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BMW plans product push to fend off Audi, Mercedes

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BMW plans product push to fend off Audi, Mercedes

September 7, 2010 08:15 CET

BERLIN (Bloomberg) -- BMW AG, the world's largest maker of luxury vehicles, will expand the BMW and Mini model ranges to boost annual sales 55 percent over the next decade and fend off Volkswagen AG and Daimler AG.

A new factory and expansion of existing facilities may be needed to underpin growth in the long run, CEO Norbert Reithofer said.

BMW aims to sell more than 2 million vehicles by 2020 from 1.29 million last year.

“The big push in new models, entering new segments comes after 2012,” Reithofer said at the automaker's Munich headquarters. “If I look forward to 2020, then we have to think about additional capacity.”

BMW plans to widen the 6 series and Mini model lines as well as build a battery-powered car for city driving, the CEO said. The maker of BMW, Mini, and Rolls-Royce vehicles is fighting to protect its turf from Volkswagen, the owner of Lamborghini, Bentley and Audi, as it merges with Porsche Automobil Holding SE.

Audi has vowed to topple BMW as the luxury leader by 2015. BMW claimed the top spot from Daimler's Mercedes-Benz in 2005.

“If you're not on the attack, there's the risk of ending up on the defensive,” said Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler. “BMW has the right mix of caution and controlled offense to meet its targets.”

Model offensive

Reithofer, 54, intends to add a four-door version of the 6-series luxury coupe after the rollout of the new two-door model next year.

He also plans to introduce new front-wheel-drive technology to the BMW brand, ending the nameplate's exclusive association with rear-wheel powertrains, as the automaker expands its compact vehicle offerings.

“We have plenty of different ideas on how to win new customers” with fresh small-car models, Reithofer said.

The executive, who took over as CEO in September 2006 after overseeing production for six years, has one year left on his current contract. An avid skier and mountain biker, the executive has eliminated jobs and set a target to cut more than 4 billion euros from purchasing outlays to boost auto profits.

He also pushed BMW to develop fuel-saving technology and initiated an electric-car program. The battery-powered so-called Megacity Vehicle, which is due to be introduced in 2013 under a new BMW sub-brand, could eventually become a vehicle family, he said.

Mini brand to expand

The Mini brand will be a focus of expansion with at least three new models in the works. Roadster and coupe versions of the trendy British marque are due within the next two years, while the Countryman, Mini's first four-door vehicle, hits European showrooms later this month.

“We have to grow Mini” to expand volumes of front-wheel-drive cars and secure the brand's future, Reithofer said in an interview Sept. 3, adding that Mini's sales of 217,000 vehicles last year are “too low.”

Audi is introducing a dozen models in 2010, including the five-door A7 Sportback and A1, its smallest car, as the automaker increases the lineup to 42 vehicles by 2015 from 34 in 2009.

Mercedes will premiere a revamped CLS sports coupe this month and plans to double its offering of compact cars with the help of France's Renault SA. The Stuttgart-based automaker is also working to build electric cars for China with BYD Co., the automaker backed by billionaire Warren Buffett.

China, U.S. capacity boost

BMW is using 90 percent of the capacity of its European plants, putting it ahead of all other automakers in the region, according to IHS Automotive. Volkswagen's European factories are running at 77 percent and Daimler at 73 percent, IHS said.

Boosted by the demand for current models, BMW last month raised its 2010 sales forecast by 100,000 vehicles to at least 1.4 million. Mercedes is targeting “double-digit” sales growth in 2010 from last year's 1.09 million cars and SUVs, while Audi is aiming for record sales this year of more than 1.08 million.

The new 5 series is sold out, and orders take two to three months to fill, Reithofer said. BMW is adding a third shift to the bodyshop of its Leipzig factory to meet demand for the X1 compact SUV, he said.

The manufacturer is already gearing up for more growth and is investing about $1.5 billion to boost capacity at plants in the United States and China. There may be further expansion.

“Looking at 2020 and beyond, I could possibly imagine building a new plant” as well as expanding existing facilities in India, Russia, and Thailand, which assemble vehicles from components produced at other factories, Reithofer said.

Sharing parts

The production capacity of BMW's own factories is augmented by Magna International Inc.'s Austrian unit Magna Steyr, which currently builds the Mini Countryman for the German carmaker, Reithofer said.

The automaker, which has been increasing the number of parts shared between different models to cut costs, is working on standardizing components and technology in its diesel and gasoline engines. It is open to selling its smaller engines to third parties to realize additional savings.

“We're also open to sharing our engine tool-kit system with a potential partner, but at the lower end rather than the six cylinders,” Reithofer said.

BMW and PSA/Peugeot-Citroen agreed in February to develop new four-cylinder gasoline engines that will be used in the Mini beyond 2015, continuing an existing partnership.

The luxury carmaker is wary of putting too much weight on growth in China, where the economy has shown signs of cooling. The company's sales plans in China are based on growth rates below the current level, Reithofer said.

BMW's sales in July jumped 82 percent in China, which has become the automaker's third-biggest market after the United States and Germany. U.S. sales rose 10 percent in July, as the company claws back from the 25 percent drop suffered during the financial crisis.

“We need a balanced relationship” in terms of growth, Reithofer said. “The U.S. is a very key market."

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20100907/ANE/100909927/1295#ixzz0yr1oMBJw

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