Will Audi,BMW and Mercedes localize their cars beyond 80% in India?

crazycardude198 · 12th November 2010, 00:33

I was reading about Mercedes's plans to introduce a new front wheel architecture which would make its cars cheaper. Thats all well and good but here's my question.

Which one of the big three will have the guts to source at least 3/4th of their parts from Indian suppliers. I strongly believe that the company that does first will trample all over the rest.

Any thoughts?

S350L-E240 · 12th November 2010, 09:38

Hi,

Good question, but logically speaking considering the amount of electronics these cars have and also a lot of components which usually sourced from a single point getting to a figure of 80% is quite impossible. Transmissions, Suspensions, Engines (Unless sourced from a 3rd party locally), In car electronics, entertainment systems all of that would have to come in to get to 80% and as of now the volumes do not justify it and in future too if volumes grow they still will not get to that high percentage as it just makes no sense for these car makers as they global volumes itself are lower then those of say Toyota etc.

While our country can surprise a lot, and a lot can happen and will happen but for the next 10 years or so I do not see any of them to get to 80%. Right now also they do source leather etc. from India and in the E-Class review it was the first thing I spoke of on how leather in CBU's of the same car is a lot softer then the one in the CKD cars from India.

Audi, in future could do a lot more then Mercedes & BMW, reason being VW & Skoda, and there are huge volumes in the future then certain parts which all 3 share could be localised as the 3 together can add to a huge volume, but then again it depends on how Audi manages everything but I do know they might have VW's advantage as certain engines etc. are cross shared too.

designersf · 12th November 2010, 11:13

One word answer - NO. Anything above 20% will be difficult. AFAIK BMW sources very few locally, interior fabric being one of them.

vishnurp99 · 12th November 2010, 11:35

In my opinion this is unlikely. The only chance of this happening is if TATA comes out with a sedan in the 30 lakh range. Hopefully they will have jaguar tech in this and export as well as domestic volume will be considered for the investment. They will make the car in india and export it to the world as affordable luxury brand

. I guess india has the expertise locally if somebody like TATA can make the investment.

Merc/BMW/Audi will have to set up 80% localization to survive.

kadanaJ · 12th November 2010, 13:55

A lot of people buy Merc/BMW/Audi for the status and exclusivity.
Making them easier to afford might go against them.
The only advantage they would then get by local assembly would be fatter profit margins, but even that would come at the cost of quality (as if the Germans don't have enough reliability problems already)

n.devdath · 12th November 2010, 15:23

I agree to what most of us have said here. 80% is a big figure and very unlikely to happen here in India. And if it does happen, I m pretty sure that these manufacturers will continue to fleece customers in the name of "Premium" brands and "German" technology.

srishiva · 12th November 2010, 15:40

If they can bring in costly components from their own countries and sell it at a higher price to make big profit, why will they care?
Localization is used to enhance profit or to gain volume by bringing down the price. Its not needed for these companies.

avishar · 12th November 2010, 19:38

Well a company will do whatever it can to maximize profits.If in the near future it can find indian components that meet its quality and durability standards at a lower cost than importing it will surely go for localization.
Now whether they decrease prices is upto them.They might not decrease it much and take full advantage of localization.

Either ways with increasing volumes soon it will become prohibitive to use CKD kits when volumes like 20-50k is reached.

Mpower · 12th November 2010, 20:15

Nopes. Doesn't make economic sense unless India is going to be an export hub and worldwide source.

VINUMON · 12th November 2010, 21:05

As everyone seems to agree, a highly unlikely prospect. Anyone got a clue about the localization percentage in China?

OT: I wonder if someone has already asked a similar question to Ratan Tata about Jaguar.

12th November 2010, 00:33	#1
crazycardude198 BHPian Join Date: Oct 2010 Location: HYDERABAD Posts: 87 Thanked: 25 Times	Will Audi,BMW and Mercedes localize their cars beyond 80% in India? I was reading about Mercedes's plans to introduce a new front wheel architecture which would make its cars cheaper. Thats all well and good but here's my question. Which one of the big three will have the guts to source at least 3/4th of their parts from Indian suppliers. I strongly believe that the company that does first will trample all over the rest. Any thoughts?
	() Thanks

12th November 2010, 09:38	#2
S350L-E240 Senior - BHPian Join Date: Apr 2004 Location: India Posts: 1,416 Thanked: 393 Times	Hi, Good question, but logically speaking considering the amount of electronics these cars have and also a lot of components which usually sourced from a single point getting to a figure of 80% is quite impossible. Transmissions, Suspensions, Engines (Unless sourced from a 3rd party locally), In car electronics, entertainment systems all of that would have to come in to get to 80% and as of now the volumes do not justify it and in future too if volumes grow they still will not get to that high percentage as it just makes no sense for these car makers as they global volumes itself are lower then those of say Toyota etc. While our country can surprise a lot, and a lot can happen and will happen but for the next 10 years or so I do not see any of them to get to 80%. Right now also they do source leather etc. from India and in the E-Class review it was the first thing I spoke of on how leather in CBU's of the same car is a lot softer then the one in the CKD cars from India. Audi, in future could do a lot more then Mercedes & BMW, reason being VW & Skoda, and there are huge volumes in the future then certain parts which all 3 share could be localised as the 3 together can add to a huge volume, but then again it depends on how Audi manages everything but I do know they might have VW's advantage as certain engines etc. are cross shared too.
	() Thanks

12th November 2010, 11:13	#3
designersf BHPian Join Date: Aug 2007 Location: Ann Arbor Posts: 603 Thanked: 80 Times	One word answer - NO. Anything above 20% will be difficult. AFAIK BMW sources very few locally, interior fabric being one of them.
	() Thanks

12th November 2010, 11:35	#4
vishnurp99 BHPian Join Date: Apr 2010 Location: India Posts: 477 Thanked: 1,029 Times	In my opinion this is unlikely. The only chance of this happening is if TATA comes out with a sedan in the 30 lakh range. Hopefully they will have jaguar tech in this and export as well as domestic volume will be considered for the investment. They will make the car in india and export it to the world as affordable luxury brand . I guess india has the expertise locally if somebody like TATA can make the investment. Merc/BMW/Audi will have to set up 80% localization to survive.
	() Thanks

12th November 2010, 13:55	#5
kadanaJ BHPian Join Date: Apr 2010 Location: Mumbai Posts: 585 Thanked: 958 Times	A lot of people buy Merc/BMW/Audi for the status and exclusivity. Making them easier to afford might go against them. The only advantage they would then get by local assembly would be fatter profit margins, but even that would come at the cost of quality (as if the Germans don't have enough reliability problems already)
	() Thanks

12th November 2010, 15:23	#6
n.devdath BANNED Join Date: Jun 2009 Location: Bangalore Posts: 4,287 Thanked: 2,811 Times	I agree to what most of us have said here. 80% is a big figure and very unlikely to happen here in India. And if it does happen, I m pretty sure that these manufacturers will continue to fleece customers in the name of "Premium" brands and "German" technology.
	() Thanks

12th November 2010, 15:40	#7
srishiva Senior - BHPian Join Date: Nov 2006 Location: Bengaluru Posts: 4,375 Thanked: 2,256 Times	If they can bring in costly components from their own countries and sell it at a higher price to make big profit, why will they care? Localization is used to enhance profit or to gain volume by bringing down the price. Its not needed for these companies.
	() Thanks

12th November 2010, 19:38	#8
avishar Senior - BHPian Join Date: Oct 2008 Location: kolkata/bangalore,india Posts: 2,901 Thanked: 4,143 Times	Well a company will do whatever it can to maximize profits.If in the near future it can find indian components that meet its quality and durability standards at a lower cost than importing it will surely go for localization. Now whether they decrease prices is upto them.They might not decrease it much and take full advantage of localization. Either ways with increasing volumes soon it will become prohibitive to use CKD kits when volumes like 20-50k is reached.
	() Thanks

12th November 2010, 20:15	#9
Mpower Senior - BHPian Join Date: Mar 2005 Location: Bangalore Posts: 10,409 Thanked: 1,730 Times View My Garage	Nopes. Doesn't make economic sense unless India is going to be an export hub and worldwide source.
	() Thanks

12th November 2010, 21:05	#10
VINUMON BHPian Join Date: Nov 2007 Location: Doha Posts: 139 Thanked: 2 Times	As everyone seems to agree, a highly unlikely prospect. Anyone got a clue about the localization percentage in China? OT: I wonder if someone has already asked a similar question to Ratan Tata about Jaguar.
	() Thanks