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The Tamil Nadu Chief Minister, Ms J. Jayalalithaa, and the Senior Vice-President, BMW Group, Mr Klaus Berning, in Chennai on Thursday. - Bijoy Ghosh

Chennai , Dec. 8

BMW, the German premium car manufacturer, is looking at sourcing components from India for its global operations. The company interacted with the component manufacturers' association at the beginning of August and association representatives have visited the company twice since then, according to Mr Klaus Berning, Vice-President - Sales (Asia, Pacific, Africa, East Africa), BMW Group.

"I am sure that something will come out of that," he told journalists at the Tamil Nadu Secretariat, after the company signed an agreement with the State Government for setting up a completely knocked down plant at Maraimalai Nagar, about 45 km south of Chennai.

Investment: BMW will invest close to 20 million euros (about Rs 110 crore) in a plant that will have a capacity to assemble 2,000 cars a year. The company plans to launch the 3 series cars first and later the 5 series. Kits for these cars will come from Germany. To begin with, the cars will have about 10 per cent local content — mainly interior parts and seat components, according to Mr Berning.

Local content: However, more important from an Indian perspective, would be for Indian component manufacturers to supply to BMW's global operations, according to him.

"I think for the Indian economy it is much more interesting whether we get suppliers working for our plants worldwide than increasing maybe by 3 per cent the local content here," he said. In principle, BMW was open to sourcing all kinds of components from India, but "I think it would be sensible that we take mechanical components from India," he said.

Mr Berning added that the supplier base could be changed only with new models. Once the company decides the suppliers for a model, they would stay for seven years. "You will hear lot of activities, but really concrete decision will be taken in due course with new models."

Asked when BMW was likely to begin sourcing components from India, he replied that it could take up to two years before the process started. He pointed out that when the company started operations in South Africa, it was almost similar to what was being planned in India — a low level of local content. However, over the last 15 years, the localisation level in the South African operations had increased to 80-85 per cent. This kind of progress in India depended on how well the market responded to BMW's cars, he said and added that he was optimistic about the response.

Competitive pricing: To a question, Mr Berning said the 3 and 5 series cars would be in the premium segment and would be "as expensive as the competition is." The company would not compete on price but on products and its brand image, which it believed was "very stable" in India.

The Chennai plant was expected to start operations in the first quarter of 2007, he said.

Mr Ronald Gentsch and Mr Peter Kronschnabl, General Managers, BMW, signed the agreement with Mr D. Rajendran, Tamil Nadu Industries Secretary, in the presence of the Chief Minister, Ms Jayalalithaa, ministers and officials.

`Make Chennai hub for S-E Asia': A State Government press release said that the Chief Minister expressed the hope that the incentive package and facilitation provided by the Government would significantly enable BMW to scale new heights. She asked the company to bring a cluster of German auto components manufacturers to Chennai and make the Chennai facility the hub for South-East Asia.

Subsidies: To a question, Mr Berning said the company got subsidies from the State Government and a lot of assistance. "Now we hope that, if something occurs which we didn't provide for in the plan, we get a flexible, quick solution to our problems." However, from today everything was in the company's hands and it was up to it to get things going.

"I think the Tamil Nadu Government did everything they could do and should do, and they did it so fast that it is incredible," he said and expressed his happiness over the Government's response. Asked if the incentive package and the response from the Government were the reasons for the company choosing Chennai from about 30 locations, Mr Berning said the company had the best feeling in Tamil Nadu as far as infrastructure was concerned and "how close we could work together with the Government."

He was hopeful that the response would be just as quick if the company went in for expansion later.

He said that the company believed in bringing the latest cars from its stable to India and would look at bringing in sports utility vehicles and multi-utility vehicles at a later date, as the market developed.

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