An Update from BSH on Protos. The Plant Oil Stove.
Samuel N. Shiroff, Director, BSH
For a brief update BSH is preparing a mass production capacity that should come on-line in late autumn of this year. Initial production will be ramped up through Q4 so we can expect to produce several thousand units in 2009. We are working with a local Indonesian partner - in an OEM process with 100% local content. This is part of our goal, but since BSH is not present in any meaningful way in our conventional business in that country, it is a very new activity for us. Thus, the time line may be subject to delay if quality or other issues arise. I would rather delay a few weeks than deliver a defective product.
The initial cost is going to be around US$40 - 42 Ex-works. This means it does not include transport or tolls if moving outside of Indonesia. Our total capacity for 2010 should be around 50,000 units - so this price will hopefully edge down. Naturally currency fluctuations will also play a role. BSH is running the project as a "social business". This means our goal is simply to cover costs and any additional profit will be put back into the project - for instance subsidizing costs in countries where there is viability, but not enough purchasing power for the capital costs. The mentioned price is the cost of production and local overhead. No more. Larger orders do not generate greater discounts. At first all orders will be filled out of Indonesia. New production capacity requires a minimum annual demand of 25,000 units and a viable infrastructure in the desired region. With perhaps the exception of the tank and some cleaning tools, it is simply not possible to establish small-scale local production that ensures consistent quality in an economically viable manner.
