Upscale performance drove BMW's U.S. success

BMW has grown from a small, relatively unknown German brand with four models to the top-selling luxury brand in the U.S. market for the past two years.

BMW of North America marked its 40th anniversary last year, and the BMW brand recorded sales of 346,023 vehicles -- a significant jump from the 19,419 cars it sold in 1975.

The brand's secret ingredient -- running for decades throughout its product lineup -- has been its upscale, European take on driving performance.

Ludwig Willisch, CEO of BMW of North America, says that the U.S. has been critical in BMW global sales and in influencing the brand's characteristics.

"The U.S. has always been important in shaping the brand," Willisch said. "It is a big influence on our decision-making process -- it is the second biggest single market now.

"When it comes to driving dynamics, it is the market for brand-shaping and decision-making."

BMW launched the tag line "The Ultimate Driving Machine" in 1975 and says it's more than a marketing slogan -- it describes the kind of performance the brand seeks from every vehicle, even its crossovers.

And the brand takes care of its customers, says one influential retailer.

"They have contemporary design; they have brought connectivity into the vehicles -- and luxury," said Mike Jackson, CEO of AutoNation. "They are very customer-friendly in free maintenance, which BMW customers just love -- they do not have this concern."

Jackson adds that the 3-series sedan -- the brand's biggest seller in the United States -- is "the foundation that epitomizes BMW."

Experts and dealers attribute BMW's rise from obscurity to its laser focus on performance.

"It has been consistent in product execution. There has been criticism on specific models or generations, but it is still The Ultimate Driving Machine," said Stephanie Brinley, senior analyst for IHS Automotive in Michigan. "They expanded into new areas, and they picked up SUVs and crossovers at the right time."

Bob Lutz, a board member in the early 1970s who later became vice chairman of General Motors, says a key to BMW's success is that "they have very carefully nurtured their brand."

"They never strayed off the course of being a driver's car. They have up to now been very true to their ethic and never tried to please everyone."

A bitter lawsuit

BMW of North America was launched as a company-owned subsidiary in 1975 when it purchased distribution rights from Max Hoffman, who brought European nameplates to the United States before the brands were interested in the market.

Hoffman Motor Co. started selling BMWs in the mid-1950s. One of the first cars sold in the United States was the 507 roadster. The popularity of BMWs grew -- as did the brand's interest in the U.S. BMW waged a bitter court battle to take control of its U.S. distribution and bought Hoffman out in 1975 for an estimated $16 million.

Today, BMW of North America is based in Woodcliff Lake, New Jersey, where it moved in 1987 and built a massive research and training center several years ago. Mini USA and Rolls-Royce Motors Cars NA are based in the same building.

The BMW Group has more than 25 facilities in the United States.

According to the Jan. 1 Automotive News dealer census, in the U.S., the company has 339 BMW franchises, 123 Mini franchises and 36 Rolls-Royce franchises. It also has 153 Motorrad motorcycle franchises, according to the company.

It has two factories in the United States -- one of which, in Spartanburg, South Carolina, is a manufacturing facility where the capacity will grow to 450,000 units annually when an expansion is completed this year. The Spartanburg factory, BMW's biggest plant, produced 400,904 vehicles last year.

BMW also has a joint venture, the SGL Automotive Carbon Fibers plant in Moses Lake, Washington. SGL makes the fiber that's used in the i3 electric and i8 plug-in hybrid cars.

BMW is building another North American factory, in San Luis Potosi in central Mexico, which is expected to begin production in 2019. It is investing $1 billion in the plant that will make 150,000 vehicles annually and employ about 1,500 workers.

BMW hasn't said what vehicles it will make in Mexico, but it will likely be the 3 series, according to insiders.

From quirky to luxurious

Like many European brands, BMW started out as a quirky, small player in the U.S. Making performance its forte, it left Mercedes-Benz to personify luxury for the older buyer and Volvo with its plain, boxy design to zero in on safety.

"They have had a performance element throughout their history," said Karl Brauer, senior director of automotive industry insights at Kelley Blue Book. But he says that BMW has built on that image.

"They have very successfully converted their image from a performance to slightly elevated premium to a luxury brand that has a performance-oriented subtext and appeal," Brauer said.

It didn't happen overnight. In fact, BMW had to create a new type of car for a new type of buyer.

The 2002 small sports car -- a vehicle that continues to personify BMW's appeal -- debuted in 1968. The car still is heralded by enthusiasts as the perfect BMW.

David E. Davis, former editor of Car and Driver, lauded the car in an April 1968 review: "The BMW 2002 may be the first car in history to successfully bridge the gap between the diametrically-opposed automotive requirements of the wildly romantic car nut, on one hand, and the hyper-pragmatic people at Consumer Reports, on the other."

David lauded the 2002 for its "great gas mileage" and performance, writing that "it goes like bloody hell."

The 2002 set the path for much of what followed as BMW expanded its lineup.

A few highlights: In 1976, the 530i debuted. It was the grandfather of what's now the 5-series range.

That same year, the 3 series replaced the 2002. Last year, the 3-series sedan and the 4-series coupe/ convertible -- BMW later renamed the two-door models -- accounted for 41 percent of BMW's U.S. sales with 140,609 sold.

The first 7-series sedan followed in 1978, flaunting BMW technology. It was the first production car with antilock brakes and digital motor electronics with fuel injection.

BMW upped the performance ante with the M-series variants. The first-generation M3 and M5 came to the United States in 1987. The high-performance models were unusual in their segment and competitors to the AMG models sold by Mercedes-Benz. Buyers flocked to them.

"Those M products and The Ultimate Driving Machine helped to support each other on the impact of the brand's image in the U.S. and globally," said Brauer. Among U.S. buyers, he added, "The M products in the '90s elevated BMW's image as a performance brand."

The Z3 Roadster debuted in 1996 -- it was BMW's premium answer to the Mazda MX-5 Miata. It lasted until 2002 and was replaced by the more sophisticated Z4.

The Z4 raised eyebrows because of its sharp angles and crispy indented sides -- foreign at the time in automotive design but later copied by others including the Saturn Sky.

The X5 midsize crossover went on sale in 1999 into a luxury SUV-crossover space where just Lexus and Mercedes-Benz had vehicles. Unlike the Mercedes-Benz ML, with its body-on-frame construction, the X5 was carlike with its unibody platform and sophisticated suspension.

When consumers responded enthusiastically, it was a turning point for the segment. Analysts and industry insiders had questioned whether a luxury crossover would be accepted in the market.

BMW also relaunched two brands that it had acquired. Mini brought out the Cooper Hardtop in the United States in 2002. Rolls-Royce debuted under BMW ownership with the Phantom in the United States in the spring of 2003.

In 2008, BMW brought out the X6 coupelike crossover that got a lukewarm reception in the buff book press but was copied by other luxury brands years later.

The 5-series GT, regarded as one of BMW's few product hiccups, debuted in 2009. The car rides on the 5-series platform but is as big as the 7 series. BMW argued the GT has four "first class seats and versatile trunk space," but buyers weren't convinced. Even Jackson admits "no one would miss," the GTs -- including the 3-series GT that debuted in 2013.

In 2014, BMW debuted its green subbrand, the i series. Dedicated to sustainable transportation, its first car was the i3 electric vehicle that features a carbon-fiber passenger cell. The carbon fiber is made at a factory that uses hydroelectric power. The i3 is assembled at a plant in Leipzig, Germany, that relies heavily on wind power for electricity. The five-door, rear-wheel-drive car weighs just 2,860 pounds.

True to its performance heritage, BMW followed the i3 with the racer-styled i8 plug-in hybrid sports car. It went on sale in 2014, and demand for BMW's racy take on electric drive far outstripped supply.