Skip to main content
Sister Publication Links
  • Automotive News
  • Automobilwoche
  • Automotive News Canada
  • Automotive News China
Subscribe
  • Subscribe
  • Newsletters
  • Login
  • HOME
    • Latest news
    • Automakers
    • Suppliers
    • New Product
    • Environment/Emissions
    • Sales By Market
    • On The Move
    • Auto Shows
    • Munich Auto Show
    • Geneva Auto Show
    • Paris Auto Show
    • Beijing Auto Show
    • Shanghai Auto Show
  • Features
    • Long Read
    • Interview of the Month
    • Focus on Electrification
    • Focus on Technology
    • Segment Analysis
    • Cars & Concepts
    • Supplier Spotlight
    • Europe By The Numbers
  • Opinion
    • Blogs
    • Commentary
    • Guest columnists
  • Photos
    • Photo Galleries
    • Geneva Photo Gallery
    • Beijing Photo Gallery
    • Frankfurt Photo Gallery
    • Paris Photo Gallery
    • Shanghai Photo Gallery
  • Podcasts
  • Car Cutaways
  • EVENTS
    • ANE Congress
    • ANE Rising Stars
    • ANE Eurostars
  • More
    • Publishing Partners
    • Social Media
    • Contact Us
    • Media Kit
    • About Us
    • Capgemini: All or nothing: Why circular business models require a holistic approach
    • Capgemini: Invent Head on automotive takeaways from CES 2023
    • Capgemini: Securing the industry's future through a radical rethink
    • Capgemini: Succeeding with the automated driving journey through AI
    • Capgemini: The circular economy is spurring new thinking on EV batteries
    • Capgemini: Toyota and Capgemini leaders on how OEMs can handle industry changes and succeed
    • HEXAGON: Plugging into data is the only way to make winning EVs
    • TUV Rheinland: Ideas, services and certifications for smart mobility
    • TUV Rheinland: Testing of automated and autonomous vehicles on test tracks
    • Toyota Europe
    • UFI Filters
    • Facebook
    • Instagram
    • LinkedIn
    • Twitter
MENU
Breadcrumb
  1. Home
  2. Automotive News Europe
March 17, 2015 01:00 AM

BMW's sales crown scrutinized as profits shrink, rivals catch up

  • Tweet
  • Share
  • Share
  • Email
  • More
    Print

    FRANKFURT (Reuters) -- BMW's record car sales have meant big profits that have funded incentives and investment in new technologies. But now sales of competitors such as Audi are catching up and profits are shrinking.

    BMW expects that higher spending on technologies will slow profit growth this year to a medium to high single-digit percentage after 2014 earnings before tax rose 10.3 percent to 8.71 billion euros ($9.23 billion) last year.

    Some industry observers are wondering if the old "sales grow, profits look after themselves" formula no longer works.

    BMW invested almost 4.6 billion euros on new models and technologies such as self-driving systems last year. That meant capital expenditures amounted to 5.7 percent of revenue, slightly higher than its goal of spending 5 percent to 5.5 percent. It's a sign that the sales crown title it has successfully defended for almost a decade is increasingly costly.

    "There is an obsession with volume growth in the German premium segment and it needs to come to an end, otherwise it becomes a negative spiral of discounting, eroding the brand equity," said Arndt Ellinghorst, head of automotive research at Evercore ISI.

    But BMW's conundrum is shared by rivals Mercedes-Benz and Audi. All have relied on a similar formula for growth: building cars which emphasize performance while expanding their sales footprint into emerging markets and developing new vehicles, such as SUVs.

    Too much product?

    When Norbert Reithofer became CEO of BMW Group in September 2006, the automaker only sold 18 BMW-branded sports cars. Today there are 35 as the company has expanded its range to boost sales and capture different segments in the car market.

    Some managers agree with the analysts. BMW's board member for Mini, Peter Schwarzenbauer, told Reuters late last year: "The auto industry has become too focused on volume sales."

    He has cut the number of Mini models on offer, discontinuing the Mini Coupe and Mini Roadster models.

    BMW says it has an ongoing strategy review as it prepares to celebrate its centenary next year and install Harald Krueger as its next CEO in May.

    A BMW spokesman said on Tuesday that volume sales is not a goal by itself and that maintaining profit margins is more important. BMW still has growth potential to exploit with its current strategy, the spokesman said.

    BMW achieved a new sales record last year, after deliveries of its core brand jumped 10 percent to 1.81 million cars, outpacing Audi, which sold 1.74 million, and Mercedes which sold 1.65 million of its own-branded passenger cars.

    But despite a sales rise of 5.2 percent to 131,416 vehicles in February, Audi still remains ahead of BMW in the ranking of the world's best-selling premium carmakers over two-month sales. Audi has sold 260,250 vehicles through February compared with 255,981 for BMW brand. Mercedes brand ranks third in the race with a two-month volume of 246,135.

    Both Mercedes and Audi have vowed to take the luxury sales crown from BMW by 2020.

    Challenges ahead

    And the traditional model looks set for more pressure.

    Emerging markets are no longer growing at the same pace as in previous years. Sales in Brazil, Argentina and Russia have fallen sharply. In January, BMW revealed it would pay local dealers in China some $800 million in rebates for sitting on large stockpiles of cars.

    Once known for creating the 'ultimate driving machine' BMW is also working to meet the demands of EU regulators and cut average vehicle fleet emissions to 95 grams per kilometer in Europe by 2021. This makes it harder to sell larger, more powerful cars, once a mainstay of profit.

    According to the German Center of Automotive Management, BMW Group needs to cut emissions by 30 percent from the average 135.7 grams average carbon dioxide output from BMW and Mini branded cars in 2014 to meet EU rules.

    This requires it to invest billions in alternatives such as hybrid and electric cars, as well as into technologies to make cars lighter, such as carbon fiber.

    Audi, the premium brand owned by Volkswagen, has also said its profit margins could fall this year because of investments in low-emission technologies.

    There is also little room left in the market for new types of vehicle that are not already being made. "All segments are quite covered by these three makes," analysts at JATO Dynamics said in research prepared for Reuters.

    Aside from executive and luxury sports cars, Audi, BMW and Mercedes have expanded their model range to develop SUVs and compact cars.

    "If you are already struggling to find a new niche, then the company and the auto industry as a whole should ask itself: have we reached a point where it still makes sense to further diversify the product range," Schwarzenbauer said.

    Bloomberg contributed to this report

    RECOMMENDED FOR YOU
    2022 Eurostar winner Enrico Salvatori of Qualcomm
    Recommended for You
    Enrico Salvatori
    2022 Eurostar winner Enrico Salvatori of Qualcomm
    Christian Dahlheim
    2022 Eurostar winner Christian Dahlheim of VW Financial Services
    Milan Nedeljkovic
    2022 Eurostar winner Milan Nedeljkovic of BMW
    Sign up for free newsletters
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please verify captcha.

    Please select at least one newsletter to subscribe.

    You can unsubscribe at any time through links in these emails. For more information, see our Privacy Policy.

    Get Free Newsletters

    Sign up and get the best of Automotive News Europe delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    You can unsubscribe at any time through links in these emails. For more information, see our Privacy Policy.

    SUBSCRIBE TODAY

    Get 24/7 access to in-depth, authoritative coverage of the auto industry from a global team of reporters and editors covering the news that’s vital to your business.

    SUBSCRIBE NOW
    Connect with Us
    • Twitter
    • Facebook
    • LinkedIn
    • Instagram

    Founded in 1996, Automotive News Europe is the preferred information source for decision-makers and opinion leaders operating in Europe.

    Contact Us

    1155 Gratiot Avenue
    Detroit MI  48207-2997
    Tel: +1 877-812-1584

    Email Us

    ISSN 2643-6590 (print)
    ISSN 2643-6604 (online)

     

    Resources
    • About us
    • Contact Us
    • Advertise with us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Awards
    • Rising Stars
    • Eurostars
    • Leading Women
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Automotive News Europe
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • HOME
      • Latest news
      • Automakers
      • Suppliers
      • New Product
      • Environment/Emissions
      • Sales By Market
      • On The Move
      • Auto Shows
        • Munich Auto Show
        • Geneva Auto Show
        • Paris Auto Show
        • Beijing Auto Show
        • Shanghai Auto Show
    • Features
      • Long Read
      • Interview of the Month
      • Focus on Electrification
      • Focus on Technology
      • Segment Analysis
      • Cars & Concepts
      • Supplier Spotlight
      • Europe By The Numbers
    • Opinion
      • Blogs
      • Commentary
      • Guest columnists
    • Photos
      • Photo Galleries
      • Geneva Photo Gallery
      • Beijing Photo Gallery
      • Frankfurt Photo Gallery
      • Paris Photo Gallery
      • Shanghai Photo Gallery
    • Podcasts
    • Car Cutaways
    • EVENTS
      • ANE Congress
      • ANE Rising Stars
      • ANE Eurostars
    • More
      • Publishing Partners
        • Capgemini: All or nothing: Why circular business models require a holistic approach
        • Capgemini: Invent Head on automotive takeaways from CES 2023
        • Capgemini: Securing the industry's future through a radical rethink
        • Capgemini: Succeeding with the automated driving journey through AI
        • Capgemini: The circular economy is spurring new thinking on EV batteries
        • Capgemini: Toyota and Capgemini leaders on how OEMs can handle industry changes and succeed
        • HEXAGON: Plugging into data is the only way to make winning EVs
        • TUV Rheinland: Ideas, services and certifications for smart mobility
        • TUV Rheinland: Testing of automated and autonomous vehicles on test tracks
        • Toyota Europe
        • UFI Filters
      • Social Media
        • Facebook
        • Instagram
        • LinkedIn
        • Twitter
      • Contact Us
      • Media Kit
      • About Us