BMW is sticking with its aggressive plans to enter new market niches despite stalling profits growth. BMW’s product offensive of recent years, typified by the arrival of the 1 Series and the X series SUVs, is set to continue although some analysts are voicing concerns over the luxury carmaker’s profit prospects.
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In 2005 BMW’s pre-tax profits and operating margin declined in spite of an increase in revenues. Although net profit was flat, the fall in pre-tax profit is only the second time since 1998 that BMW has not improved its results. BMW blamed the profit squeeze on currency effects and higher raw materials costs.
The company plans a number of new models for further volume growth over the next few years.
In 2006, the company expects to benefit from a renewed Z4 roadster as well as the introduction of a Z4 coupe.
BMW’s plant at Spartanburg in the US has been reorganised for a gear-up in Z4 production. At the end of last year the plant was shut for four weeks as the Z4 and X5 manufacturing lines were consolidated into a single flexible line. Outgoing Z4 roadster production in 2005 was just 19,800 units against 35,000 units in the previous year.
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By GlobalData“We see a bright future for the new Z4 roadster and the Z4 coupe, especially with the arrival of the new 6-cylinder engines,” said BMW UK product manager Martin Sloan, speaking at a BMW Z4 launch event at the BMW Performance Centre, Spartanburg.
“There are significant improvements in the new range over the old and we have added a number of new variants in the new Z4 line-up, including the Z4 M Roadster. We see the Z4 range as a key component in what the BMW brand is all about – especially a sense of dynamism and sportiness,” he said.
Sloan also said that the BMW X5, due to be replaced at the end of the year, had been an ‘unbelievable success’ with sales staying high last year in defiance of the usual tail-off that models see towards the end of their lifecycle.
“We are very pleased with the performance of both X products,” Sloan said.
“The X3 is also doing well now that the 2-litre diesel engine is well established,” he added.
Sloan also acknowledged that there are a number of options for BMW in further meeting market sub-segments from its X-range. He admitted that a seven-seat configuration SUV was a possibility for the next generation X5, though he also conceded that the ‘third model’ for Spartanburg may be a ‘Space Functional Concept’ as hinted at by BMW CEO Dr Panke.
“I think many of us were a little surprised by Dr Panke’s remarks about that proposed vehicle when he made them,” Sloan said, emphasising that any such vehicle is still some way away from market launch (analysts say 2008).
But would it make sense to assume that any such vehicle (essentially a Mercedes R-class fighter) would be made at Spartanburg and share plenty of componentry with the X5? “Yes, it might,” admitted Sloan, although he could not confirm that such a model was in development.
As far as other BMW niche models are concerned, Sloan outlined the basic tenets of BMW’s criteria for development: “When BMW looks to enter non-traditional market niches, the proposed vehicle must be first and foremost a BMW, embodying core BMW values, especially those of sportiness and dynamism. For example, that’s what we did very successfully when we entered the SUV segment with the X5; it is both sporty and dynamic – clearly a BMW – as well as fulfilling certain utility parameters for that segment. But any new BMW product must deliver on these essential BMW values.”
Dave Leggett
