BMW Plans Major Product Offensive to Stave Off Audi Challenge

BMW is looking to increase its passenger car sales volumes by 55% during the next decade as it looks to launch a brand new range of small passenger cars which it hopes will help it retain its position as the world's top premium passenger car manufacturer. According to a Bloomberg report, BMW chief executive officer (CEO) Norbert Reithofer said that the company would also have to look at investing in additional production capacity to cater for the growth the new model ranges will add to sales volumes. Speaking at BMW's corporate headquarters in Munich, Reithofer said, "The big push in new models, entering new segments comes after 2012," Reithofer said at the automaker's Munich headquarters. "If I look forward to 2020, then we have to think about additional capacity." The company is planning arrange of new model launches at the upper and lower end of its model range, but it is in the area of small vehicle segments where the substantive growth will occur.

The company's new model push will encompass the new front-wheel drive architecture that BMW is currently developing (see Germany: 18 March 2010: BMW Targeting Single-Digit Volume Growth in 2010, Confirms New Front-Drive Architecture). This all-new platform will form the basis of the third generation "new Mini" model which will be launched in 2013 and a new generation of front-drive BMW models. These models will compete directly against Audi's new A1 model and the range of spin-offs that the Mercedes-Benz is planning with the next generation of A and B-Class models BMW's new model push will also encompass the new Megacity A-segment electric passenger car which is aimed at drivers in city environments. BMW is planning to launch the Megacity under a new sub-brand. The Mini brand is in the process of increasing the number of models in the brand portfolio to substantially increase its sales volumes and expand its appeal to beyond that of a fashion-orientated brand aimed at younger buyers. In addition to the current Mini, Mini Cabriolet and Mini Clubman model's, the company is also in the process of launching the Countryman sport utility vehicle (SUV), which will be in showrooms at the end of the month. In addition it will launch the Coupé and Roadster versions of the Mini by 2012. Reithofer has previously said that the sales volume figure of 217,000 units was "too low".

Interestingly, Reithofer commented that BMW is currently wary over depending too much on the Chinese market to generate growth. This has certainly been the view of IHS Automotive in recent months, with all the Big Three recording massive growth in China, with the country generating the vast majority of BMW, Mercedes-Benz and Audi's overall volumes growth in 2010 so far. BMW has yet to release its August sales figure but the company's Chinese sales rose by 81.7% in July to just under 14,000 units and the company is on target to sell in the region of 150,000 units. However, Reithofer said that BMW's growth forecast for China were below the current actual sales volume. Reithofer said, "We need a balanced relationship in terms of growth. The U.S. is a very key market." The company will be targeting the U.S. market with its new range of small cars, looking to further boost the Mini's brand penetration and market share in the United States.

Outlook and Implications

Audi has stated that it is looking to overtake BMW as the world's top-selling premium passenger car carmaker by 2015. Audi is planning its own new model offensive by moving into new segments and launching new niche models, such as the new A7 sedan-coupé. A very important new model for Audi is the A1 which is currently being launched across Europe. The premium B-segment model is aimed directly at the BMW Group's Mini, with the manufacturer identifying a growing market for small premium cars aimed at younger buyers, with excellent fuel efficiency and low emissions. However, BMW is developing its own BMW-branded answer to the challenge of the A1 in the form of the new front-wheel drive platform BMW's .These models will be the first BMW-badged passenger cars to be front-wheel drive, breaking one of the unique characteristics of the BMW brand. As the table above highlights, IHS Automotive forecasts that BMW will stay comfortably ahead of Audi by 2020 on our forecast, even with Mini brand sales stripped out. When Mini is included it will stay further ahead of the opposition and come close to hitting BMW's own target of two million units by 2020. IHS Automotive forecasts that the new "sub-1-Series" model, as we currently term it, will meet the challenge of the A1 almost exactly in volume terms by adding 100,000 units to BMW's overall group sales by 2015.

It will be interesting to see the effects of the raft of new model launches planned by BMW in the smaller vehicle segments on the brand's current entry-level model, the 1-Series. It may have been predicted that the new entry-level models for all the main German premium brands will put downward pressure on the sales of existing C-segment entry models such as the 1-Series, Audi A3 and Mercedes-Benz A-Class. However, we do not see this as being the case, with BMW 1-Series sales volumes forecast to rise to an all-time high of almost 300,000 units by 2020, in the wake of the launch of the third generation model. In all likelihood the changing global dynamics towards Brazil, Russia, India and China, and increasingly aspirational and brand-conscious consumers in these markets are likely to benefit all the smaller vehicle ranges in premium brand portfolios. Either way we still expect BMW to lead the way among global premium brands by this point.