Does BMW have an exclusivity problem?

3-Series | January 14th, 2016 by 13
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Over the holidays, I and a friend were discussing the exclusivity of premium automotive brands. As only one of the major premium manufacturers interests me, …

Over the holidays, I and a friend were discussing the exclusivity of premium automotive brands. As only one of the major premium manufacturers interests me, it led me to focus the conversation further to my preferred Bavarian brand. I’ll give you a hint, the company’s logo isn’t remarkably similar to the logo used by the Olympics.

Those of us whom live in nicer areas, likely, see BMWs quite often. According to CBS, the BMW 3er is the second most popular vehicle in America’s richest neighborhoods. Too, part of the perception that some hold, that they aren’t very uncommon, may be due to the fact that because they are more prestigious vehicles, they more easily catch the eye and draw our attention. However, for a premium brand exclusivity is valuable and essential to brand equity.

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In fact, Domagoj Dukec, the head of exterior design for BMW, lists exclusivity as one of three essential things that a BMW should be. According to an interview with former BMW CEO, now chairman of the supervisory board, Norbert Reithofer, BMW customers report viewing their BMW vehicles as status symbols and as being representative of their distinction, individuality. In my opinion, BMW has struck the perfect balance between volume and exclusivity for the brand’s position within the premium market but what do the numbers tell us?

Well, according to Statista, there are roughly 212 million licensed drivers in the United States. Now, considering that the median income in 2014 was $53,657, we can quickly ascertain that very many can’t afford to purchase a BMW. This too applies to late-model used BMWs due to higher insurance costs, as well as higher maintenance and parts costs. This is especially true now that BMW’s no-cost maintenance is no longer transferable. It isn’t merely a coincidence that the median annual income for BMW buyers is nearly $170,000.

According to the New York Times, the average luxury car driver in the U.S., in 2014, was taking home just shy of $100,000. Also, according to the same source, geography plays a big part in this equation. However, in 2015, a record 17.5 million cars were sold. According to Reuters, in 2014, the top 8 premium manufacturers combined only managed to move 1.7 million cars. Keeping in mind that lower volume is integral to a premium brand’s ability to command higher prices and also greater profit margins. What is BMW’s share of the premium market?

As we know, BMW recently, again, maintained its crown as the number one premium brand in the U.S., outselling brands like Mercedes and Audi whom have, in recent years, sought to go further and further down market. In 2014, BMW’s share of the premium market, calculating only the top 8 premium brands, was 20% in the States. That means that of the upwards of 16 million cars sold that year here, according to goodcarbadcar, 1.7 million were premium and 20% of that 1.7 million were BMWs. Simple math tells us that over 1.36 million were not BMWs. This puts BMW’s market share within the whole of the automotive industry at just 2.13% for that year in the U.S.. Keep in mind that the 20% premium market share is also inflated because it excludes all premium brands outside of the top 8, like Porsche, Volvo, Jaguar, Land Rover, etc.

So, in conclusion, with such a small percentage of the vehicles sold here in the U.S. per annum adorning the famous blue and white logo, it’s clear that BMW has managed to achieve growth but in a way that is sustainable in the context of also being able to preserve the exclusivity which is necessary for a premium brand to maintain such high brand equity. According to remarks from Ludwig Willisch, BMW USA CEO, this is likely to remain unchanged as BMW USA doesn’t intend to chase its competitors downmarket and will not sell vehicles with a starting price of less than $30,000.

Now, of course, this doesn’t account for all of the pre-owned BMWs out there but it does lead one to conclude that it is probable that the vast majority of pre-owned, late-model BMWs are too distributed in much greater proportion in areas where incomes are significantly greater than average. Too, it tells us that if such a small percentage of the cars being sold per year are BMWs, there are less out there to later enter the pre-owned market which, consequently, also suppresses their presence on the road.

13 responses to “Does BMW have an exclusivity problem?”

  1. Russell says:

    It’s been a few years since I’ve been to the states, but it seems to me that Cadillac owners and Audi owners won’t get as excited by their cars, on average, as BMW buyers, which means that as the cars get older more and more will be either uncared for or unwanted.
    Here, at least, a 10 year old BMW still catches the eye as a premium car (albeit an older one) whereas a 10 year old domestic luxury car, or a Lexus or Audi etc won’t have the same impact. I think it is the older cars which make BMWs seem more plentiful on the roads than other “exclusive” brands.
    We also had a record year for sales, but BMW came 3rd behind Mercedes and Audi here, so it is surprising how prevalent even the new ones seem to be.

    • John says:

      The Lexus will still be running with problem-free with regular maintenance after 10 years though. :P

    • janon says:

      I think you may be on to something. Benz in particular seems to be evergreen only with pre owned values falling off a surprising cliff yet still not really finding love. I think many end up exiting to secondary markets whereas the ancient BMWs tend to stay on shore.

  2. Cary says:

    Sorry, but BMWs are now common as muck. Both new models and used. I often stop at an intersection and count the cars…yep, 3 out of 4 are BMWs. In the low income neighborhood where I live, I see late model cars throughout the range every day. I love my car, but the brand is hugely diluted from 20 years ago, when every BMW driver waved at each other, because there weren’t that many of us on the street.

    • Terry Cowan says:

      BMW have doubled their sales volume in that time. Had they not retained their independence by doing so, just how diluted would their muck be after being taken over by a competitor, China, or India? Also, I don’t know where you live, but the only waving from any brand’s drivers I see these days involves one finger only.

  3. John D says:

    Yes. Too many 1 series and now 2 series active tourer on the road.

    • Terry Cowan says:

      Where do you live? I’m in one of their richest markets & we don’t even get those models. That 3’s are ubiquitous here I just take as proof BMW builds a better mouse trap & we are smart consumers. Screw exclusivity!

      • janon says:

        Fair. But the article was NOT “should we care about exclusivity??” with a conclusion of “HELL NO!”

        The article was ARE BMWs still “exclusive ” and attempted to “prove” the answer is YES which is simply ridiculous.

        • Terry Cowan says:

          He mentioned active tourer, which we don’t have here. I million units over 30 years isn’t bad. I wonder how many actual clones have been sold by other manufacturers. Since BMW is #1 premium in volume, maybe exclusivity isn’t the issue, their being the market standard is (as Mercedes still are for large sedans, regardless of their hatches and other not so Smart Cars).

  4. janon says:

    Nice try. If you have to ask, you have your answer. Funny the footer of the article links another article celebrating the *millionth* 3 series sold.

    BMW is a lot of things, including ridiculously overpriced these days, but thanks to gaming the leasing model with artifical residuals and priming the .9% for 60 mths CPO pumps “exclusive” ain’t one of them

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