I’ve been a subscriber to Bimmer Magazine for a long time. I really like their coverage of all things BMW. In the most recent issue I read an article that in my opinion spelled out bad times coming for BMW enthusiasts in the U.S.
First I should define what I mean by enthusiast. It doesn’t mean anyone who has a fat enough wallet (or good enough credit) to buy a BMW just for the marque. To me it means someone who wants to do more than get from point A to point B, who wants to learn about his or her car and maybe even is willing to tackle a few DIY projects. An enthusiast is also someone who accepts the need for preventative maintenance and is OK with trading some reliability (hopefully not too much) for driving performance.
Based on my read of the “in the werks” column of the May 2011 Bimmer magazine, the future for that kind of enthusiast seems bleak. (Sorry there is no link — the Bimmer web site is brochureware circa 1999, with online access to only two stories months delayed.) The two main causes are CAFE requirements in the U.S. and the ability to sell cars at a higher price in other markets, especially China.
CAFE fleet requirements are rising in 2012 to 33.8 for cars and 25.7 for trucks. Manufacturers who fail to meet those averages will face heavy fines. For example, according to Bimmer BMW paid $8,861,776 in CAFE fines for the year 2003. Although the article also notes these costs are simply passed to the customer, BMW would like to prevent these types of fines if possible.
So in response, the company has developed the N20 turbocharged four cylinder engine. The engine is a tour de force of complex technology, with 245 horsepower, 258 foot pounds of torque and 35 mpg highway. And hey, who doesn’t want a turbo? But turbocharged engines do not last as long as normally aspirated engines, nor do they offer the same type of driving experience.
Combined with BMW’s “no maintenance” program for new cars — whoops, I meant “free” maintenance — this almost assures that these cars will not be long lasting past their warranty period. Turbocharged engines are also harder and more complex to work on than normally aspirated engines, and BMWs are becoming more and more software based, rather than mechanical. Even today, you can’t even change your battery yourself in a post 2005-6 BMW — the battery must be “introduced” to the car’s control module, by the dealer of course.
All this could be manageable except that according to Car and Driver, ALL BMW 3 series cars from 2013 on will come with turbocharged engines. This in an incredible change is a very short period of time. In 2007, the BMW 335i offered its first turbo engine in decades. Six years later, the normally aspirated engine will be gone and not offered at all in the 3 series, always the best selling BMW model.
An even bigger trend is pricing. Apparently when it comes to BMWs, only Americans care about cost. In Germany, the X1 28i with that hot N20 engine sells for over $56,000 in U.S. dollars. By comparison, the X3 28i — larger and plusher by BMW’s model hierarchy — sells for $36,750 here, a difference of almost $20,000. Clearly that’s a huge product differentiation problem for BMW — darn those pesky Americans and their expectation of value for their money! Logically, BMW will shift allotments of popular models to markets where they can command a premium price.
That brings us to China. The same E92 M3 coupe that starts at $58,900 here in the States can command $166,812 in China. Wow! Even with the totalitarian Chinese government restricting automobile purchases through hard to obtain permits, BMW still sold 169,000 vehicles there in 2010. This puts the Chinese market behind only Germany and the United States, both almost exactly equal at around 266,000 vehicles. It’s pretty clear China will soon be the biggest BMW market – at least until the Chinese steal BMW’s intellectual property.
Now I’m all for less pollution, though I’d rather see it accomplished via things like telework than the extinction of the non turbo engine. And I’d never try to deny BMW the right to make the most profit possible. Managing a growing agency the past few years has given me a more acute understanding of managing costs and maximizing return than I had earlier in my career.
But when it comes to BMW, I’m an enthusiast not a businessman. And I don’t like the trends I’m seeing. There seems to be no place for the occasional DIYing, post warranty period BMW owner in the future. Good thing both my decade plus age cars are in great condition — I’ll be sure to keep them that way.
Here’s one sentence I think sums things up chillingly, talking about where BMW will decide to focus sales:
“When the same M3 coupe that commands $58,900 in the U.S. can be sold for $166,812 in China, it’s hard to argue for a U.S. allotment any larger than the minimum required to keep enthusiasts loyal to the brand.”
Doing just the minimum required — now there’s a new U.S. marketing slogan for BMW. Yes it’s hard to financially argue against that approach. But if BMW carries that concept to its logical conclusion, there won’t be any loyalists left in this country.
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