BMW gears up for Asian auto boom, increase investment

BMW gears up for Asian auto boom, increase investment

Eileen Ng, Agence France-Presse, Kuala Lumpur

German luxury car maker BMW unveiled plans on Tuesday to expand
in Malaysia as part of moves to strengthen its presence in Asia
where it plans to double sales to 150,000 units in the next five
years.

BMW will invest 93 million ringgit (US$24.5 million) to set
up a wholesale company in Malaysia and two regional centers for
information technology and parts distribution, said group senior
sales vice president Lueder Paysen.

Paysen said BMW would relocate its regional parts distribution
center from Singapore to the Port of Tanjung Pelepas in southern
Johor state by mid-2004 due to the higher sales potential in
Malaysia, which is the biggest car market in Southeast Asia.

The move is seen as a setback to Singapore and reflects the
economic rivalry between the two senior members of the
Association of Southeast Asian Nations (ASEAN).

Paysen said, however, that Singapore would remain BMW's
regional corporate office and the move was aimed at gearing up
for a boom in Asia's fast growing auto markets in the long-term.

He said BMW also hoped to tap the benefits of the ASEAN Free
Trade Area (AFTA) under which car import duties were cut to below
five percent this year, except Malaysia which has delayed market
opening until 2005.

"The European market will not really be growing in the next 10
years to come, the U.S. market maybe a little bit but real growth
in the automobile industry will come in Asia," Paysen told a news
conference.

"The BMW Group is expanding its business in Asia and we are
choosing the best location for each type of business, especially
in ASEAN which is moving towards a single common market.

"Our sole manufacturing plant is in Thailand, our parts
distribution and IT center in Malaysia and other regional
services will continue to be supported out of Singapore."

The BMW Group sold 78,000 BMW and Mini cars in Asia last year
and Paysen said it "expects to double sales to 150,000 units over
the next five years" driven by new models, a more professional
network and growing demand in China.

BMW's new production joint-venture in China will be
operational in October with targeted output of 30,000 units, he
said.

Asian sales currently account for less than 10 percent of
BMW's global revenue but officials said the company aimed to
raise this to 25 percent over the next 10-15 years.

Overall, BMW accounts for one-fifth of the luxury car segment
in Asia and is especially strong in certain markets.

Japan, South Korea, China and Taiwan are BMW's key markets.
Paysen said BMW foresee vast potential in India and in ASEAN
markets under AFTA.

He said the new wholesale company in Malaysia, which is its
28th such subsidiary worldwide and sixth in Asia, would be a
51:49 joint venture between BMW and local franchise Sime Darby
Bhd.

"We aim to be the number one premium car maker in Malaysia. We
are not moving to Malaysia because of tax incentives. We are
expanding our operations here because of strategic
considerations," he added.

Sime, which last year sold 2,401 BMW and Mini cars in Malaysia
for 37 percent of the premium car segment, keeps its assembly
rights and remains the key BMW car dealer with 8 out of 14
outlets under its wing.

Under the new venture, it has the first right of refusal for
any new dealership opportunities in Malaysia for the next three
years. Sime also retains its sole distributorship in Singapore
and Hong Kong.

BMW is following other foreign carmakers including Japan's
Honda Motor and Germany's DaimlerChrysler which have begun
phasing out franchises to cut out middlemen and so boost their
direct presence in the region.