China: BMW CEO forecasts lower margins with higher sales image

The chief of the German company’s China business foresees earnings from profit margins could take a hit because the luxury automaker is increasingly localizing production in the world’s largest auto market.

While margins would continue to dip from the move to increase local production output, the leader of the China unit, Karsten Engel, thinks that increased localization would allow BMW to maintain its sales pace – double-digit increases would be achieved even as the growth in the second-largest premium market slows and competition is tougher.

“Everything is normalizing in China – the market growth, the volume growth, the margin growth,” said Engel during an interview on the sidelines of the annual Guangzhou auto show. “In the coming years…we expect the premium market (in China) to grow around 10 percent, and for us, a little bit more. The breakneck growth of 30 to 40 percent will not come back again,” he added.

The head of the BMW China division said that before 2020 the company aims to double the number of locally produced models to six in order to maintain its double-digit growth and the lead over the broad market. The move would allow the German carmaker to set more competitive prices for the models, as it avoids hefty import taxes in the process.

Via Reuters