Serving the World's Largest Emerging Automobile Market
Home > Commentary > BMW: More respect for China please

BMW: More respect for China please

by Li Miao

Audi announced a “Pioneer” plan just a few days ago aiming at annual output of 700,000 units in China by 2015 and the introduction of 42 new vehicle products.

BMW, in comparison, has been trying to shorten its gap with Audi, the ambitious market leader, with a number of product and marketing schemes, including extended versions of the 3- and 5-Series,  an engine plant – first one overseas – in Shenyang, branding strategy of BMW Joy and Olympics, dealer network expansion and aggressive localization of management in China.

These efforts explain why BMW has been successful in closing in on Audi in the ABB (Audi, BMW and Benz) competition trilogy. In comparison, Mercedes-Benz has lagged further behind.

BMW has been very close to Chinese consumers over the past few years listening to their needs and feedbacks. But in order to close in further on Audi, the German luxury carmaker must show more respect for the China market.

“Global warranty” has been a proud service of luxury brands for their global customers. But last year BMW refused to honor warranty to imported BMWs made in the U.S.

With rising demand for luxury cars in China, the number of imports of German luxury cars made in the U.S. and Europe increased rapidly. These imported BMW models are priced significantly lower and better equipped than BMW’s official imports. A BMW X5, for example, sells for around ¥780,000 ($124,800) in China, but an import from the U.S. is ¥80,000 cheaper.

BMW China was quiet over such imports when their volume was small. But as the number of imports from the U.S. increased significantly, the company refused to honor warranty for such imports.

This is hurting BMW’s brand image because of its China pricing scheme. If consumers are able to pay less to purchase the same BMW car outside of BMW’s distribution channel in China, it would affect BMW’s direct sales and cast doubt on its China’s pricing policy. BMW headquarters has been increasing its administrative control over its China management.

Because of weak market demand in Europe, BMW has been pinning hopes on the China market. BMW’s director of global sales Ian Robertson said last October that the company would target more sales in Asia and the U.S.

Chinese consumers, however, are no longer blind about the price and value of luxury cars. Despite BMW announcement not to involve in price wars in China, it lacks a solid and reasonable pricing structure and therefore is facing unexpected market prospects.

Last year BMW dealers reportedly refused to take in inventory because of declining profit margin. Dealers were not able to get X3s to meet consumer demand but were forced to take in inventory of the high-priced X5s and X6s. This not only hurt the relationship between BMW and dealers but also tarnished the BMW image among consumers who were unable to get what they wanted but were forced to consider unpopular models.

Compared with Audi’s 2015 goal, Mercedes-Benz is much less aggressive. Domestic assembled models include only the C- and E-Class and the GLK and planned 2015 sales would be 300,000 units.

Sales of the BMW already exceeded 300,000 in 2012. But in order to catch up with market leader Audi, BMW is short of any specific plans for additional models in local production. With Christoph Stark’s retirement and the resignation of Lu Yi, his deputy in charge of imports, and Daniel Kirchert, BMW-Brilliance vice president, key sales positions are now vacant. The new CEO, Karsten Engel, is caught in between the headquarters and the JV partner in China even before he arrives.

Successful multinational automakers in China have one thing in comment: bringing in the most advanced technologies into the market. Volkswagen and GM, for examples, have done so and developed an internal competitive mechanism among different brands with a focus on how to meet consumer demands.

What lies before Engel is real respect for consumer expectations in the China market if the luxury carmaker wants to follow Audi as closely as possible. He must tackle with such issues as global warranty, such as introduction of more vehicles for localized production, a good and balanced relationship with dealers and a stable management team in China.

(Rewritten by Wayne Xing based on author’s article published in Zhongguo Qiye Bao or China Enterprises)

| |

Leave a Reply