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Benz could have charged more for A-Class: BMW

Cut price: BMW followed Audi's lead and reduced the price of their 1 Series hatch to compete with the aggressively priced Mercedes A-Class.

BMW boss says Mercedes didn’t need to be so aggressive with A-Class pricing

23 Aug 2013

BMW Group Australia managing director Phil Horton says arch-rival Mercedes-Benz need not have been so aggressive with the pricing of its segment-topping new A-Class.

Mercedes launched the fully redesigned A-Class small car in February with sharper pricing than its key competitors, the BMW 1 Series and Audi A3, and a longer-than-expected list of standard features.

By the time the new model rolled into showrooms, Mercedes had already taken more than 1000 pre-orders, and by June some dealer waiting lists had blown out until the end of the year.

In response, Audi launched its new-generation A3 in May with an identical starting price of $35,600 plus on-road costs to the A-Class. One month later, BMW cut the opening gambit to – you guessed it – $35,600, and dropped prices and added extra equipment to the range.

Speaking at the launch of the facelifted Z4 roadster in Queensland this week, Mr Horton said BMW’s nemesis from Stuttgart could have justified a higher pricing structure across the range.

“I think they’ve actually been more aggressive than they probably needed to, because I think the car looks good, it’s a pretty good car and they stuffed it full of kit, it’s a very interesting proposition and of course now they can’t provide all those cars,” he said.

“Clearly from that point of view, it was a very single-minded attempt to push into areas where that brand hadn’t been before and clearly to an extent they’ve succeeded with that.” Mr Horton said strong growth at the premium end of the market, up 14 per cent year-to-date by BMW’s calculations, was “being driven by Mercedes in particular being very aggressive with its positioning of the A-Class”, plus other models such as B-Class.

But BMW has not sat idle, Mr Horton said, having adjusted the spec levels of several key models and lowering the price of the 1 Series, “because clearly we have to respond, we can’t just live in splendid isolation with what happens in a competitive market”.

“That whole of the market, whether it’s the premium segment or that end of the market, brands have been putting more equipment in, some have simply been cutting the price, but everybody I think to a greater or less extent have been adjusting price and adding kit,” he said.

“Cars, particularly premium cars, have never been more affordable and better value in Australia than they are right at the moment.” However, Mr Horton cautioned that the falling Australian dollar – at 90 US cents at the time of writing – “is going to put a lot of pressure on quite a lot of companies that have put a lot of equipment into their cars banking really on a very strong Australian dollar to see them through from a profitability point of view”.

“A 10 to 15 per cent drop is a big drop and will affect anybody. That was something we were trying to plan for with our own response,” he said.

Despite the shifting exchange rate and the potential for a further fall in the Australian dollar, Mr Horton said BMW Australia still saw strong, sustained growth ahead in the premium car market.

“I still think there’s a lot more growth in the premium segment. The segment here year-to-date accounts for, the way we measure it, 8.4 per cent of the total market, and for a mature market like Australia that’s actually quite low,” he said.

“I think there’s an opportunity for that to at least go up by 50 per cent, over a period of time, partly because there are more and more cars coming in, particularly at the lower end.” As an example, Mr Horton provided BMW’s well-reported plans to add a Benz B-Class rival, previewed by the Compact Active Tourer concept earlier this year, plus its push into front-drive cars (co-developed for its Mini subsidiary) and push into downsized engines.

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1st of January 1970

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