Indonesian unit of German premium automaker BMW AG launched Friday a variant of its popular sport utility vehicle BMW X5 that is locally assembled, banking on domestic consumers’ increasing demand for luxury cars.
BMW Group Indonesia assembles the advanced diesel X5 in partnership with PT Gaya Motor, a subsidiary of Jakarta-listed automotive giant PT Astra International (ASII), which has a reputation for high quality manufacturing, said ASII president director Karen Lim.
Currently, BMW is still importing several completely built up (CBU) vehicle variants from Germany. With the addition of the X5 to the firm’s assembling unit, it should be able to reach its 2015 local production target of 2,400 units, up from 2,045 units last year.
“BMW always tries to contribute to the development of the Indonesian economy by locally assembling our cars continuously […]. I’m looking forward to more growth [here],” BMW Group Asia managing director Axel Pannes said during the launching event at BMW Production Network 2 in Sunter, East Jakarta, which can assemble 10 cars a day.
Local assembly is a business model used by luxury automakers like BMW and its rival, Mercedes-Benz, to speed up delivery time and reduce costs, allowing the firms to offer more competitive prices in the local market.
Mercedes-Benz Indonesia, a subsidiary of German car manufacturer Daimler AG, for instance, assembles its C-Class, E-Class, M-Class and S-Class vehicles at its plant in Wanaherang, Bogor, West Java, which has been in operation since 1987.
Since 2011, BMW has invested Rp 150 billion (US$11.6 million) to assemble BMW variants, including the newly launched X5. The company sold 3,443 vehicles last year, up 6 percent from a year earlier.
Last year, BMW booked an all-time global sales high of 2.11 million units, up more than 7.5 percent from the 1.96 million vehicles sold in 2013.
BMW Group Indonesia’s head of corporate communications Jodie O’tania said her firm was optimistic that Indonesians’ interests in luxury cars would continue to increase, allowing the company to sustain or increase its market share.
When introduced last year, the X5 saw a warm welcome from Indonesian consumers, which have seen a rapid increase in income in recent years thanks to stable economic growth, helping consumers accumulate disposable income.
The X5, with a price tag of Rp 1.14 billion, appeals to a specific target market that values prestige and environmental awareness, as this model comes with an advanced diesel system that uses the high-profile and low-carbon emission fuel Pertamina DEX.
Locally assembled BMW X5 will only be available in the domestic market and will not be exported, as the company is aiming to increase its line production number in Indonesia.
“Though locally assembled, all auto parts are still imported as BMW has high standards in innovation. But in the future, the local content might be used,” said corporate communication head O’tania, answering the government’s demands for a local production base.
The Industry Ministry’s acting director general for high-priority industry, Panggah Susanto, reiterated the government’s request on Friday during the launch event for the X5, saying that the automotive industry had been one of the biggest contributors to the worrisome deficit of Indonesia’s current account — the broadest measure of international trade. (ind) -