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Indian summer for Mini production

BMW has announced that it is to commence production of its Mini model range in India. In a move that will concern some of its UK workers, the German owners of Mini confirmed that the first Mini Countryman cars would be produced at its plant in the Indian city of Chennai later in 2013.

BMW has announced that it is to commence production of its Mini model range in India. In a move that will concern some of its UK workers, the German owners of Mini confirmed that the first Mini Countryman cars would be produced at its plant in the Indian city of Chennai later in 2013. It comes at a time when new car sales in India are declining but BMW described the country as "an increasingly significant market" for the prestige German car maker. BMW has so far conducted its own sales in India, selling just 300 cars in 2007, the first year of operations.

BMW confirmed that the decision was part of a wider strategy where its 'production follows the market' rather than a simple exercise to move production in order to take advantage of cheaper labour. What is undeniable is that the company will save on India's 100% tax on imported cars. Where car parts are imported to be assembled in the country, that tax is reduced to 30%. Since its launch the Mini has been built mainly in England, at the company's plant in Cowley, with a second plant in Austria. BMW has moved to allay fears from its UK workforce by insisting that Cowley will remain the centre of Mini production.

BMW clearly sees India as a huge growth market, with car owners making up just 1.5% of the population but the timing of the move will surprise some UK observers who might question whether the move is indeed simply a ploy to enjoy cheap labour. The Indian economy has declined sharply in the last year, reversing a previous trend of rapid growth. Car sales also fell last year, with a report by the Society of Indian Automobile Manufacturers showing that sales fell by 6.7% during 2012.

It may be of course that BMW is simply playing a long game or that it was already contractually committed to the move but it highlights the fragile nature of a booming UK car industry where every major brand manufactured in the UK is under foreign ownership. Last month, for example, Volkswagen hinted that the new Bentley could be made in Slovakia. Unless there are more millionaires in Slovakia than previously thought, this is clearly not a case of 'production follows the market' but rather a simple move to cut costs. UK car workers could be forgiven for keeping a close eye on these developments.
 

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