BMW Says Less Expensive Cars Will Remain In Production
BMW Chief Executive Oliver Zipse has said that despite the automaker’s status as a luxury carmaker it would not be abandoning lower-priced segments while it swaps over to electric vehicles. Though the general trajectory for the Bavarian marquee – and the automotive industry in general – over the last several years has been to chase higher margins by focusing on pricier, often larger, vehicles and clever packaging.
The German company even said as much in 2017, with former product management and brand chief Hildegard Wortmann saying that the company had to do what was necessary to maintain BMW’s notoriety as an automaker. Five years ago, this meant more electric vehicles and ensuring that its luxury products were a cut above by offering modern technologies and cleaner styling. BMW was all about going upmarket, just starting to get serious about electrification, and seemed torn between honoring its heritage and reinventing itself.
“I think it’s important when you have such a strong brand that you keep it fresh all the time, that you keep it original, that you keep it on the edge,” Wortmann noted at the time.
While some of this shift didn’t come to fruition, especially the then-rampant promises tied to automated driving, BMW did scale back options and entire trim levels for some of its smaller models. By 2021, it had even killed off the all-electric i3 – its most-affordable all-electric model – in the United States. Though the cuts were more noticeable in the European market where the company had fielded far more pint-sized models. BMW was already becoming distressed at the meager profits it was seeing from vehicles retailing below €40,000 and believed that it could do better by focusing on pricier units.
The plan seems to have worked, with the company enjoying a profit surge in the third quarter of this year despite overall sales being down. BMW Group reported that it had booked a net profit of nearly 3.2 billion euros ($3.1 billion USD), which was up from 2.6 billion euros between July and September of 2021. Success was attributed primarily to elevated pricing and healthy demand for its fancier models. The same was true of its electrified models which typically come with MSRPs that eclipse their gas-driven counterparts.
However, BMW also stressed that sustained inflationary pressures could complicate things moving forward. The economy has gotten so bad that many people are being bounced out of the market entirely, likely leaving BMW catering to the only demographic that’s managed to avoid financial setbacks – people that were relatively wealthy to begin with.
“High inflation rates and interest rate hikes are causing conditions for consumers to deteriorate, which will impact their purchasing behaviour [sic] in the coming months,” the company explained in its latest earnings statement.
Meanwhile, CEO Zipse is trying to assure the public that it’s not going to be following Mercedes's current playbook – which involves culling entry-level models and spending the brunt of its developmental dough on top-end (see: highest margin) vehicles and high-volume staples like the C and E-Class.
"We are not leaving the lower market segment. Even if you consider yourself a premium manufacturer, it is wrong to leave the lower market segment – that will be the core of your business in the future," Reuters quoted Zipse as saying during a recent event hosted by supplier Robert Bosch GmbH in Berlin.
Maybe so. But BMW has already taken a lot of actions that seem counter to the promises it’s currently making and Europe – a market where the company can actually sell less-expensive products with some amount of consistency – looks as though it’s entering into a period of severe economic duress. So far as we know, the automaker doesn't have any small combustion vehicles forthcoming and the iX1 which starts for around $53,000 in Europe doesn't look like it's coming to North America. That leaves our market with the $56,000 i4 eDrive40 as the brand's most affordable EV. Though it does look like the X1 (starting around $39,000 before fees) may stick around for another generation. The 230i Coupe is also still around, however it doesn't seem like BMW sells a lot of those in the base format.
[Image: Sklo Studio/Shutterstock]
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A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
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I didn't know BMW sold 'lower-cost' models - or is it April 1st?
BMW's issue is model proliferation. They have, what, 8 different ICE crossovers? And for each of those 8, typically 2-3 engine configurations. And now they are adding a similar # of EV crossovers. Dozens of different crossover models sold in the US, and all of them combined sell as much as the Model Y? That's a problem.