BMW shifts gear to lure new kind of buyer

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Dorothee Tschampa Frankfurt

Chris Bangle, BMW’s former design chief, once likened the German car manufacturer’s line-up to a bratwurst in three different lengths. Now, there is a lot more on offer, including convenience sizes.

BMW, which used to rely on the 3-, 5- and 7-Series sedans, has more than doubled its model offerings in the past 15 years to 26 variants chiefly by adding smaller vehicles. Audi and Mercedes have followed a similar path, veering away from the refined, powerful cars for which they are best known.

BMW starts deliveries in September of the 2-Series Active Tourer, a van-like compact with a three-cylinder engine.

Further challenging the notion of what the brands stand for, the top three luxury car makers build more and more cars outside their homeland, thereby diluting the “Made in Germany” cachet.

These shifts ultimately may affect their industry-leading profitability, because their pricing power comes in part from selling customers a sporty, elegant image that they have spent decades crafting.

“Every diversion from the essence of a brand poses a danger, because you have to make compromises and every compromise softens the brand in the long run,” said Klaus-Dieter Koch, the managing partner of Brand Trust, a German consultancy. “If you overstretch a brand, the ability to ask for a price premium vanishes.”

The three German vehicle manufacturers are broadening their line-ups and global scale out of necessity because being niche players selling only sedans starting at $40 000 (R420 000) is not sustainable in the long term. The traditional draw of big engines is no longer enough on its own to lure wealthy customers, and higher sales volumes spread the billions in costs for developing cleaner cars to meet tighter emissions rules.

The German luxury brands “are willing to risk some exclusivity to bring in new customers”, Kevin Tynan, an analyst at Bloomberg Industries, said. “The idea is to let a customer buy a $30 000 vehicle in his 20s or 30s and move him up once he’s paid for college and can afford a more expensive car.”

So far, the plan is working. BMW, Audi and Mercedes posted their highest monthly deliveries ever last month.

BMW retained the overall lead with a 17 percent surge, outpacing Audi’s 15 percent growth and Mercedes’s 13 percent rise. – Bloomberg


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