High Cost May Impede BMW's Engine Plant

The expansion project of BMW will include the establishment of an engine plant, which has been reflected in the memorandum of Brilliance and BMW for the development in the next stage, according to the Jinghua Times. But the engine plant project is still an option waiting for adequate arguments. Compared with Audi, BMW is in great need for reducing the cost in order to catch up with the rival at the crucial moment.

　　Domestic sales should reach 50,000.

As BMW Brilliance is expanding capacity in China, BMW will further accelerate the localization process and the establishment of engine plant has become the most important issue.

However, in the conference of expansion project which was held on last Thursday, both Brilliance and BMW failed to offer further explanation about the engine plant project. According to the expansion project, the cost totals five billion yuan. It is not clear about how to allocate such a huge sum of money and which part will be used to build the engine plant.

In fact, until now the engine plant project is still in the demonstration period. The attitudes of Brilliance and BMW are intertwined, according to the Jinghua Times.

Recently a director from the Brilliance Automotive Group told Jinghua Times that BMW Brilliance has 1.8L, 2.0L, 2.3L, 2.5L and other engines. But in terms of single type the sales are not satisfactory. When BMW Brilliance localizes the production of engines, the bottom line of vehicle sales will be 50,000, or even 100,000. Currently BMW Brilliance has not reached that level.

Actually BMW also has some evident concerns. As a premium brand, BMW will suffer from high cost brought by localization of engine production if the sales are not sufficient. The Jinghua Times learned that BMW would accept the engine plant project based on the bottom line of at least 100,000 sales.

BMW is confident of the high-tech elements of its engines, such as light engines and fuel-efficient feature. Nevertheless, BMW will hardly find suppliers with the same high quality in China since the requirements are very high.

There is another option that BMW Brilliance could import critical parts of engines and then finish the assembly task in China. However, this is not a good solution. During the transportation process the parts of engines may have to suffer from bumps and scratches. Therefore in the current stage BMW Brilliance will continue using the imported BMW engine.

　　The campaign of engines kicks off.

To some extent BMW's high-profile announcement to build the engine factory sends a signal to luxury car makers. Following the battle of expanding capacity, a campaign for localization of engine production has emerged.

Reporters learned that as the top player in Chinese luxury auto market, Audi has already achieved the goal to produce some kinds of engines in China. Mercedes-Benz has also stepped up the localization process, including the engine project. In fact, as early as two years ago, the Beijing Automotive Holdings Chairman Xu Heyi once said that BAIC and the Mercedes-Benz China would jointly build Mercedes-Benz engine plant. At that time, the new Mercedes-Benz C-class was to be released soon.

Power system accounts for 20% of the cost of a vehicle. If the power system can be produced locally, there will be extremely large space for the reduction of cost. In the fierce competition with rivals, BMW has to bypass the hurdle of localization of engine production prior to stepping into a new level. (Translator: Qinghua/Hanxin)

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