BMW's "unleash ASEAN" strategy positions the region as its fourth key market
Growth in the ASEAN region is a key target for BMW, as it looks to increase its market share – overcoming regulatory hurdles and working with partners to offer customers its full product portfolio.
As protectionist trading models have pushed OEMs to diversify their operations, focusing on the ASEAN region has emerged as an attractive proposition for automakers looking to gain a strategic advantage on the global stage. Delivering a keynote presentation at this year’s Automotive Logistics & Supply Chain ASEAN, Dr Michael Nikolaides, senior vice-president production network, supply chain management, logistics at BMW Group, provided a look into BMW Group's production network, supply chain and logistics operations across the ASEAN region.
Unleashing ASEAN
Nikolaides explained that just a few years ago, BMW had three major sales regions: Europe, China and the Americas. But the company, seeing the opportunity to increase its global market share, decided it was time for a "fourth pillar" in ASEAN. He noted that already having a local production footprint in the region provided an advantageous starting point for BMW's growth strategy in the region.
He shared that BMW operates small-scale production centres across South-East Asia, supplied by supply centres in its main regions. This structure, according to Nikolaides, brings huge benefits in terms of customs, taxes and tariffs and in terms of customs and taxes for localised production.
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However, he acknowledged some of the obstacles OEMs face in the region. "The challenge is that this is not a homogeneous regulation because it is different and diverges from country to country, Nikolaides said. "There are countries where we have to have a paint shop and a body-in-white operation, there are other countries which require engine assembly and there are countries which require specific production for, to give you an example, battery assembly."
BMW's deconsolidation strategy
To combat these challenges, BMW made the decision to deconsolidate its supply chains and value streams in its packaging centres and then build kits which can be supplied to local production plants in the region. This, Nikolaides referred to as the "IKEA principle". A disassembled kit is sent to to the region for final assembly, and this is done in stages across different countries, according to the specifications of local registration.
"In one country you have an engine assembly, in the other one you have a body-in-white or even an electric drivetrain assembly.," he said. "There are two fixed points in that: the first one is when our kits leave our packaging plants and the other one is when the complete finished car leaves our production plant."
Nikolaides noted that this strategy is not a new one, and in fact mirrors the model used in Europe "long before the European Union was established. This results in a long lead time, making demand planning and forecasting all the more important – something BMW is taking advantage of digital technologies such as AI and digital twins to improve, as seen in its Debrecen and Munich plants in Europe.
However, to truly support growth and efficiency for OEMs in South-East Asia, Nikolaides claimed that more standardised regulation across the region is needed. "The more homogeneous we could get the regulations over the different countries and the more integrated they could get, that would bring the complete industry, I think, a huge efficiency and I am convinced everybody would benefit from that," said Nikolaides.
Today, BMW has seven small-volume plants worldwide, four of which are within the ASEAN region. Nikolaides explained that BMW uses "a huge variety of business models", ranging from running plants itself – like in Thailand – to having partners manage plant operations, import vehicles and handle sales – like in Vietnam. "Based on the specific market environment, we choose which model best suits the demands in order to fulfil our ultimate target, which is to grow and to increase our market share," he added.
Openness in technology and skills
Ensuring the correct business model is in place in each country is crucial, Nikolaides said, to ensuring that BMW is able to offer the complete variety of its product portfolio to customers in the region. This level of "technology openness" is central to BMW's business strategy. The company identified that this "ensures different drive types are developed and used in parallel, so that mobility solutions can be specially tailored to the different needs of different regions and individuals". This brings advantages such as increased consideration of customer needs and regional specifics, as well as greater resilience to geopolitical challenges.
Nikolaides identified one last and very important consideration for the region: people. He emphasised the cruciality of not just bringing value to the ASEAN region, but also investing in upskilling people there "because in the end manufacturing a car is done by people" – something he acknowledges is "also a very important aspect".
