The year 2017 was a challenging year for the automotive industry in India due to several policy fluctuations. In spite of this, BMW Group India reported 25 per cent increase in car sales in 2017 compared to 2016. In 2018, BMW aims to further consolidate its position in the premium car segment in India with the launch of new models. Vikram Pawah, President, BMW Group India, is confident to repeat the performance of last year. Though the market for premium cars in India is small compared to other emerging countries, he feels that it has the potential to grow in double digit. In this exclusive interview with Rakesh Rao, Pawah elaborates on the growth strategy of BMW in India, new launches in the pipeline and government policies.
The Indian Government intends to make the country an all-electric vehicle market by 2030. How do you view this?
The government’s plan to go for complete electrification of vehicles by 2030 is a good initiative and we fully support it. However, there should be a policy roadmap for electric vehicles (EVs) and infrastructure should be put in place before fast-tracking on the EV mission.
We had policy benefits for plug-in hybrids and electric vehicles earlier. When GST was implemented, electric vehicles were taxed at lower rates, but taxes on plug-in hybrids were increased. One needs to understand that technology is not driven by the manufacturers and the government, but is driven by customers’ demands. For example, if the customer is anxious that his or her car will get stuck in the road (due to lack of charging infrastructure), then they will not buy electric vehicles in spite of providing incentives.
There is a need for step-by-step approach to create a more reliable infrastructure to support the EV market. The government should also bring back incentive for plug-in hybrids.
There should be stability in the policy. The government needs to provide clear policy roadmap as shifting to new technology requires huge investment.
At present, lots of questions remain unanswered as far as EV policy is concerned. The market should be driven by customers. The government should provide infrastructure and frame policy in such a way so that it helps the customers to choose the right product for their needs.
Are you in favour of a technology agnostic approach?
Everything should be driven by objective and it should be technology agnostic. So if the objective is to reduce emission, then first decide the emission levels. Let innovation take place and let people decide the right technology that meets the emission norms. Don’t give incentives for EV, or even for the size of the car. Give the benefits to cars that meet best-in-class safety and emission standards so that people have access to products that match that of the globally set standards.
Diesel engines are considered as the bad boys of automotive industry and many countries have decided to ban diesel engine by 2040. What is your take on this?
As I said everything should be driven by objective. Every technology is good as it serves the purpose at the end. By 2020, Bharat Stage (BS) VI norms will be implemented. If diesel engines meet these norms, then the objective is achieved. So first define the roadmap for emission and then the technology development will follow.
How is BMW moving towards BS VI norms?
As announced earlier, all our petrol line-up from April 1, 2018, will be BS VI complaint. Diesel engine still dominates our vehicle portfolio. We are seeing a trend towards petrol version. In February 2018, we launched 6 Series Gran Turismo only in petrol variant and we are seeing fantastic demand for it. So people are looking at options and we have petrol as well as diesel vehicles.
With respect to BS VI compliant diesel vehicles, it will be dependent on availability of BS VI fuel. Compared to petrol, diesel vehicles need more technology upgradation to meet the BS VI norms. BS VI technology is available even today, but the question is when will BS VI fuel be available across India?
What are your launch plans for electric vehicles?
In 2015, we introduced our first electric vehicle in India. We showcased another two - i3S (full battery vehicle) and i8 Roadster (plug-in hybrid sportscar) - in this year’s Auto Expo. BMW i8 Roadster will be launched in India later this year. We want to launch i3S as well, but there is no infrastructure right now. So the launch will happen when the infrastructure
is available.
We will bring in plug-in hybrid in India. We request the government to look at the tax rates to facilitate the development of plug-in hybrid segment in the country as the customers are demanding it.
Where India does stands as a market for BMW Group?
In terms of ranking, it will be low. In India, only 1.2 per cent of the automotive market is premium segment. In China, it is 8 per cent and 3 to 4 per cent in Thailand. From volume perspective for BMW, India is ranked very low. But if you look at from potential or strategic point, India is number one for us.
We are seeing growing demand for our cars from emerging cities. BMW Group India sold 9,800 units in 2017 as against 7,861 units in 2016, a growth of 24.66 per cent. This year, we promise to grow in double-digit as well.
BMW Group India has launched Skill Next initiative in India. What is the objective behind it?
Skill Next is a technical skilling initiative and aims to act as a major catalyst in developing automotive talent in the country. This initiative will present an opportunity for engineering and technical students to get hands-on training on advanced technologies of BMW engine and transmission.
At present, engineering colleges in India do not have access to engines for practical training. If they purchase them, it is going to cost a lot. So we decided to give BMW engine and transmission units to engineering and technical institutes at no cost.
The demand for luxury automotives in India is witnessing tremendous growth. With the growing number of cars on road, there is a high requirement of good technical talent in the industry. Skill Next will strongly promote the development of technical competencies in students across the country by enhancing their practical knowledge of advanced automotive technology.
BMW has launched two models – X3 and 6-Series GT - recently. How do you see the potential of these new launches?
There are three main product categories that contribute to the sales of BMW in India. First is X1, second is 3 Series and 3 Series GT combination, and third is 5 Series. BWM 6 Series GT sits in between the combination of 5 and 7 Series.
In the executive sedan segment, where 5 Series and 6 Series GT are placed, 5 Series is contributing very successfully to BMW sales in India and I see the 6 series also doing the same for me.
With 6 Series Gran Turismo, we are creating a new segment and adding value to the customers. If you look at executive sedan segment in that price range, you will get vehicle which is purely driver oriented or back-seat oriented, ie either you love driving it or driven in it. BMW 6 Series Gran Turismo gives both. That is what we call creating value for our customers.
Globally, BMW was the first to introduce the concept of sport activity vehicle (SAV) – a derivative of the most successful SUV X5 – with the launch of X3 in 2003. It has done phenomenally well in the last 15 years. We have launched a new generation of X3 in India now. Since we entered India, the SAV volumes have gone up by 100 times. With even more striking and dynamic styling and a luxurious interior, the all-new X3 will help BMW to further increase its momentum in the Indian luxury car segment.
In terms of localisation of content in your vehicles in India, where do you stand?
We procure 50 per cent of components for our vehicles locally. For localisation, certain volume thresholds are required. We constantly look at increasing local procurement. But, there has to be a sufficient rise in volumes to justify investment to increase localisation of content further. The extent of localisation will depend on volume growth and we have enough capacity in India to raise the production.
In the budget, customs duties were increased on completely knocked down (CKD) components. How do you react to it?
I was not happy at all about it. Impact is huge and prices will go up by 3 to 5 per cent. This is against the concept of Make in India. After last year’s GST, we expected some stability happening. We are already 50 per cent localised and have invested heavily. We want to grow the volumes so that we can localise more. However, if you have a policy that dissuades volume increase, then localisation process gets hindered.
Lower taxes aid increasing volumes, which in turn helps raise local content in our vehicles. This will give a push to Make in India initiative.
Everything should be driven by objective and it should be technology agnostic. So if the objective is to reduce emission, then first decide the emission levels.