BMW to increases prices, cut production and reduce the number of leases

3-Series | August 5th, 2008 by 8

This past week, the auto industry has been shaken by the very pessimistic reports and disastrous quarterly earnings reported by some of the largest automakers. …

This past week, the auto industry has been shaken by the very pessimistic reports and disastrous quarterly earnings reported by some of the largest automakers. BMW is one of them and with 1.6 percent drop compared to August ’07, the future does not look too rosy.

While the overall sales for the BMW Group are up 2.2 percent (thanks to the Mini brand mostly), the year-to-date sales are down 8 percent, which for a giant automaker as BMW, can only announce new changes in their business strategy.

Last Thursday, in an important BMW Board meeting, the rumored X7 project was erased from BMW’s future plans, but that’s far away from the bad news to come. BMW is raising prices next year, with some of them being implemented by the end of this year for some of the MY09 cars.

Wait, did you think this was all? No, in the same time with the price increase, BMW will manufacture fewer vehicles in 2009, with a rumored number around 25,000 less cars globally, and it will sell 40,000 fewer units on the U.S market.

How is this going to affect the buyers? Jonathan Spira, a well known and respected Business Editor for BMWCCA, explains it very well:

This will change as BMW will return to a pull-oriented (versus “push”) sales strategy that will limit sales volume, requiring customers not only to pay full price but to wait for cars rather than being able to drive them off the lot (something practiced almost universally except in the United States).

Paying MSRP for a bimmer is something that us, BMW fans, have not encountered over the last few years, with the exception of a few new models that weren’t discounted the first few months.

And if this wasn’t bad enough, then the 60% of the BMW owners that are part of the leasing program, are in for a big surprise as well. The highly subsidized BMW leases were a gimmick that allowed many buyers to get some amazing deals on some quite expensive BMW models. It was pretty much common to lease a $40,000 bimmer for a monthly payment of around $500, a much lower payment that BMW’s competitors with cars in the same price range.

BMW will begin offering higher incentives to customers that are looking to finance a car or cash-purchase it, rather than going through the famous BMW Financial Services program. As a paranthesis, I remember leasing my previous BMW 325i with a finance rate of around 1% over a 3-year period, which combined with higher than normal residual values, it allowed me to lease my $36,000 car for $400/month.

There are many other angles here and tons of other details that can be discussed, but I will let our dear Jonathan Spira take over and give you some more detailed information over at BMWCCA forum.

As always, please feel free to leave a comment and tell us what you think. Let’s start a conversation on this and see what your future plans are.

P.S If you’re on the market for a new bimmer, now it’s the time to analyze the facts at hand and decide fast on which car to get.

Thanks again for the link Jonathan!

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