BMW AG forms subsidiary

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)