BMW To Build Second Plant In China

Rising Demand, Consumption Smooths The Path For BMW And Local Partner Brilliance To Further Cement Position In China

Dr. Friedrich Eichiner, Member of the Board of Management of BMW AG, Finance, and Qi Yumin, Chairman of Brilliance Group, at the signing ceremony of the Memorandum of Understanding in Beijing on 12th November 2009 regarding the construction of a second plant in China (Photo courtesy BMW)

Dr. Friedrich Eichiner, Member of the Board of Management of BMW AG, Finance, and Qi Yumin, Chairman of Brilliance Group, at the signing ceremony of the Memorandum of Understanding in Beijing on 12th November 2009 regarding the construction of a second plant in China (Photo courtesy BMW)

One of the big stories coming out of the global auto industry today is the announcement that BMW is set to build a second plant in China with their local JV partner, Brilliance Auto. While this isn’t much of a surprise, given that BMW has sold nearly 72,000 cars in China in the first 10 months of this year, it certainly is an important move on BMW’s part as it works to challenge the dominant luxury automaker in China, Audi.With its new plant, BMW will more than double its current production capacity and be well-placed to compete with the dominant luxury player in China, Audi, which expects China to become its largest single market by 2013.

In addition to doubling its capacity, BMW’s new plant — scheduled to begin construction next year, with production starting in 2012 — is a smart move for the company to show its commitment to the Chinese market and the Chinese consumer, an important marketing point upon which its chief competitors Audi and Mercedes have placed paramount importance. Reaffirming its bond with Brilliance Auto, a leading domestic brand, and its involvement in this new plant is another smart move for BMW. From a company press release:

“Brilliance Automotive Holdings Limited is a reliable joint venture partner with whom we have already worked successfully for more than six years. Our plant has reached its capacity limit – so we are now taking the next step. The decision to build a second plant demonstrates that we are investing in our future in China and that we intend to participate in the strong growth in the Chinese market,” stated Friedrich Eichiner, member of the Board of Management of BMW AG, responsible for finance and vice chairman of BMW Brilliance Automotive (BBA). “It is also an important strategic step towards reducing our exposure to currency fluctuations,” Eichiner added.

As successful foreign companies in China have proven over the last 20 years, showing a strong commitment — and localizingyour commitment — to the China market by proving to Chinese consumers that your company actually cares about its China operations and isn’t simply dumping excess stock into the country is critical. As Patricia Pao, President of  luxury consulting firm The Pao Principle pointed out in a recent Q&A, marketing to the Chinese consumer in this way is key to continued success in the mainland:

Q: What advice can you offer [luxury marketers in China]?

A: Creatively “tweek” the existing promotional program to make mainland Chinese buyers believe they are getting a deal.  This can take the form of gift-with-purchase, tickets to special events, frequent buyer clubs, etc.

Don’t use mainland China as a dumping ground for excess inventory.  Instead improve selection by offering limited edition pieces and the same merchandise that is only available in New York, Paris and Tokyo brand boutiques (but not Hong Kong).

• Invest in programs that increase mainland Chinese’ knowledge of your brand.  Remember that education is key to conversion.

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