BMW Re-thinking Sales Plan

As you all know by now BMW made the decision a few months ago to change its strategy. They opted to use the “pull ” mentality in much the way MINI operates and has been successful, a car is sought by a purchaser rather than pushed by the dealer. This is to keep supply and demand in check and not allow for a huge inventory or surplus of cars.

Indications from inside Woodcliff Lakes is that there is another change coming. All indications are that the pull plan is going out the window because the economic downturn has gone global and is not just a US issue. BMW had cut US allocations to send them elsewhere, the problem is that elsewhere is getting hit harder with this downturn than the US. The economy in Russia has lost about half of its value in the past few months, a key emerging market for BMW that is no longer going to have the anticipated demand. That is not to mention the issues in Europe and the remainder of Asia.

As we reported yesterday, BMW will be cutting overall production at the Leipzig plant. This was not part of the original plan of just moving allocations, by eliminating cars this signifies something far worse. The other major issue is that customers are not making large scale purchases, like cars, in fear of our economy worsening. This is not helped by the “pull ” mentality and the fact leases are not being subsidized as much as in the past. While the industry as a whole is suffering BMW is seeing former customers looking elsewhere for a lower payment as even with the Owner Loyalty rates BMW is not even in the same ballpark payment wise as other marquees.

In a nutshell BMW has indicated that they will announce “a new aggressive sales and marketing plan by tomorrow “. We are not sure what this entails other than that quote, may be for 2008 models still on lots or for 2009 cars. Making Friday announcements is a technique BMW has been using to spur commenting on blogs and forums over the weekend to get some easy free marketing; mainstream media will cover it as well but over the weekend word of mouth picks up a bit.

We suspect that leases may become a bit more reasonable but more so that financing will become even better for longer periods of time. This would make buying the car via financing have similar payments as a lease. There may be new “pull ahead ” programs to get existing lease customers into newer cars sooner with special money factors. While these ideas are pure speculation, something is coming tomorrow and it should move cars.

From our conversations with salespeople in the industry this is welcomed news, as they are getting minimal traffic these days and financially hurting badly.

We should have more details by tomorrow afternoon so stay tuned.

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  • Nick

    How about selling BMW’s to people who can actually afford them instead of granting easy credit to every joe schmoe and their brother. In regards to people moving to other marques, based on my own personal experiences at various dealerships, don’t suggest that a $38k 328i is a “steal” when it doesn’t even come with powered seats.

  • Adam L.

    Well I for one I’m glad they will bring prices back down to earth!! I mean X6 lease is going for almost $1600 which I think is insane… Whether we like to admit or not, that ugly Infiniti will just eat into it’s sales. I’m getting a new car next year and plan for it to be another BMW, I pray financing on X6 will get better as that’s what I aim to get.

  • Doug

    It sounds counter-intuitive to market heavily during a downturn, but it’s the classic marketing philosophy. BMW will probably succeed for doing this.

  • BMW driver

    I think the raising of the X6 price for no apparent reason is perhaps the most arrogant move. I would expect that they would either keep the price the same or offer incentives- but no, their arrogance would not let see beyond their nose.

  • BMW guy

    You guys bitching about X6 pricing are missing the point. X6s are one of the few models where demand is outstripping supply hence the lack of aggressive financing.

  • JRobUSC

    BMW Driver, why would BMW offer incentives or lower the price on the X6? The X6 is sold out. The two dealers near me are taking orders so far into their pipeline they’re promising delivery ONE YEAR from now. At the last two BMW company car auctions, dealers were paying OVER MSRP for X6’s with 5k+ miles. That’s right, DEALERS were paying OVER STICKER. So not dropping prices or incentivizing them is not “arrogance” on BMW’s part, if anything expecting them to do so under those circumstances is just stupid. You either can afford what they run or you can’t, which was exactly the point of the X6, just like it is the ML63 AMG, Porsche Cayenne Turbo, etc. It’s an exclusive vehicle, you gotta pay to play. If you can’t afford it or can’t justify the cost, I’m sure Infiniti would be more than happy to sell you an FX, since they are building three times as many of them as BMW is X6’s.

  • Michael

    X6 demand outstripping supply because it is new. There are always people who just want something no one else has yet. As soon as interest to a new shiny uncommon models fades out, sales will vaporize. Just look at ’08 M3 which was selling well over sticker a year ago and is now below invoice.

  • Michael

    How’s about BMW NA stops playing ‘we are an exclusive brand’ song and finally bring cars like 320d, 120d and 1 hatchback to US? Perhaps ditching electronic gizmos will help lower prices and make cars more reliable? I just got electronic stuff repaired second time in 3 months.

  • FrankNY

    I agree about offering more decontented models and focus on the driving aspect like it used to be. Only offer that horrible iDrive on the top models. Regardless of the amount of electronic options, find a supplier who know how to build them correctly. After only having my CooperS for 2 weeks, I’ve already found myself sitting in the Mini customer lounge for 2 hours to be told my Bluetooth is already busted and a new needs to be ordered and replaced. Yikes. I hope that’s the last and least of it.

  • The huge popularity in the X6 as been driven hugely by the export market. You can take a $65-70k X6 and sell it in Russia for $300k or South America for $200+k. In my area we can get an X6 for a US resident within 2 months.

  • Brian

    Pure economics… shorten supply reflecting decreased demand. I doubt this will have as much of an impact on BMW than the rest of the competition; they have a pretty strong customer basis and an unrivaled loyalty base that keeps marketing going for generations, aside from their excellent cars.

  • BMW driver

    JRobUSC,

    If demand is outstripping supply then I am sure the X6 sales number will be outperforming the projection even before the economic crisis. Based on sales figure thus far, the X6 performance is below BMW forecast