As the competition for the number one luxury car maker in India hots up, Germany's BMW says it has no intention to get into 'discount wars' with rivals to spur volume growth, choosing to focus on sustainable profitability.
“They (rivals) can do what they want, but BMW is always going on its own way and we are not participating in this discount war because it damages the brand," said BMW Group India President Philipp von Sahr. The company is in a stable phase and the focus is not to build short-term volumes pushed by discounts, he added.
With the Indian automobile market on a prolonged slump, many companies have been offering various schemes and freebies, especially in this festive season, to boost sales. In 2010, BMW became the top luxury car seller in India overtaking rival Mercedes Benz. It retained the position till last year, but another German rival Audi has been breathing down its neck this year.
Some reports have even suggested that Audi has overtaken BMW as number one in the first quarter of this fiscal but with the company sharing only its annual sales number, it could not be verified.
While stressing on the importance to have healthy volumes, von Sahr said offering discounts is "absolutely not our policy". "If you give lot of discounts then you don't have profitability. Then you cannot invest in the brand anymore, sooner or later you are out of the market," he said.
Instead of participating in the discount wars, he said the company would like to develop dealers and invest on its plant. "We are looking at what is our long term vision - develop dealers, optimise processes, invest on plants and invest on training and so on," he added.
When asked if the company is looking to further increase prices of its cars, von Sahr said: "If it's necessary we would go for it. We go for profitability, what we will never do is to have negative contribution margin on the cost."
The company has already hiked price twice during the current year, in January and August, due to the rupee's sharp slide against the US dollar, he added. Terming India as a strategic market for the company along with other countries like China, Brazil and Russia, von Sahr said the company is betting on the country's long-term growth potential.
"India is a strategic, very important market. Even if the volume may be lower at the moment than some European markets but here in India you have a long term growth, like China, Brazil or Russia, so these are the emerging growing markets," he said.
"We fully believe in the long term growth in the Indian market even though economical situation this year is not so easy," von Sahr added.