They seem to be doing okay at BMW these days. So far this year, BMW Group automobile deliveries are running a fifth ahead of last year’s level. Impressive stuff. After the painful memories of a few years ago, it is a case of minding the knitting and getting on with selling (profitable) upscale BMW cars.
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And the group is also getting a volume boost from the new Mini (or MINI as BMW prefers to shout it). But what about BMW’s upcoming 1 Series? A small BMW? How financially successful has the Mercedes-Benz A-class been?
BMW chief Dr Panke believes the key to BMW’s success in the small car segment is to maintain a premium price position. Yes, of course – that makes sense. BMW’s margins – said to average seven per cent and second only to those of Porsche – are clearly the key to the company’s strategy, as they give it the cash flow to continue to invest in R&D and capital expansion. “We have completely financed those activities from cashflow for the past 20 years,” Panke told just-auto, ” and we will continue to do that.”
But there are more than a few whispers of concern surrounding a small BMW below the Compact. Margins will tend to be low whatever the company may think it can do to justify premium pricing. And doesn’t BMW already have the Mini (FWD and unique platform, sharing little with other BMW products)?
Other prestige manufacturers’ experiences in moving into lower margin, higher volume territory hardly instils confidence. The Mercedes-Benz A-class has been far from successful financially, although it has hit its volume targets. Analysts say that the second-generation model stands a better chance of being profitable than the first (which suffered the added costs of ESP after failing the Elk test). It has been an expensive learning experiment for DaimlerChrysler. The MCC Smart, even more so. Audi has dropped plans to directly replace the Audi A2, which employs expensive aluminium technology and is missing sales targets. A novelty item perhaps, but not exactly a barnstormer.
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By GlobalDataHow many conquest sales can BMW get with a small premium car? Or will the 1 Series project be scaled back to a more niche offering based on the CS1 concept that was shown in Geneva this year? Clouds on BMW’s horizon? A few gentle fluffy ones perhaps. BMW shareholders will hope they fail to develop into anything more substantial.
Dave Leggett
Managing Editor
