Say Again, BMW?

By Alex Ricciuti

02.10.2008

January sales in the US just dropped dramatically for BMW (story below). BMW says this has to do with inventory and a sales surge in December and that they expect sales for this year to grow slightly. One has to be skeptical about that, even though those factors they mentioned may have had an impact. The U.S. is experiencing a credit crunch right now and how many people do you know buy a BMW and pay the full amount in cash? That’s right, not many. In fact, it’s worth pointing out that many consumers in the U.S. lease their new BMW, and since an auto lease requires better credit than an auto loan, and credit standards are tightening as I type this, the drop in sales for BMW may not be as temporary as they are saying.

Toyota’s sales are also down slightly in the US for the fourth quarter which they blamed on the subprime crisis, which has hit homeowners on both coasts of the U.S. harder than elsewhere, and also, not coincidentally, happens to be where Toyota sales are the strongest in the U.S.

All of this together means that US consumers simply can no longer borrow to spend at anywhere near the rates they’ve been doing so over the last several years. Spells recession? Maybe, maybe not, but it sure sounds like it.

I think all automakers, but especially the German brands, are going to have to re-assess their position in the US market. And just when VW has chosen to make its long-overdue push in the US, this crisis hits. Hey, the world waits for no one.

BMW U.S. vehicle sales drop 22 percent in January

FRANKFURT (Reuters) — German carmaker BMW said group vehicle sales fell 22 percent to 16,935 in the United States in January but said it expected retail sales there to rise slightly in 2008 compared to last year. “Sales were impacted by lower than normal inventory levels due to a very strong retail performance in December and high demand for all-wheel drive models,” BMW of North America said in a statement on Monday.

BMW brand sales were down 26.7 percent to 14,475 vehicles, compared to 19,761 vehicles sold during January 2007, BMW said.

It was a few weeks ago that BMW announced that they are planning on increasing their sales in the U.S. from 336,000 vehicles per year to 400,000 units. This, when the American economy is almost certainly heading for a recession and almost every auto analyst stating that 2008 will be one of the worst years for auto sales in recent memory.

Again, from Reuters:

Report: BMW eyes U.S. sales of 400,000 cars per year
Reuters
January 28, 12:00 CET

FRANKFURT (Reuters) — German premium carmaker BMW aims to increase its sales in the United States to 400,000 units per year in the medium term from 336,000, the German auto motor und sport magazine reported.

“Today Europe is still our main market with a share of around 60 percent followed by North America with 24 percent and Asia with 11 percent,” the magazine quoted BMW’s head of sales and marketing, Stefan Krause, as saying.

“Looking at countries, the United States with 336,000 units overtook Germany as our main market already a few years ago. And it is there that we see the absolutely strongest growth worldwide,” Krause said.

Does BMW know something that everyone else doesn’t? Do they have a better crystal ball than economists and auto industry analysts, perhaps one of those crystal balls made in Germany to higher performance specifications?

Because I just can’t see it, frankly. Although, to be fair, its not just BMW; there seems to be a amazingly serene outlook on sales growth among all the German manufacturers. They all say their U.S. sales are going to grow like crazy in the next few years.

Well, that’s a lot of expectation to deal with and I’m starting to think the German automakers are reading each others’ press releases. If every automaker is going to grow their sales in the US like they say they are, then Americans are going to be buying a lot more cars in the near future than they are today.

Yes, the US market is the world’s biggest and is certainly still one of the most dynamic markets where consumers will flock to buy a product that strikes their fancy. But it’s also a very mature one that is astoundingly and fiercely competitive and quite saturated already. Any gain in sales by one brand almost invariably means lost sales by another. And, as noted before, the country’s economy is teetering on the edge of a precipice called “the R-word” which can stick a pin in all those balloons carrying your rising German brand sales numbers.

I think the Germans may be in for a rude re-adjustment of their expectations.

Alex Ricciuti is a freelance writer and automotive journalist based in Zurich, Switzerland. He writes frequently for Automotive News Europe and others. He also writes on all things automotive on his own blog at eurocarguy.blogspot.com.

Brendan Moore also contributed to this article.

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Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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3 Comments

  1. BMW may be kidding themselves, but there is no company more completely delusional tham VW in terms of what they’re forcasting for their US volume in the next 10 years. They are out of their freakin mind!

  2. Tell the truth, truthist!

  3. If BMW wants to sells 400 000, I wonder if they’ll go further in the rental fleet market or even the taxi fleet market like Mercedes did in Europe for years?

    Another possibility is to sell basic stripped down and cheaper versions of the 3 and 5 series letting BMW going downscale instead of upscale besides the arrival of the 1-series.

    And speaking of the 1-series, I posted a rant about this in a previous post

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