BMW plans larger model lineup to push sales to 2+ million a year, is it a good thing?

[Sticky]

Businessweek is reporting BMW CEO Plans ‘Big Push' in Models to Fend Off Audi, Mercedes. BMW currently is the largest luxury auto maker in the world, a title they took from Mercedes in the mid 90's. They plan to keep their lead by expanding the Mini range as well as the number of 6 series models with a 4 door coupe. BMW is also planning an all electric city car which no doubt has us all curious as to the 1/4 mile times.

What does this mean for us? Well, BMW will get bigger and no doubt the number of M models will increase. This also means dilution, greater bureaucracy, and a tougher fight on warranty claims as BMW shifts focus to volume and profit. This isn't the same tough little BMW we all loved, this is a powerhouse that is turning into something that is potentially scary. BMW sales are up 82% in China who is now taking more and more focus and has risen to the third largest market behind the USA and Germany.

BMW is planning this roll out during the next decade, attempting to hit their goal by 2020. We all obviously are fans but as a performance oriented group we would like to see BMW focus more on making special things like the CSL or GTS happen in the USA rewarding its most loyal customers instead of just adding more junk to the bottom line.

[62Lincoln]

Most industry pundits (and CEOs, like Fiat's Marchionne) believe that an auto company needs to be sized around 5-6 million global units of sale in order to achieve the economies of scale necessary to drive costs down, and to afford R&D and development costs expected to incurred this decade to comply with forthcoming fuel economy and CO2 regs. BMW and Mercedes might not need quite the scale in terms of units as some of the mainstream companies, owing to the higher margin sales of their more luxury oreinted product lines. Nonetheless, they are under pressure to increase unit sales and income due to the upcoming costs mentioned above, as well as the need to generate more sales of higher fuel economy products in order to achieve government mandated fleet fuel economy and CO2 averages. Give BMW credit for the development of the MINI product line, as those sales unquestionably help BMW in these areas, but obviously those sales are not enough, as BMW must also now develop its own line of FWD products to contribute to improving its fleet averages.

At the extreme end of this discussion is BMW's ability to remain independent. BMW is fortunate that the largest block of its stock is owned by the Quandt family, and they have generally been good stewards. But - if the costs of technology and development continue to hammer the company, it's within the realm of possibility that BMW could become a target for acquisition or merger if the financials become untenable. It's against this worst case scernario backdrop that the decisions regarding product line extentions are made. Just remember, for every permutation of the 6 series that BMW can successfully sell, they put another brick in the wall that protects from the worst case scenario I described. BMW's biggest challenge is to remember their core product traits that make them so valued by enthusiasts; as long as they can do that, I think we'll be okay.

[Sticky]

Most industry pundits (and CEOs, like Fiat's Marchionne) believe that an auto company needs to be sized around 5-6 million global units of sale in order to achieve the economies of scale necessary to drive costs down

A bit sad it is coming down to volume above all. The little guys can't survive in this environment and that hurts us a bit.

Give BMW credit for the development of the MINI product line

I agree, I never would have guessed the mini line would become as integral as it has.

[62Lincoln]

A bit sad it is coming down to volume above all. The little guys can't survive in this environment and that hurts us a bit.

It all comes down to profit; these companies are not, and never have been, altruistic. What has changed is the drumbeat of forthcoming regulations I mentioned: the regs are forcing tremendous investment in R&D, technology, and product development. Give BMW credit, they see what is coming, and they intend to be one of the winners. Otherwise, they could end up like Porsche, and be gobbled up by a bigger player (I don't really think it could happen, that's worst case scenario).

[Sticky]

It all comes down to profit; these companies are not, and never have been, altruistic.

Companies participating in capitalism rarely are. However, did not they take greater care of their prominence and manner when the emphasis was more on the product itself than on the volume it could generate?

Give BMW credit, they see what is coming, and they intend to be one of the winners.

Oh I do, but I do not give them credit for being so willing to sacrifice what made them BMW in the first place simply to dominate a market. They will sell a great deal of models, along with a piece of their soul.

Otherwise, they could end up like Porsche, and be gobbled up by a bigger player (I don't really think it could happen, that's worst case scenario).

I do not think this could happen either, what cost Porsche was the power play by Piech to take over VW which backfired.

[62Lincoln]

Companies participating in capitalism rarely are. However, did not they take greater care of their prominence and manner when the emphasis was more on the product itself than on the volume it could generate?

I don't know if their profit is any better now than in their earlier days; they obviously were profitable enough to keep the Quandt family in place and to grow their business. I think it's important to see their need to grow in order to fund product development as well as position themselves to be protected from takeover or merger. They would be pisspoor managers if they didn't do these things. None of these goals preclude the product emphasis you describe.

Oh I do, but I do not give them credit for being so willing to sacrifice what made them BMW in the first place simply to dominate a market. They will sell a great deal of models, along with a piece of their soul.

I don't think they are trying to dominate a market - I think they are making certain that none of their primary competitors get to a position of being able to dominate BMW. Audi has very deep pockets in its parent company, so BMW will always have to be certain to stay apace of their movements.

I do not think this could happen either, what cost Porsche was the power play by Piech to take over VW which backfired.

Actually, the power play was by Weideking at Porsche; Piech was the one who ultimately defeated the move and engineered the takeover of Porsche.

[Sticky]

Actually, the power play was by Weideking at Porsche; Piech was the one who ultimately defeated the move and engineered the takeover of Porsche.

I swapped the parties, my mistake. The over-reaching by Porsche was ultimately its downfall, BMW is not in a similar position here and likely never will be.

I don't know if their profit is any better now than in their earlier days; they obviously were profitable enough to keep the Quandt family in place and to grow their business. I think it's important to see their need to grow in order to fund product development as well as position themselves to be protected from takeover or merger. They would be pisspoor managers if they didn't do these things. None of these goals preclude the product emphasis you describe.

None of these goals preclude the product emphasis I describe in theory. However, we are already seeing brand dilution (namely M) and a focus on volume at the expense of the enthusiast. We see BMW taking the same motor and putting it in basically every chassis, a move that mimics Mercedes and AMG. Certainly there have been some things lost in this transition to major luxury player.

I don't think they are trying to dominate a market - I think they are making certain that none of their primary competitors get to a position of being able to dominate BMW. Audi has very deep pockets in its parent company, so BMW will always have to be certain to stay apace of their movements.

In order for the competitors to get into a position to dominate BMW, BMW would essentially have to fade from prominence very quickly. I don't see that happening, but it happened to GM. That was not something that took place overnight so being pro-active certainly does not hurt. The main thing is for BMW to not forget its core group or where it came from. We see some traditions already being pushed aside, where could this lead us?

VW does have deep pockets, but they are not so deep that they can suddenly eliminate or take over BMW. If they were, it would have already happened.