’s Mercedes-Benz brand had 20.6 percent, according to IHS Global Insight research company. China is already Audi’s biggest national market.

Photographer: Nelson Ching/Bloomberg

A Bayerische Motoren Werke AG (BMW) vehicle moves down an assembly line at the BMW Brilliance Automotive Ltd. Tiexi plant in Tiexi, near Shenyang, Liaoning province. Close

A Bayerische Motoren Werke AG (BMW) vehicle moves down an assembly line at the BMW... Read More

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Photographer: Nelson Ching/Bloomberg

A Bayerische Motoren Werke AG (BMW) vehicle moves down an assembly line at the BMW Brilliance Automotive Ltd. Tiexi plant in Tiexi, near Shenyang, Liaoning province.

Market Growth

Engel, 54, took over as the head of BMW in China in January. He succeeded Christoph Stark, who retired after overseeing a 15-fold sales jump in the country over eight years. Engel, who was head of BMW’s German sales and marketing before taking the Chinese post, has also worked at the carmaker’s South Korean and Thai operations.

The BMW brand’s first-half sales in China, which increased 16 percent to 170,730 vehicles, were a record for the period, the company said yesterday. The 5-Series, BMW’s best-selling model in the country, posted a 28 percent gain, the carmaker said.

Even with a slowdown in BMW’s Chinese sales growth from an 87 percent surge in 2010, Engel said he remains optimistic about the company’s expansion.

“We sold 800 cars in the full year of ’94,” he said. “Now we’re selling 900 cars a day.”

BMW’s planned i3 electric city car is likely to be introduced in China in the second quarter of 2014, while the i8 hybrid sports car will go on sale later, Engel said. Customer inquiries indicate the models will win buyers, even though the vehicles won’t receive Chinese government subsidies because they’ll be imported, he said.

To contact Bloomberg News staff for this story: Alexandra Ho in Beijing via aho113@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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