Gauging how much importance the world's leading premium car producer BMW attaches to the Chinese market is rather simple.

The first photograph in the company's 2003 annual report is of the luxury automaker's joint venture in China with the caption reading "Production of BMW cars in Shenyang in the northeast of China began in September 2003 - This is an important milestone in the BMW Group's expansion strategy."

Helmut Panke, chairman of the board of management of BMW AG, mentioned his company's "particular success" in the Chinese market time and again when releasing the company's annual report last week at its headquarters in Munich, Germany.

Panke had reason to do so. Just have a look at the eye-catching figures depicting BMW's performance in China last year:

The company sold 18,445 cars on the Chinese mainland, 176 per cent up from the previous year. In the overall Chinese market, which also includes Hong Kong and Taiwan, customer deliveries grew by 75 per cent. This compares with the group's 4.5 per cent growth globally and a 0.9 per cent decline in Germany - its home market.

China became the company's eighth-largest market last year, moving up from the 12th place in the previous year.

China also became the third-largest market for the BMW 7 Series - the most luxury and expensive BMW brand limousines. In 2003, sales of the top model alone -the BMW 760 Li - were 1,000 units in China, higher than anywhere else in the world.

"China will soon become one of BMW's seven largest markets if the dynamic growth there continues in the years to come," Panke said.

The company, refusing to forecast how many cars will be sold in China in the coming years, only said it planned to increase customer deliveries in Asia to 150,000 cars by the year 2008.

"Asia will show the most significant growth in future... as we see a very large, lasting potential especially in China, which shows above-average growth," he said.

Booming sales may also encourage the company to expand production in the BMW Brilliance Automotive - its joint venture in Shenyang, capital of Northeast China's Liaoning Province.

Designed annual production capacity for the joint venture is 30,000 units. BMW originally planned to reach the capacity in four to five years.

"We will reach that goal ahead of schedule," said Andreas Kunz, chief representative of BMW's Beijing representative office, adding that orders now far exceed production.

The joint venture, with Brilliance China Automotive Holdings as the Chinese partner, will have a total investment of 450 million euros (US$558 million) by 2005. It is now producing BMW 3 and 5 series.

Last year, the company produced over 3,000 BMW cars, including some 2500 BMW 3 series and 500 BMW 5 series.

However, the production mix will be adjusted this year as Chinese customers show more enthusiasm toward BMW 5 series limousines - more expensive, larger and more luxurious than the 3 series - while the market for 3 series sedans "remained to be tapped," said Kunz.

"It is understandable that the market performance of BMW 3 series is so flat in China," said Li Chunbo, an auto analyst with CITIC Securities. "You know in China BMW buyers are very wealthy people who care more about the grade of their sedans than how much it costs. If they choose to buy a BMW, they won't buy a 3 series which is not luxurious enough."

Kunz said this year, about 60 per cent of BMWs made by the Shenyang joint venture will be 3 series cars while the share of 5 series will rise to 40 per cent.

Moreover, the company is working to lobby the Chinese Government, hoping domestically made BMW sedans can be used in government departments and institutions, according to Kunz.

Now, Audi sedans produced in Changchun, in Northeast China's Jilin Province, are the most popular brand among top-grade cars used by Chinese Government departments.

However, Chinese auto analysts say it is difficult to promote the use of BMWs among government organizations.

"According to regulations, Chinese officials at the vice-ministerial-level can only use 1.8 litre sedans," Li said. And BMW is unlikely to downgrade its sedans to 1.8 litres, according to Li.

Even if BMW successfully downgrades its sedans, it will lose other advantages, especially its powerful engines.

At this point, dynamic growth in the Chinese market is propelled more by private buyers rather than government purchase.

"BMW should better directly position itself as a premium business sedan provider," said Zheng Xianling, an auto analyst with China Securities.

Despite this issue, BMW's aim is clear: It intends to be the most successful supplier of luxury cars in China.

(China Daily March 27, 2004)