A decade after taking the top spot in the global luxury-car market, BMW is at a crossroads. CEO Harald Krueger addressed a news conference in Munich today.
MUNICH (Bloomberg) -- BMW CEO Harald Krueger vowed to push the company deeper into the market for electric cars and accelerate the introduction of self-driving features, while broadening the range of lucrative luxury models that will help fund his strategy.
Krueger laid out the plan in his first major review since becoming CEO last year. Novelties include the introduction of more SUVs, including the full-sized X7, as well as more versions of high-end models such as the new 7-series flagship sedan, Krueger said today in Munich, where the company is based.
In a statement BMW also said it will launch a roadster version of its i8 plug-in hybrid sports car, along with an new version of its i3 compact EV with increased battery capacity and a longer range, as well as a plug-in hybrid for its Mini brand.
The approach is the centerpiece of a strategy review by Krueger and is aimed at maintaining pretax profit margins at a minimum of 10 percent through 2020.
A decade after taking the top spot in the global luxury-car market, BMW is at a crossroads. Years of rolling out new models ranging from coupe-like SUVs to seven-seat wagons have left the company with few niches that could spur growth. Rival Daimler has a chance to reclaim the crown as early as this year after catching up to BMW with a slew of new models and upgrades of its best-sellers.
“We need to manage our current business to perfection, while continuing to grow in a targeted fashion, in order to secure the necessary investment,” Krueger said in the statement.
The carmaker’s last major strategic shift was in 2007, when then-CEO Norbert Reithofer pushed the sporty brand to invest billions to reduce fuel consumption, produce its first electric vehicle and pioneer the mass production of carbon fiber. Krueger said today that he’ll add open-top versions of the i8 plug-in, while also broadening the range of cars that come with the optional M high-performance packages.
Unlike rivals Mercedes-Benz and Audi, the owner of the BMW, Rolls-Royce and Mini brands isn’t part of a broader group, meaning it has to absorb the costs of developing these new technologies on the strength of its current offering. Growth though is slowing as Daimler AG’s Mercedes and Volkswagen’s Audi push for the No. 1 spot, and brands including Maserati, Jaguar and Alfa Romeo expand to give luxury-car buyers more options.
“There’s not much they can do in terms of adding more products,” Dominic O’Brien, a London-based analyst with Exane BNP Paribas, said before BMW released the strategy report. “The three key themes of emissions reduction, connected cars and autonomous driving will keep spending on research and development at an elevated level.”
BMW predicted another year of record sales volumes, revenue and earnings, while group earnings will rise only slightly this year, compared with a forecast of solid growth last year.
Revenue from the automaking segment will grow slightly, the company said, compared with a significant increase last year. BMW’s focus on conserving its resources was evident in its decision to refrain from an expected special payout for investors this year, as the company celebrates its 100th anniversary.
In addition to battling its traditional rivals, BMW also faces the emergence of new competitors such as Tesla Motors and potentially Apple. The company outlined its view of future luxury autos last week when it presented a concept vehicle where the steering wheel and center console retract, enabling the driver to turn to face the front passenger.
“We need to act swiftly in the digital world and be prepared to take risks,” said Krueger.