BMW using Chinese sourced engines ?

[Jim Young]

#2278

BMW/Husky Press Conference at Milan.... Most interesting at end, talking about sourcing in Asia....Speech of Fritz Geri - Executive Vice President Finance, Business Unit Planning, IT - BMW MotorradPress Conference Husqvarna Motorcycles65th International Motorcycle Show “EICMA” 2007 Milan, November 06 2007 Ladies and gentlemen,A very warm welcome to you here in Milan for the press conference of Husqvarna Motorcycles.You may be rather surprised to see me speaking to you here. Well, the EICMA is the most important trade show of the year for all motorcycle manufacturers – and for BMW Motorrad particular. For us this trade fair is the right time and the right place to present the strategic orientation of our two brands BMW and Husqvarna Motorcycles for the first time: after all, this is BMW’s first press conference since taking up business operations with Husqvarna Motorcycles. But I will start by taking a look at BMW Motorrad’s current retail figures.As of September 2007, motorcycle retail is at 7,661 vehicles worldwide. This means that as compared to September last year, the number of BMW motorcycles supplied to customers has risen by over 4 per cent to some 82,800 units. So once again we have moved a little closer towards the target we announced in Paris just a few weeks ago.This year we intend to supply more motorcycles of the brand BMW Motorrad to customers than ever before. This is an ambitious goal in view of the fact that we passed the 100,000 mark for the first time last year.The market here in Italy has developed very well for BMW Motorrad over recent years. Italy has now become established as the second most important market for BMW Motorrad after Germany, with double-digit growth rates in some cases. This means that Italy has contributed significantly to our success and we are particularly pleased about this.You will find out more about the Italian market later from Andrea Castronovo, President of BMW Italia, at the BMW Motorrad press conference.I would now like to say something about our two-brand strategy.When the contract between BMW and MV AGUSTA was finalized on October 1st 2007, BMW became the owner of Husqvarna Motorcycles and took over business operations. The company headquarters of Husqvarna Motorcycles will remain in the northern Italian region of Varese, likewise the company’s management, development, production and central sales and marketing organisation. Internationally speaking, sales operations will remain in the tried and trusted hands of our worldwide importers.We wish to continue to grow profitably, that is our aim. To do so we wish to address customers in the medium and long term in segments and markets which are new to us. We intend to achieve this aim together with Husqvarna Motorcycles – a brand which stands for highly emotional products. The conditions for success are excellent. With the state-of-the-art Husqvarna single-cylinder sports models we are presenting here and the BMW models which will celebrate their world premiere at the BMW stand, it is clear to see just how well the model ranges of the two brands complement each other.With the sporty off-road profile of Husqvarna Motorcycles as a second brand, we will be able to penetrate younger customer target groups and extend the range to include the entire off-road and supermoto area more quickly than with our core brand alone, thereby initiating significant growth.In the off-road segments above 650 cc, BMW Motorrad will very soon be enhancing its range, extending model diversity and closing gaps. I can reveal this much now: at the BMW Motorrad press conference today we will be presenting several world premieres.Unstoppable – this is the motto of BMW Motorrad at the EICMA. It stands for the products we are presenting to you and for the market and model campaign which we have pursued consistently since 2004. And what we are showing you today does not mark the end of our product offensive, of course. We will continue to make use of the potential of both brands to further expand the range of BMW Motorrad and Husqvarna Motorcycles in the years to come. In order for us to maintain a BMW range in the highly competitive medium category segment, we do need to take full advantage of both sales potential and cost potential, however. In concrete terms, this means that we will be intensifying our sales activities in Asia. In this connection I would remind you of the Boxer Café opened in June 2007 in Chongqing, the centre of the Chinese motorcycle industry. The Boxer Café is the second sales centre for BMW motorcycles in China after Peking.Our next step is to increase our purchasing and cooperation activities in the Asian markets. Purchasing parts and components in the Asian region is an important means of reducing the currency disadvantages of the euro – in particular as compared to the yen. This is the only way we can create some leeway within cost structures so as to enable us to continue to offer our customers innovations and technical highlights in the medium category. For this reason, we have decided to procure the single-cylinder engine for the G 650 Xcountry from a Chinese supplier who will manufacture the engine according to our BMW specifications and quality standards. And the 450 cc engine for our new, innovative BMW sports enduro will be made by Kymco in Taiwan in a production facility equipped according to BMW specifications. We will continue to build on these examples and join together with our partners to develop further ideas as to how to capitalize on further growth potential not yet tapped into by BMW Motorrad. All our activities in the Far East are of great strategic importance to BMW Motorrad. Our aim is to participate successfully in the development of the motorcycle market there from the very beginning. As yet there is virtually no market for large-volume motorcycles in the up-and-coming countries of Asia, but we are confident that this will change in a few years’ time. Ladies and gentlemen, allow me to summarise briefly:1. BMW Motorrad is well on the way to surpassing last year’s retail record once again this year.2. By purchasing Husqvarna Motorcycles we have set the course to continue to grow profitably and faster in the future. And… 3. In order to achieve this growth in a highly competitive market with considerable currency distortions, we will continue to extend our purchasing activities in the Asian economic region, as well as our sales activities.

[Dave Ross]

#8745

Cool, pay European prices and get a Chinese product, this might not go as well as they hope it will.

[Anonymous]

#8746

I was going to order a 450, but now I'll buy a KTM. BMW bikes are going to go down the toilet with this announcement.  😕 😮

[Anonymous]

#8747

I'm not that keen on a Chinese 650 it seems to me you can control manufacture but you also need to control raw material supply and any other coomponent supply and while the product coming out of China is improving especially where manufacturing is a joint venture, I'm not sure that it is ready. The level of pollution and the fact that discharge is uncontrolled concerns me.Taiwan is a whole different kettle of fish. Taiwan produces outstanding product and is on a par with Japan in terms of quality. I believe you'd struggle to find a Taiwanese product that was anything but high quality. Their engineering standards are exceptional. I would have as much faith in the Taiwanese engine if not more faith in it than the equivalent being built in Germany. I'd expect both to be of a high standard. Having said that I read comments about BMW has been having some quality issues at a level I would not have expected. They do seem to take them seriously and respond to them. I don't expect to see Taiwanese product have those same issues.To that end the 450 is enhanced as a buy option for me by being made in Taiwan. I like the 450 and it is certainly a bike I will look at. (or the F800GS) hopefully not both. Obviously Taiwan will still be producing a German designed engine.Are BMW cars produced in a number of countries now? If so is there that much difference between doing this with cars and doing this with bikes?It'll be interesting to see how this goes.

[Dave Ross]

#8748

Obviously Taiwan will still be producing a German designed engine.Are BMW cars produced in a number of countries now? If so is there that much difference between doing this with cars and doing this with bikes?It'll be interesting to see how this goes.

Why would they produce in a foreign country if it wasn't for favourable conditions. I know VW is producing in Brazil, and they are responsible for a lof crimes against the environment over there. Part of the attraction of owning a machine that is produced by a european country is the peace of mind that comes form knowing that the people who have produced it did so under human conditions and that regulations are in place that govern waste disposal etc.

[Anonymous]

#8749

Part of the attraction of owning a machine that is produced by a european country is the peace of mind that comes form knowing that the people who have produced it did so under human conditions and that regulations are in place that govern waste disposal etc.

So if part of the attraction is the peace of mind that comes from knowing that the people who have produced it did so under human conditions and that regulations are in place that govern waste disposal etc then that means to me that there are many countries where I would get this from. I agree China wouldn't be one of them but the likes of Taiwan, Japan, Korea, Singapore etc would all meet that criteria.That still leaves me comfortable with the 450 engine. Just out of curiosity how much of the BMW bike comes from countries other than Germany.Mind you if everyone bought products produced in countries that met this type of criteria then I suspect The Warehouse may not have a viable business.It looks like interesting times ahead for BMW.

[Dave Ross]

#8750

Part of the attraction of owning a machine that is produced by a european country is the peace of mind that comes form knowing that the people who have produced it did so under human conditions and that regulations are in place that govern waste disposal etc.

Just out of curiosity how much of the BMW bike comes from countries other than Germany.

Oh, I am sure there are quite a few parts. Showa is Japanese if I am not mistaken, so is Bridgestone. The rest of the bike is assembled in Berlin (not part of Bavaria) by significant amount of Turkish guest workers. That is not an issue for me. I also understand the Taiwan is not the same as mainland China. Internationally the lines have blurred. However, there is more to buying a product than rational thought and there comes a point when the market may not accept it.I know that there are quality differences between , for example, Mercedes built in the US and those from Germany. The same applies to Hondas built in Spain compared to those from Japan. If I pay a premium price for a German product, I would prefer it to be made there. This is where I think they may hit some resistance.People don't like to be told by their friends that their Chinese BMW looks pretty good. Yes, the Wharehouse would struggle. Unless we learn to pay nearer to the true price of a product, we will continue on a downward spiral. 

[Murray]

#8751

Get over it – this is about money & profit something that BMW are traditionally quite good at managing.Suzuki AX100s sold new in NZ have been made in China for years. Come to that, plenty of US badged machines' componentry is made in eastern Asia.The Koreans just build things really well.Going on other's comments, and my own experience, the decline of BMW quality over recent times is the perfect reason for them to be looking abroad for a new supplier. One thing about the Chinese manufacturues is that they are prepared to spend money, and to look internationally, to do things properly. I would not be at all surprised to see BMW reputation for quality start to improve again with Asian-made product and of course it's not like they will be building things from scratch, they'll manufacture the engine according to BMW specifications.Some would also say that quality to match the present pricing would be a good thing to see.

[Anonymous]

#8752

Get over it - this is about money & profit something that BMW are traditionally quite good at managing.

Your not wrong, the fuel pump I bought the other day ($540) was only $210 more than the one I bought 2 years ago.Didn't realise a chinaman was watching while I was bent over being reamed.Change the words money & profit to blatant greed.

[Dave Ross]

#8753

Get over it - this is about money & profit something that BMW are traditionally quite good at managing.

I am not naive enough to think it is about anything else but profit. I know that industry has moved on from traditonal values, even though BMW is one of the last large businesses, where a family still has a controlling interest.Of course I am biased, because I prefer the German workforce to have jobs :-).Ultimately though the consumer will have the last word. If the product delivers and the price is right it will sell, regardless of any ideological opinions. 

[Tony Russell]

#8754

A parallell here: Triumph riders objected to having bits made in the Far East, without realising that most of the bike already was. ..I believe that as long as the quality assurance system is BMW, the product will be alright. As for pricing - Husky used to be Swedish and ended up way too expensive. Problem in Europe is price of labour and building sites. Therefore China - western consumers are not exactly known to shy away from a quality product if it is acceptably priced. As for profit - if BMW didn't show a profit, we wouldn't have their bikes. Therefore, if my RT was Chinese made but with same quality as present, I'd go for it. MV Agusta, hailed as The Great Italian Motorcycle aren't very Italian, are they? As long as we western consumers want ever better quality at ever lower prices, it is inevitable that production must be transferred to low cost areas. I guess that in a decade or three we'll be getting quality products from Somalia and Burundi, which will benefit their society - and ours...

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