BMW Group is having a pretty good year. The company’s car sales are heading for a record 1.6m units in 2011 and it is posting impressive financial results. Dave Leggett interviews Ian Robertson, BMW board member responsible for sales and marketing.
DL: What’s behind BMW’s strong performance this year?
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IR: Many of the decisions we took in the period 2008-2009 are now bearing fruit. During the difficult years we did a lot of things. We challenged the way we design cars, the way we build cars, the way we sell cars. And one thing that we didn’t do was stop any of our future investment strategies. A lot of the cars you see coming through now, in new segments, like the X1, 5 Series GT, like the successor models of the 5 Series, 7 Series, the new 1 Series, 6 Series just rolling out…and in the next 18 months we will replenish the majority of our fleet, our model cycle is in an accelerating period…those decisions were taken during that tough period.
Also, the way in which the cost base was challenged in that period is now showing very positive results in our performance.
At the same time, we have a global footprint that is well understood. We are enjoying success in the three major market areas [of the world] and it is very important for us to have a balanced approach – which is the US, Europe and Asia. We are investing across the world and we will continue to do that.
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By GlobalDataWe are confident but we are also cautious on the outlook. We are confident about our new model introductions and about markets like China, Brazil, Russia and India, Turkey, all growing at 50, 60, 70 percent this year and we’re seeing growth in the US of 10, 15 percent as well and in parts of Europe, there are also many parts of the world which are still in quite troubled waters. Europe is a tale of north and south and the border of where north and south falls is moving. I was looking at the statistics for June in Spain and the whole market is back 35 percent, the Greek market – no surprises – is almost non-existent, the Italian market is tough. The UK market in the first six months has been more positive than we anticipated but that has been driven by the fleet business, not the retail environment.
In the US we have had success with new products but until the consumer feels confident about unemployment and the housing market, I don’t think we will see the US market getting back to pre-2008 levels of around 17m units – this year will be between 12.5m units and 13m.
All in all I think we have reason to be cautious but we also have reason to look at our balanced portfolio and say ‘that was the right strategy’. We will continue to invest around the world – we’re building our second factory in China, extending our business in Russia, we’re building a new factory in India, we’re looking for a site in South America. That will continue the strategy of being where our customers are today and where we believe they will be tomorrow.
Given the considerable volume growth, is there a point at which the premium brand values get diluted for BMW?
Our revised guidance for this year is 1.6m units and we have set strategic objectives to do 1.8m units and so forth further out. In a car market that this year will be around 70m vehicles and a premium segment that will be somewhere around 5m vehicles we occupy, market by market, 25 percent of the premium market, ish. It is still a small percentage of the overall car market. Now, there are always exceptions to that. You could say ‘in Los Angeles on a Saturday afternoon, at a traffic light, you might see a lot of BMWs’. Does that really make a difference? No it doesn’t, because the wider picture is small percentage stuff.
We have a clear view that we will only remain premium, we have no intention of going down into volume markets and we will continue to reinvent premium. When I look at the forecasts the premium market will continue to exceed the growth in the volume market around the world and the small car segment will continue to exceed growth in the more mature segments. So we will see more products in the small car segment as well as a broadening footprint in the more mature segments – China is a case in point.
On small cars, can you say more about the i-brand?
It was a deliberate sub-brand of BMW. We thought long and hard about what we wanted to do. The sustainability message is clearly an important element, under the umbrella of the overall Group. It is at one end of the spectrum and ‘M’ is at the other. Is M divorced from sustainability? No, it is not. The new generation 5 Series is proof of that: an increase in horsepower and a massive reduction in CO2. The i-brand is a range of cars with two bookends at the moment: the megacity i3, and the i8 which is a new definition of what the sports car is for the future: the plug-in hybrid with an onboard combustion engine, using new materials, using new technologies, new techniques generally.
And by the way, you will also be seeing a lot more small BMWs and Minis in the future.
Are there still new segments to fill?
We have many ideas about new segments that we continue to explore and in due course you will hear more about that. Our track record illustrates that we are pretty good at identifying new segments. To put it in perspective, it is only ten years ago that we were a 3,5,7 company that made a few Z3s. The X5 was a runaway success – double our original anticipated volume – and the X3 followed in its footsteps, and then the X6…a polarising car in some respects, but 40,000 customers a year love it…and the X1 opened up another new segment; there were 99,990 of them sold last year – and we will burst through 100,000 X1s this year.
Next year will see the 4-door 6 Series and that will give us another interesting segment with an extremely elegant car.
The 5 Series GT has opened up a lot of new customers to the brand. In its four-wheel-drive format it has been very strong, more so than we thought, and that tells you that there are customers looking for the crossover between a sedan and an SUV and they want four-wheel-drive as well. In fact, four-wheel-drive is almost becoming one of the ingredients of premium. If we look at the snow belt of the US running from south of New York through to Colorado, 80 percent of the 3 Series and 5 Series sales are now four-wheel-drive. If we look at the Alpine states of Bavaria, Austria, Switzerland and parts of northern Italy, it is 100 percent in many areas.
The ‘premium club’ seems exclusive. Do you see that changing, new entrants making more of an impact?
Of course there are pockets of that. Lexus is a good case in point; it is primarily an American brand, lower sales elsewhere around the world.
More often than not – but not exclusively – premium brands tend to have a long history, whether we’re talking automotive industry, fashion, watches, whatever. The brand comes with a knowledge of the past which is generations, stories and myth and that should never be underestimated. There are exceptions – Apple being one in the consumer electronics industry. But that history is quite important in the automotive sector. No doubt there are some very capable cars coming from companies that are not in the premium sector. Are they making traction on a global scale? No, they are not and the three German brands are dominating the global scale – there are exceptions in the UK, in Italy, there is Lexus in the US, but overall the three German brands, and in particular the two German brands, are the ones dominating the upper levels.
Given your global manufacturing footprint, will you continue to make world cars or do you think you will be making more cars for specific regions or markets?
The history of the premium car market will tell you that we have been building world cars for a long time. The history of the volume car market is that they have just rediscovered that. They knew it originally, but then they forgot it and now they have rediscovered it. We have slightly shifted our position in the premium market. We will, of course, continue to make primarily the same car, but in China we make longer versions of the same car. That’s because the Chinese consumer likes to sit in the back and part of the measure of success is to have a driver and therefore the extra length is appropriate in that market.
But everything else is the same.
One other thing that changes around the world is fuelling and there are definite trends. Europe is predominantly a diesel market, North America is predominantly a petrol market, South America is predominantly an ethanol market and there are grey bits around the edges. Diesel is getting more traction in the US at the moment – diesel is outselling hybrids with the exception of the Prius. We can’t supply enough diesels to the US at the moment.
The important thing is to have a range of powertrain and techology solutions to cover all eventualities in terms of evolving market trends and local preferences.
See also: RESULTS PREVIEW: BMW heading for record profitability with Q2 results
