In 2007 Audi’s profit margin topped BMW’s

Interesting | March 26th, 2008 by 0

Despite the larger amount of cars sold by BMW in 2007, Audi managed to be more profitable. An even more interesting aspect is that Audi …

Despite the larger amount of cars sold by BMW in 2007, Audi managed to be more profitable. An even more interesting aspect is that Audi accomplished this without having its own financing services. Some of the reason why BMW performed poorly in compare to Audi, lays in the fact that beside higher raw material prices, higher energy prices, our weak dollar, higher marketing expenses BMW, lots of money were invested in the Research & Development process and marketing of the Efficient Dynamics technology. 

The reason why I wanted to explain some of the reasons why BMW has not been more profitable than Audi back in 2007, is the article posted in Autoweek by Guido Reinking. He also has some interesting points and I am just going to paste his article below.

There was a surprise in last year's results, though. Audi's profit margin topped BMW's. And Audi accomplished the feat without a financial arm of its own. Parent company Volkswagen handles the brand's leasing and financing.

BMW's comparatively bad showing demonstrates just how right CEO Norbert Reithofer has been in pursuing drastic cost reductions. Anyone who continually sells more cars without making more money is heading in the wrong direction.

BMW's results can be excused only partly by rising raw material prices. In the United States, BMW has become a victim of its own success. The weak dollar most hurts the import company selling the most in the United States.

But some of BMW's problems are homegrown. The 7 series has $2,500-$5,000 dealer incentives in the United States. BMW wouldn't need to support the vehicle if it were more attractive.

The U.S.-built X5 premium SUV scores well with U.S. customers and reportedly has 60 percent local content. But its expensive engines and transmissions still come from Europe and must be paid for with a weak dollar. So it hasn't had the effect on BMW coffers that the company was seeking.

In a perverse sense, Audi should be grateful to Ralph Weyler, its departed sales and marketing chief. Contrary to his clear mandate, Weyler only halfheartedly looked after the American market.

Weyler's inattention helped put Audi far behind Mercedes and BMW in U.S. sales. But as an unintended positive result, the dollar's weakness today is barely affecting the company.

That's certainly a silver lining. In fact, it makes one wonder if the folks at Audi might be secretly hoping for Americans to buy a record number of BMWs again this year, too.

[Source: Autoweek ]