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.