The Telegraph
Since 1st March, 1999
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BMW takes a road not travelled
- German auto aristocrat picks port city in Kerala to set up plant

Malappuram (Kerala), Aug. 19: After BMW, there isn’t much by way of cars — ask James Bond. And it’s here, or will soon be here.

But not in Maharashtra. Not in Haryana. Nor even in Karnataka. The elite German carmaker has chosen unpretentious Kerala to set up base in India, state government officials said.

BMW will establish its manufacturing facility at Kalamassery, which is 15 km from the port city of Kochi, called the queen of the Arabian Sea and Kerala’s commercial capital.

Officials here expect the memorandum of understanding to be signed with the Munich-based company by the end of next month, marking the debut of the first car project in the small southern state, living for long in the shadows of its bigger cousins, Tamil Nadu, Karnataka and Andhra Pradesh.

“A team of BMW officials has been frequenting this place for the last six months,” said an official. “What probably clinched the deal in favour of Kochi is that it is a port city,” the official added.

Kerala’s high-decibel political activism does not seem to have had an adverse influence on the prospective investor, though a BMW reconnaissance team last month landed in the state at a time when it was gripped by student violence.

The BMW plant will come up at a site of 25 acres from where the company will roll out the 318 model. Among its low-priced products, the fully built 318 model will be imported for sale in India this year.

BMW’s entry comes almost simultaneously with the arrival of Volkswagen, Europe’s biggest carmaker, which is planning to set up base at Visakhapatnam in Andhra.

The Beemers, as BMW cars are popularly known, that will adorn showrooms in India belong to the 3series that is in direct competition with the C-class cars sold by the other German car company famous for its engineering, Mercedes Benz.

BMW’s 318 petrol version is expected to sport a sticker price of Rs 24 lakh, about the same as the Mercedes Cclass cars. Volkswagen is planning to launch the Audi TT 1.8T that will be priced between Rs 20 lakh and Rs 25 lakh.

The pricing shows that the models are being marked at a premium of almost 100 per cent on the retail price in Europe. One reason for this is that the carmakers which have entered India late prefer to import fully built units that attract a customs duty of 115 per cent.

But they are still able to reel in profits as an expanding market throws up enough people who can afford to buy these cars. And millionaires, as a recent survey showed, do not belong to Mumbai and Delhi alone.

Kerala, the country’s most literate state, missed the boom of the 1990s when Karnataka, Tamil Nadu and Andhra aggressively courted foreign investors. Late to join the race, it is promoting itself as a state where salaries and employee turnover rates are lower and which has reliable, high-speed telecom links.

It is also hoping to win business on the back of the state’s reputation as an unspoilt tourist destination and cheap real estate relative to other southern cities like Bangalore.

BMW’s decision to invest in Kerala is symbolic of the emergence of southern states as growth centres. Karnataka is the breeding ground of software giants while Andhra is home to a clutch of pharmaceutical firms.

Tamil Nadu houses several carmakers, including Ford Motor Co. and South Korea’s Hyundai Motors.

That BMW, which offers “pure ride”— Bond used it in several movies, including Tomorrow Never Dies — would drive into God’s Own Country may not be too much of a surprise. Some decisions are easy, as the company tells would-be buyers confronting a BMW.

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