Pull the trigger on that new Bimmer now.

[IslandS62]

From this weekend's WSJ.
BMW to Cut Production, Raise Prices World-Wide
German Car Maker Posts 33% Drop In 2nd-Period Net
By EDWARD TAYLOR
August 2, 2008; Page B5
Luxury-car maker BMW AG issued a hefty profit warning and signaled a return to more conservative sales tactics, reversing a policy of using steep discounts and cheap leases to win U.S. market share.
The German company said it would cut production and raise prices globally, especially in the U.S., as it disclosed that second-quarter net profit fell 33% to €506 million ($789.3 million), down from €751 million in the year-earlier period. Revenue was down less than 1% to €14.6 billion.

Like other premium German brands selling in the U.S., BMW faces an increasingly tough choice between trying to protect profitability and hold on to market share, industry analysts say.

In recent years, BMW has pushed aggressively to sell cars in the U.S., using discounts and easy leasing terms. That trend accelerated over the past year as the U.S. market turned sour, forcing brutal price competition to draw customers into showrooms.

BMW
Auto executives and analysts warn that BMW, Mercedes-Benz and Audi, the luxury brand of Volkswagen AG, all risk losing their most valuable asset -- their exclusivity -- by copying the hard-sell high-volume tactics U.S. car makers have used for decades. BMW now appears to be struggling to return to its previous sales strategy known as "pull" -- making customers line up to wait for cars and pay full price, attracted by the belief they are getting an exclusive product.

"Any premium auto maker that strives to push volume for its own sake, runs the risk of losing exclusivity," says Vic Doolan, president of Volvo Cars North America until March 2005, and president of BMW of North America until July 1999.

BMW said Friday it wants to "retain its position as the world's leading premium manufacturer." In 2005 BMW eclipsed Daimler AG's Mercedes-Benz to become the world's biggest-selling premium auto maker by sales, in part as a result of its aggressive sales tactics. But the Munich-based company said "volume growth will not be pursued at the expense of profitability. In the light of the ongoing weakness of the U.S. dollar and market, sales volumes will be reduced in the U.S. on a targeted basis as part of a new strategy for this region."

BMW has been among the most aggressive companies in its use of discounts to sell cars in the U.S., offering an average $4,680 per car in June, up 62% from June 2007. Rival Mercedes-Benz offered $4,692 of discounts, roughly 35% more than in June 2007. Audi, which offered $4,085 per car in June, ramped up its incentives by 50%, figures supplied by Autodata Corp. show.

The incentives are higher than those granted by Ford Motor Co. and General Motors Corp., but they're also higher than those for Lexus, which offered incentives of $1,557 per car in June, and Acura, which offered discounts of $1,841.

Cheap leasing deals have also hurt BMW's profits. In the second quarter, BMW booked a charge of €459 million related to its leasing business, following a €236 million charge in the first quarter.

A sharp downturn in auto markets in recent weeks means BMW won't meet its previous profit target for 2008, the company said, warning that 2009 will also be a tough year. BMW said it expects the operating margin in its automotive division to reach "approximately 4% or higher" in 2008, down from the 6.4% in 2007.

BMW's bid to boost sales volumes appears to have been eroding the company's profitability for some time. While its auto sales rose to 1.5 million cars in 2007 from 1.05 million cars in 2002, operating margins for that segment shrank to 6.4% at the end of 2007 from 9.2% in 2002. Currency factors, rising investments in fuel-efficient technology, the rising price of raw materials, as well as slumping demand in the U.S., have contributed toward eroding profits, the company says.

Rather than seeking to top the 336,000 cars BMW sold in the U.S. in 2007, sales volume figures are "likely to be lower than a year ago," the company said. On a group level, BMW has decided to "reduce production volumes and increase selling prices."

Audi recently reduced its sales target in the U.S. to 95,000 units from the 100,000 in sales it previously had targeted for this year, a spokesman for the company said Friday. Daimler, the Stuttgart, Germany-based parent company of Mercedes-Benz, late last month gave a profit warning and also said it would give increased emphasis to growing volumes profitably.

Cliffs: The discounted US prices for BMWs is coming to an end. BMW no longer interested in writing you a lease on a 3er you can afford.

[SpasticDwarf]

Good thing my dad already ordered his 335.

[Bavarian_6shot]

VW may be on the same path.

[PixMan]

BMW has worked hard to price me right out the market for a new one already. This just adds more pain.

I had been targeting September '09 as time to replace my aging 530i with a 550i, but the Pontiac G8 GXP is really starting to have some appeal as being almost as much car (certainly more HP & torque) for about 1/2 the money. That's a big enough chunk 'o change that for the price of a 550i, I could have a G8 GXP *and* a new econobox for the wife.

It would be really hard to leave BMW though. A CPO'd 550i might work if I could find one with a known, good history of a happy PO.

[Goat128]

It doesn't say how much they're going to raise prices though. With a slumping US and world economy I doubt they could raise prices much.

[sbblowz]

hmm damn debating that 135i

[SilverBeam]

It doesn't say how much they're going to raise prices though. With a slumping US and world economy I doubt they could raise prices much.

I guess you missed this one:

http://www.theaustralian.news.com.au...-20142,00.html

[DrRT]

BMW has worked hard to price me right out the market for a new one already. This just adds more pain.

I had been targeting September '09 as time to replace my aging 530i with a 550i, but the Pontiac G8 GXP is really starting to have some appeal as being almost as much car (certainly more HP & torque) for about 1/2 the money. That's a big enough chunk 'o change that for the price of a 550i, I could have a G8 GXP *and* a new econobox for the wife.

It would be really hard to leave BMW though. A CPO'd 550i might work if I could find one with a known, good history of a happy PO.

Did you just say you are considering replacing a BMW with a Pontiac?

[Snork]

Did you just say you are considering replacing a BMW with a Pontiac?

Well they do look similar nowadays..

[Treepusher]

Power aside, GM cars don't hold their value for beans. The G8 looks good, but what's it going to be worth in a few years? Scrap + $50 bucks, maybe. All right, I'm exaggerating, but not all that much.

Yes, the BMW will fall dramatically in value, too, but at least it will be worth something, still look good and run well.

Bottom line, BMWs are perceived as high end cars that are still worth buying used. To push prices up and limit availability of new cars ought to stimulate demand for the used BMW, CPO or otherwise. Do the same for Pontiacs, and we'd still be awash in them, and they'll still be heaps of junk after only a few years.

[apollo322]

BMW has worked hard to price me right out the market for a new one already. This just adds more pain.

I had been targeting September '09 as time to replace my aging 530i with a 550i, but the Pontiac G8 GXP is really starting to have some appeal as being almost as much car (certainly more HP & torque) for about 1/2 the money. That's a big enough chunk 'o change that for the price of a 550i, I could have a G8 GXP *and* a new econobox for the wife.

It would be really hard to leave BMW though. A CPO'd 550i might work if I could find one with a known, good history of a happy PO.

I can't say I blame you for feeling this way. If you really want a new car only this is a very tempting one.

[iammarkhong]

Hmm. I think all the development out of germany is interesting, but simple economics says that you can't just raise prices to be more profitable. it is only one part of the formula. They need to ensure that we all would pay more next year for the same exact car, without moving onto different cars.

I personally think that the discounting practices will continue.

[Amir@AvusAutosport]

would be a good idea. BMW's are a dime a dozen now

[pegcity]

Any premium auto maker that strives to push volume for its own sake, runs the risk of losing exclusivity

B Class mercedes anyone?