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The Spun Bearing: BMW – A Look Back and Forward

Interesting | January 1st, 2013 by 2
Happy_new_year

The automotive new year begins with the North American International Auto Show, held in Detroit mid-January and attracting concept cars from around the world. It …

The automotive new year begins with the North American International Auto Show, held in Detroit mid-January and attracting concept cars from around the world. It seems appropriate that some reflection of the year past occur between the start of the calendar year and when BMWBLOG arrives at Cobo Hall.

A recent news item stated that BMW has produced 1.8 million vehicles this year. They are within spitting distance of achieving the 2 million vehicle production goal. That goal is believed to make them ‘purchase proof’ – the hope is that at 2 million units of sales they become too large to be swallowed by a larger concern.  Based on a quick peek of automotive companies market capitalization (the dollar amount required to purchase all shares at current share prices) BMW is positioned quite well. In fact their market cap is better than several companies that produce larger volumes of vehicles.

The Spun Bearing: BMW   A Look Back and Forward

Photo by m3cutters

BMW has its wide range of vehicles to thank for that. It seems to have every segment of the sporting luxury universe accounted for, and has created niches that didn’t exist before. In comparison to the offerings of their competitors, only Audi comes as near with a total array of cars for every conceivable sporting luxury segment.

And if you look at the competition closely, Audi is the 800 lb gorilla in the room. Another recent news item mentioned that the VW group was going to infuse Audi with a large dose of cash (read billions of Euros). Of the other luxury purveyors, Mercedes-Benz and Lexus are strong, Cadillac is not worldwide yet – but has some significantly good product in the ATS and CTS (especially the V variants). Inifinti and Acura are also rans, and Lincoln is on death’s door. Volvo should get some sort of recognition, but with an all FWD lineup and a near-luxury reputation it’s hard to to justify. And lest we forget, Tata’s ownership of Jaguar bodes well for the marque’s future. Seeing Jaguar’s engineering staff in Hinjewadi, India – young, bright, and eager to work – was a treat.

BMW’s product line, with MINI and Rolls-Royce included, covers the gamut of the premium market space. And it’s their ability to efficiently produce cars in all model ranges that allows them to be profitable. Their engineering and production processes are world class. And they utilize those processes to their benefit.

They can take chances on niche vehicles because of the common core of technology that’s used in their offerings. Look at suspensions, engines, transmission, steering racks, electronics, and software and you see that the incremental costs of building a new model are not as great as they would be if you were creating a car from scratch. These common cores, platform matrices, are BMW’s ‘killer app’, it allows them economies of scale that transcend their size.

But in uncertain economic times and with previously luxury features finding their way into mass market brands, there is no time to rest on your laurels or succumb to the sin of hubris.  And BMW has to respond effectively to the competition. Look at how they’ve invigorated their lineup with M-performance vehicles. Not quite full on M products, but with enough extra kit to garner a premium price for them.

But BMW needs to broaden its base of buyers to reach their goals and this is where the ‘Luxury’ lines and Eco-pro/Comfort/Sport/Sport + settings come in. BMW’s appeal as the ‘Ultimate Driving Machine’ out-of-the-gate eliminates potential shoppers for whom driving is not the ultimate pleasure. The brand itself has fantastic appeal and great value, now they have to find a way of making it valuable to more, and less enthusiast oriented, customers.

That is why we will see a FWD BMW in production. That is a segment of the market, small, space-optimized suburban people carrier, that can attract a new set of buyers. They don’t have fundamentalist views on drivetrain configuration but are brand aware and inclined towards luxury. That BMW will deliver a FWD car that should have an appropriate amount of power and decent handling is icing on the cake – and will go unnoticed by new buyers initially, but will cement their desire for the brand in the long run. It is what makes a BMW a BMW, great driving dynamics, regardless of drivetrain configuration.

However, when even Kia has in-dash GPS, Bluetooth, and infotainment features previously only available in premium brands, you become more aware that a new definition of luxury needs to be asserted to differentiate the truly premium brands. The near future of luxury is the connected vehicle; the car that is aware of your needs. Through integration with owners media devices and the surrounding environment, the car itself will become more of a personal assistant than just a set of wheels and an engine. And BMW has been sharing that vision of the future with us for the past year or so. Look for more on this in the
coming year.

And we shouldn’t forget the ‘i’ sub-brand. While the next year or two will see the initial roll-out of the i3, BMW has already shown an i4, the i8 (in coupe and convertible formats), and there are undoubtedly others in the wings. BMW’s involvement in developing the resin transfer molding (RTM) process has attracted the interest of a number of manufacturers. BMW has announced joint development projects with Toyota and Boeing. (And that validates a comment I heard in Leipzig that aircraft manufacturers were knocking on BMW’s door for a peek at that technology.)

All in all BMW is well positioned for the near future, however they cannot afford to lose focus or fear. Given the management’s performance over the past few years, that seems unlikely currently. But if arrogance surfaces, of the type the US industry developed in the ’60s, they could be in trouble. Their production processes and people are outstanding, their product line is expanding (in hopes of expanding their customer base) and the ‘i’ sub-brand promises them a transition to the next evolution in personal transportation.

But, to put another spin on ‘Can Heritage Hurt a Brand?’, when a generation does not respond to the ‘Ultimate Driving Machine’ and that is your brand’s image, you better be looking to change as ably as possible – and it would be foolish to think BMW doesn’t understand this. Subsequently, this next year will be as interesting as any for watching BMW.

  • Mathis Haas

    Well, even if someone would have the necessary cash to buy all of the BMW shares, there is still a certain family that has no reason to sell – they make millions every year just by keeping their shares. Further BMW has so many strategic partnerships that help the company cut costs while being at the cutting edge. So, I am not concerned about BMWs independence at all – even if the will sell less cars in 2013 or 2014…

  • David

    Enjoyed reading that. Thanks

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