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BMW eyes prestige market leadership

Retail refresh: BMW is rolling out a fresh look for its Australian dealer network that includes new technology for customers.

Despite sales falling behind Benz in recent years, BMW is working to regain top spot

11 May 2015

BMW plans to wrestle back sales leadership in Australia’s increasingly competitive premium new-car market from German rival Mercedes-Benz through a measured product rollout, updates to its dealer network and a sustainable growth strategy, according to the car-maker’s Asia-Pacific chief.

BMW has lost its grip on the number-one position in recent years, succumbing to a resurgent Mercedes despite claiming the top spot eight times since 2004.

But 2013 marked a major turning point, thanks to Mercedes’ rollout of its new range of compact cars, starting with the instantly popular A-Class hatch and CLA-Class sedan, both of which showcased the new styling direction of the brand that is now seen across its model range. Mercedes topped BMW that year by 2584 sales with 23,106 new passenger car registrations, against BMW’s 20,522, and extended the margin further last year to 4399 units (27,121 versus 22,722), according to VFACTS figures.

So far this year, Mercedes is ahead of BMW by about 2300 sales, and Audi, which has also declared it is gunning for prestige market leadership in Australia, is nipping at its heels with just 212 units separating second and third spot. Audi also outsold BMW last month.

In Melbourne last week, BMW senior vice-president of Asia-Pacific and South Africa Hendrik von Kuenheim said that while the company was working to take back market leadership, it would not come at the expense of profitability.

“In principle I would like to be number one,” he said. “But you have to balance your growth … you have to have profitable growth.

“BMW’s philosophy in the last 10 to 15 years is, clearly, we want to be number one worldwide. Not just volume, you want to be known as number one as a brand with the most innovation, most customer satisfaction, the most focused on environmental issues. Clearly we want to be number one in profitability as well and number one in volume.” BMW’s sales growth in the past decade has been strong, rising from 14,860 units in 2004 to 22,722 last year, while Mercedes has climbed from 13,075 to 27,122 over the same period. Audi, meanwhile, has risen from 3701 units to 19,227 last year.

Globally, BMW is still the number-one brand in the premium segment, with more than 1.81 million sales last year, but a bullish Audi is on its tail with 1.74 million. Mercedes-Benz was third with 1.65 million sales for the 2014 calendar year.

Mr von Kuenheim highlighted BMW’s stable profit returns compared with its rivals, and expressed confidence in recently appointed BMW Group Australia managing director Marc Werner as the best person to build BMW further in this market.

“In the last 10 years BMW has been the largest luxury brand in the world. We were in 2014 again and clearly again in first quarter of 2015 and when it comes down to profitability we can clearly say BMW continues to be the best-run in the world,” he said.

“We have a constant, stable return to our shareholders in the guidance of 8-10 per cent. If you look at competitors that are up and down like a yoyo, BMW is very stable, which is evident in our share price.

“I have all the confidence in the world that we will turn out eventually to be number one. It’s not important to be today or tomorrow, but you have to have your strategy and your vision and focus and don’t leave the path of your strategy. Since Marc used to work in the (BMW) strategy department for many, many years, he is very visionary and he knows what to do.” While describing the Australian and New Zealand markets as “paradise” in terms of economic stability compared with other markets in the Asia-Pacific region, Mr von Kuenheim said there was still room for plenty of growth.

“I believe in Asia and Oceania and here Down Under we have substantial potential to grow. It looks pretty good for first few months of this year. We did pretty well last year,” he said.

 center imageLeft: BMW Asia Pacific and South Africa vice president Henrik von Kuenheim.

“But he (Marc Werner) can always sell more cars, there is no question about that. I am never 100 per cent satisfied.”

Identifying areas for improvement in the Australian market, Mr von Kuenheim said BMW’s 45-strong dealer network required attention.

“Not everything in the past was great. We need to straighten out a few issues on the dealer organisation and I think Marc is just the right character to do this. Sometimes you just need to listen, sometimes you need to talk and I believe the feedback I have received from some of the dealers has been outstanding,” he said.

“I do believe that everywhere in the world we have dealers that can do a better job. They have some outstanding dealers in Australia and they have some dealers that could pick up the pace as well.

“The majority of BMW dealers have been in the business for 30 years so some of them are up for succession planning, some are not. Some have performance issues, some not.”

Mr von Kuenheim said the growth of international dealer groups such as Inchcape and Sime Darby Motors in Australia had positive implications for the industry, and highlighted American retail kingpin Roger Penske as a leader in the field.

“We see international groups more and more investing in Australia. So far Roger Penske, who I consider one of the great leaders in this world, he has three to four dozen BMW dealerships throughout the world.”

While Mr von Kuenheim declined to comment on whether the Penske Automotive Group was planning to set up BMW dealers in Australia, he said he had a meeting with a representative of the group last time he was here.

Currently Penske operates a truck rental business in Australia and has the rights to import MAN, Western Star and Dennis Eagle commercial vehicles in Australia and New Zealand, but has not yet entered the passenger car retail sector.

“I wouldn’t be surprised if he enters the car business as well in the luxury segment (in Australia). Those international groups they raise the bar on how they do business with the customer, how they do follow up,” he said.

Other changes to dealerships in Australia include a fresh look for the showrooms that is being rolled out now, and the introduction of a product ‘genius’ – a non-sales staff member that offers advice to buyers on how to get the most out of the technology in their new BMW.

While Audi and Mercedes-Benz are BMW’s most obvious rivals, Mr von Kuenheim said there is now stronger competition coming from Korea and Japan than other European countries.

“Traditional competitors have virtually disappeared. If you look at the importance of the Italians in the 1960s, ’70s and ’80s, or the French, and where they are today.

“We talk about Korea. I think the Hyundai-Kia motor group is incredibly aggressive and advancing. It is a changing of the guard. Some of the Korean products replacing the Japanese products and eventually putting a threat or challenge to BMW.”

Mr von Kuenheim said he was not concerned by the rise of Mercedes-Benz and its growing appeal to younger buyers, adding that competition can lead to positive outcomes for a car-maker.

“If I look at my product and what I have coming, I think we are very much on the edge of being very aggressive, very useful and very modern in technology and in design which is why I am not concerned at all,” he said. “Competition is not a bad thing, it is a good thing. It keeps you awake. Sometime they sneak one on you – why didn’t we see this? Maybe their strategy worked better than our strategy.” Mr von Kuenheim said BMW has a strategy for growth that is truly global, rather than relying heavily on one or two larger markets.

“You always have to see the global aspect – are we well balanced? – and I believe … if you look at the German competitor, we are the most balanced where we do our business in the world. We don’t depend heavily on China like some people from Ingolstadt (Audi).

“Between America and Germany and China we’re very much a well-balanced business, very well balanced in Asia between Japan and Korea and Australia – better balanced than the competition.”

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