By Grant Clark of Bloomberg......
Sept. 24 (Bloomberg) - Bayerische Motoren Werke AG executives bet they'll be winners at Sunday's first-ever Formula One race in China, even if Juan Pablo Montoya -- the star driver on BMW's racing team -- isn't first to the finish line.
"A country of 1.3 billion which has contact with F-1 for the first time -- you can imagine the impact on spectators and business,'' said Mario Theissen, 52, director of Munich-based BMW's racing division, in an interview. "We sell more 760s in China than any country in the world, which is unbelievable and gives a glimpse of the huge potential.'' Munich-based BMW expects the Shanghai race to help it sell more 760 sedans and Mini Coopers in China, where its sales rose by three-quarters in 2003 and it aims to triple production capacity to 100,000 cars in the next decade. Other carmakers backing teams on Sunday, including Toyota Motor Co. and Renault SA, also say racing in China for the first time will boost their brands in a market where overall auto sales surged 76 percent last year.
Formula One racing is the latest international sports event to arrive in China. Golf and tennis tournaments are also drawing sponsors eager to tap a market where urban incomes have climbed 40 percent in four years and the number of millionaires rose 12 percent last year to 210,000, according to the World Wealth Report by Cap Gemini SA and Merrill Lynch & Co.
BMW sponsored the country's first European PGA Tour golf tournament in Shanghai in May. InterContinental Hotels Group Plc is sponsoring next month's Crowne Plaza Open -- one of six Asian Tour golf events in China this year, up from one in 2001. China will host the 2008 Beijing Olympics, attracting sponsors such as Volkswagen AG.
'The Obvious Place'
BMW spokesman Joerg Kottmeier and InterContinental spokeswoman Joanna Ong said their companies don't disclose spending on sponsorships. Walter Hanek, Volkswagen's executive vice president in China, declined to comment on the value of the company's Olympic sponsorship. Bernie Ecclestone, who controls Formula One's commercial rights, said adding China to the Grand Prix calendar is part of the sport's push into Asia. "I've been trying to get into China for 10 years, and Shanghai is the obvious place for us,'' said Ecclestone, 73, in a telephone interview from Shanghai. "I'm very much pro-Asia. Europe will be a third-world economy within 10 years and Asia will rule the world, assisted a little bit by America.''
The seven automakers that back Formula One teams are spending a combined $884 million on 18 races this year, according to BusinessF1 magazine, which tracks the sport. Other sponsors include Hewlett-Packard Co. and Anheuser-Busch Cos.
Appetite for Golf
Formula One generates about $1.3 billion a year from television rights and sponsors, according to BusinessF1. Golf-tournament sponsors are also tapping a growing appetite for the sport in the world's most populous nation. China, which got its first course 20 years ago, now has the world's fifth-highest number of golfers, said Li Young, a spokesman for the Chinese Golf Association. The four-day BMW Asian Open tournament was shown live on CCTV, the state broadcaster.
The headline sponsor of an Asian Tour golf event pays between $600,000 and $3.5 million, depending on the event's size and the prize money, said Asian Tour Chief Executive Louis Martin, 60. In return, the sponsor's name appears in the event's title and at tournament venues.
"Golf is a reasonably inexpensive way to get your brand into China,'' said Martin, 60, in an interview.
Masters Cup
Tennis' season-ending Masters Cup, contested by the world's top eight men's players each year, will be held in Shanghai from 2005 to 2007. The city is the first to win rights to the tournament for three straight years.
"People are just waking up to tennis in China,'' said Nicola Arzani, a Monte Carlo-based spokesman for the Association of Tennis Professionals, which runs men's professional tennis and organizes the tournament. "The sponsors we have, and potential sponsors, are very excited.''
Mercedes-Benz, the luxury-car unit of DaimlerChrysler AG, will be one of the event's sponsors, Arzani said. Mercedes, which also co-runs a Formula One team, sold 3,000 of its S-Class cars in China in the first half of 2004, triple the same period last year.
Television coverage of the Shanghai race will beam team sponsors' names to television viewers across China.
Live on CCTV
The 90-minute Grand Prix, being shown live on CCTV, will draw an estimated 10 million viewers, according to a spokeswoman for Shanghai International Circuit, the organizer of Sunday's race, who declined to be named. Grand Prix events attract an average 162 million viewers worldwide, according to figures from Formula One Management, which runs the sport.
Even so, Formula One exposure won't translate into immediate sales gains for carmakers fielding teams, said Paul Gao, a principal at McKinsey & Co. in Shanghai. "In the short term I doubt it will have a major sales boost because it's a public-relations event,'' Gao said. It will probably lead to future sales by building carmakers' brand image, he said.
Fiat SpA's Ferrari, whose team includes seven-time world champion Michael Schumacher, is among the seven carmakers lending their names to teams racing in Shanghai. Teams' and sponsors' logos are displayed on cars, on drivers' suits and helmets, and around the 5.45-kilometer (3.39-mile) racing circuit, which accommodates 200,000 spectators.
Logo in Chinese
Hewlett-Packard -- a sponsor of the BMW-Williams team, jointly run by BMW and U.K. racing team Williams -- had its logo translated into Chinese on the rear spoilers of cars racing in Shanghai, the team said in a statement. Palo Alto-based Hewlett Packard is China's fifth-ranked seller of desktop personal computers.
In March, Toyota Managing Director Akio Toyoda stood on a platform next to Olivier Panis and Cristiano da Matta -- drivers on the Panasonic Toyota Racing team -- at a promotional event at Shanghai's Plaza 66 shopping mall. "We want to raise brand awareness through this kind of activity,'' Toyoda told reporters at the event, a month after the world's No. 2 carmaker by production started making its Corolla model in China. Toyota spokesman Paul Nolasco declined to comment on how much the company spends on Formula One.
Renault, France's No. 2 carmaker, is counting on Sunday's event to introduce its name to Chinese consumers as it enters a market where rivals such as Toyota, BMW and Volkswagen have a head start. Bradley Lord, a spokesman for Renault's Formula One team -- third in this year's standings -- declined to comment on how much the company spends on the sport. "No one has good name recognition in China, at least among the new entrants,'' Renault Chief Executive Officer Louis Schweitzer said in an interview in Geneva in March. "Perhaps the Chinese will watch F-1 and we can build our name.''
