BMW AG forms subsidiary

JAKARTA (JP): The Germany-based automotive company BMW AG has established a wholly owned subsidiary to handle wholesales of BMW cars, motorcycles, spare parts and accessories in Indonesia.

Vice President Luder Paysen said on Monday the new company, with an initial investment of about Rp 200 billion (about US$21 million), would start operating in April.

He said the new company, PT BMW Indonesia, would also be responsible for the overall planning of sales, marketing, after sales and related activities in the country.

Astra International, through its subsidiary PT Tjahja Sakti Motor (TSM) will continue to handle the importation of BMW cars, the local BWM assembling plant and their retail sales despite the establishment of the new company, Paysen said.

"Our new arrangement brings together the expertise from both parties," he said at a press conference after the signing of the agreement on the change in the business partnership between BMW and Astra.

Before the agreement, all BMW's activities in Indonesia were handled by TSM. Astra owns a 50 percent stake in TSM but it is negotiating the acquisition of the other 50 percent from minority shareholders.

Paysen also said the establishment of the wholly owned subsidiary in Indonesia was based on the long-term prospect of the Indonesian car market.

"One has to make an investment and commitment now to prepare the ground for future market expansion," he said.

Astra's president T.P. Rachmat said the change in their partnership with BMW would further intensify BMW sales in the local market.

Last year, BMW booked a total sales of 2,403 units or 55.7 percent of the total sales of luxury cars, Rachmat said.

He said the sales of BMW cars were estimated to only increase slightly to between 2,500 and 3,200 units this year, compared to the sharp increase in the previous year.

"It seems the economic conditions are not favorable to the automotive industry," He said.

He blamed the expected increase of interest rates, the rise in fuel price, the weakening of the rupiah and the imposition of value added tax (VAT) as factors behind the projected slow increase in BMW sales.

BMW cars are sold here at between Rp 388 million ($40,842) and Rp 1.3 billion (05)