Good news, South Carolina!
BMW, the only automaker building cars in our state, looks for a 10 percent sales increase this year. Jim O’Connell, the chief executive officer of BMW (U.S.) Holding Corp., says the company is recovering from a 20 percent sales drop in 2009.
In an interview published in Automotive News, O’Donnell says over the next five years BMW will introduce smaller cars, an electric plug-in model and front-wheel-drive cars in the United States.
So far, through reported sales for the first four months of the year, the 10 percent forecast is right on target.
The CEO said this about the new 5-series that will debut this spring. “It’s our most important car, profit-wise. It’s been acclaimed across the world. We can’t wait until it arrives. The competition and the (Mercedes) E class are doing very well in this market and just seizing our share.”
He was asked about the “aggressive” price of the 5-series. “Yes, we wanted to be very competitively priced. We had no choice. The 535i is $1,650 less than the 2009 model, and the 550 is $900 less. The good thing when you reposition a vehicle is that you may attract more people into that segment.”
Is BMW profiting from Toyota’s problems? O’Donnell’s answer is a bit perplexing. “No, I don’t see any evidence at all. There isn’t a lot of cross-shopping from BMW to Lexus, but we do get people moving from Lexus to BMW.”
Another key question: Why does BMW think a front-drive car slotted below the 1 series will sell in the United States? “Our engineers will make it the best front-drive car available. The average consumer won’t know if it’s front-drive or rear-drive or really care as long as the package is good. And we need it because the (federal) government has given us a 35.5 mpg fleet requirement by 2016. This is part of the plan to get there. Last year our fleet averaged 29 mpg, better than required, and trucks were 22.7 mpg, 0.4 below.”
Obviously, BMW is planning the introduction of four-cylinder cars for our market. O’Donnell touched on this subject. “The four-cylinder will come out sometime next year, and it will produce better fuel economy, lower emissions and better power than the corresponding six-cylinder.”
What about the rumored X1 crossover? “We haven’t announced anything. I don’t have bid targets for the X1. It won’t be a volume car. It will be priced lower than the X3. We will price according to volume aspirations. We think we will attract people from the 1- and 3-series segments. No one else has this offering in the marketplace — not in the luxury segment. I don’t think it will be for soccer moms but empty nesters or sporty people.”
In America, interest in diesel sales has picked up. How about BMW diesel sales? “They have been doing very well,” O’Donnell said. “The diesel is 28 percent of the X5 volume; and the 3-series about 6 percent. The bigger the car, the more diesel makes sense … Premium buyers will buy diesel; they are more open-minded.”
Now, about electrics. BMW has tested the plug-in electric Mini E for a year with lessees in California, New York and New Jersey. On the electrics subject the BMW CEO says, “We are going to extend Mini E lease contracts for another year for people who want it. The Mini E has been surprisingly successful and people who have them love them. It’s been a real success. It will help to do an even better job with the ActiveE. In 2013, we get the Megacity vehicle.”
Tell us about the Megacity — will it be as small as the smart car? “It will be more than an urban small car. It will have the powertrain of the ActiveE. The Megacity will be able to seat four adults.”
O’Donnell was asked if the 550 crossover is luring conquests from other carmakers or are buyers downsizing from the 7-series. “We don’t know yet on the conquest side, but I have been surprised how many 7-series customers bought it instead of another 7 … the 550 all-wheel drive goes on sale in June … I think the 3-series GT has a future.”
Does the smaller version of the X6 make more sense than a 3-series GT? “The X6 has surpassed our expectations — double what we originally thought in terms of segment share. We’re closing in on 100,000 vehicles in two years … the X6 is all-wheel drive, and the bulk of our market is the Northeast.”
In conclusion, O’Donnell was asked how he sees BMW of North America in five years. “I see it as a different blend with most cars at the lower end of the spectrum but still premium. This will be a shock to some because many will be front-wheel drive. We are geared for the higher volume because dealers have invested a lot. We have bigger and better showrooms.”
All the above IS good news for South Carolina!
Dr. George G. Spaulding is a retired General Motors executive and distinguished executive-in-residence emeritus at the School of Business at the College of Charleston. He can be reached at 2 Wharfside St. 2A Charleston, S.C., 29401.