Information on BMW Foreign Direct Investment

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The German automaker Bavarian Motor Works -- known as BMW -- was, until 1992, reluctant to invest outside of Germany. Since then, BMW's markets and production facilities have grown global in scope. As of May 2011, BMW is growing rapidly in China, India, the United States and Russia.

Strategy

  • BMW has always been important in the luxury car market. This market, however, is highly competitive. All major luxury automakers such as Rolls-Royce and Mercedes are heavily invested overseas. The present BMW strategy is to break open the Asian market through both China and India -- two economies that have been growing rapidly and have developed a strong demand for European luxury cars. While the economy has slowed in the United States, BMW's South Carolina plant is expanding. The German firm announced this expansion in 2008, saying that the American market for this car line is increasing despite the deep recession.

India

  • BMW-India is owned totally by the German firm. Its main plant is located in Chennai, and, since 2010, has been expanding rapidly. This plant has recently bought more land and equipment and seeks to use its growing India market to expand its entire Asian production line. BMW has also announced that it seeks to double the number of dealerships in India over the next few years and wants to markedly increase its 2010 figure of 10,000 units sold.

China

  • The Chinese market is similar to India's: These are two strong, growing economies whose newly rich entrepreneurs want the status of European millionaires. Luxury cars are an important part of this status. As of early 2011, BMW has invested $1.44 billion in China. It has two large plants, one in Da Dong and the other in Tiexi, both in the well-developed eastern part of the country. BMW has dozens of dealerships throughout the nation. In the first four months of 2011, BMW sold more than 74,000 cars of all types in the country. The Chinese demand is predicted to slow but will remain high for the short term.

Russia

  • BMW built a plant in Kallinigrad, in the westernmost part of the country, in 1999. In 2009, BMW sold more than 16,000 cars and sees Russia, too, as part of its overall Asian strategy. In all cases, BMW appeals to the newly rich in these “transition” economies, providing affluent people with status symbols to match their newfound wealth.

References

  • Photo Credit Johannes Simon/Getty Images News/Getty Images
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