Photo: bmw
Late last year, BMW's Chief Financial Officer, Mr. Friedrich Eichiner made some forecasts regarding the way car sales will evolve in China. The world's biggest car market and a huge cow-cash for German premium car makers has been an important pillar in the development of the companies over the last few years.
However, the days of double-digit growth are all but gone, and even the forecast of Mr. Eichiner wasn't capable of predicting how low sales will slump. Over the course of the first three months of the year, BMW's earnings from the joint venture with Brilliance China have nearly halved due to a series of unfortunate factors.
The Chinese government's investigation into the pricing strategy of the company and the aging line-up have definitely taken a toll. The thing is, unfortunately for BMW, its rivals are still thriving, which points to a brand-limited issue.
Mercedes-Benz, for example, has seen income swell by up to four times during the first three months of the year which is huge by any account. Luckily for them, the results are currently being counter balanced due to a sudden rise in sales in Europe, their biggest overall market.
However, this is the first time in six years when the EU shows signs of rising sales, and it could all be just too little for too short in order to keep profits flowing towards Munich.
How is BMW going to counter the new trend?
Things are going to get even rougher in the future, various analysts predict. However, BMW won't just sit by and wait for things to happen simply. In a recent interview with Automotive News, the Germans' chief of sales said that they are looking into the matter and trying to counter the effects.
The first move will be to slow down the production so that dealers aren't overflowed with stock and forced to drop prices even further in order to sell. Another initiative looks to boost the sales of premium pre-owned certified cars as the market is simply demanding them.
"In the U.S. or Europe, where aftersales and used cars make up 70 percent to 80 percent of dealer’s business, and new-car sales are the cherry on top. Until now, the situation was the reverse in China but this is changing. That’s because, in past years, we have sold about 2 million cars in China and as the kilometers on those cars mount up, the demand for aftersales increases," Mr. Robertson said to Automotive News.
Will all of these work on the long run? They could, but there will be other challenges ahead as well, as the communist government in China is looking to crack down on owners of luxury cars. In the last few months, officials have been investigating where all the money for these expensive rides have come from, and the results aren't pretty.
In response, wealthy individuals are now keeping a low profile, avoiding luxurious brands as much as possible. For this issue, solutions are even harder to find!
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