Reduced BMW / MINI Availability?

Sections: In the Press | Sales May 19th, 2005 10 Comments

From Wards Auto: Weak Dollar Limits BMW NA Options:

The continuing weak relationship of the U.S. dollar to the euro is adversely impacting importer BMW of North America LLC’s margins, CEO Tom Purves says.
Although BMW AG has not reduced North American allocation as a consequence, BMWNA is unlikely to see increased shipments of imported vehicles, despite this year’s introduction of an all-new 3-Series – the auto maker’s volume model.
Thanks to dollar’s weakness, North American sales of imported BMWs generate less profit. “If we get an increase in production, we wouldn’t see an increased volume for the U.S.,” Purves says. “We would raise allocations for areas where the currency is stronger than the dollar.”
The U.S. remains BMW’s top export market, with sales of about 260,000 units. The U.K. is next with about 105,000 units annually

While this story primarily discusses the BMW models, the same is very likely to apply to MINI; I have already heard of a lack of Convertibles through the summer months.

Written By: Ian

10 Comments

Eric May 19th, 2005 Link

Ian, I wonder how this will affect BMW’s planning and strategy for the upcoming 1er in North America???

Bill Lawrence May 19th, 2005 Link

This could mean expansion of the Spartanburg SC plant. BMW depends too much on North American sales to just not attempt to meet demand.

Amit May 19th, 2005 Link

This is exactly why I bought my new MINI in the US and brought it to Montreal. The US dollar is extremely low and the prices across border have not changed as a result. I saved $5,000 by going this route.

johnsocal May 19th, 2005 Link

It appears the US-dollar bottomed out against the Euro in March and has been climbing since.

Erik May 19th, 2005 Link

If you currently own a MINI it’s probably good for future resale.

Ian Elstub May 20th, 2005 Link

Remember guys that the UK is not part of the euro so I guess the Mini is dependent on the Â£/$ exchange rate. Although the Â£ is strong it is showing signs of weakening against the dollar and the UK economy is likely to be quite soft in the coming months forcing it down further, I think it unlikely that with the expansion of production at Cowley that supplies to the U.S. will get smaller.

Timothy Sipples May 20th, 2005 Link

Well, what would Mr. Purves say? “Dear Potential Purchasers: Our products will be in plentiful supply, especially those new models that we’re introducing. Your Beemer will be as common as cups of coffee at Starbucks. Your neighbor will be driving one, too. Feel free to negotiate aggressively with our dealers. They’ll be desperate to unload all the extra inventory we’re sending them. Buy a new 7 series and they’ll throw in a MINI if you simply ask.”

Please. If it wasn’t the exchange rate (which is probably hedged anyhow) Mr. Purves would talk about something else. For example, the bankruptcy of Rover now “forces” ex-MG buyers to purchase MINI convertibles, making them rarer than virgins in a Nevada brothel.

Besides, BMW now gets to pay its U.S. workers who assemble its cars in South Carolina a lower (euro) wage, saving money there. So even unhedged, it’s not like currency fluctuations affect their business uniformly. Those high markup X5 monsters just got cheaper to produce, in relative terms.

Greg May 21st, 2005 Link

Hmmm…seems Timothy has an issue. The lower US dollar means lower profits for BMW AG despite record sales in USA and elsewhere. The more cars sold in USA mean less profits for the Quants and shareholders. If it weren’t for BMW the Mini would be also dead and buried with MGF and Rover. What has Mini convertible got that MGF and Mazda Miata don’t have? Answer – two rear seats. Otherwise Mini beats both hands-down in many areas.

Timothy Sipples May 21st, 2005 Link

An automaker CEO’s job is not to talk about plentiful supply but rather (artificial) scarcity. I guarantee that if/when the dollar’s value increases relative to the euro — as it has somewhat recently — Mr. Purves will not be talking about the eagerness with which BMW will offer increased allocations to North America.

BMW makes lots and lots of cars (and SUVs) in South Carolina now. So does that mean BMW will be lowering the euro price of the X5? Of course not.

Currency fluctuations happen all the time. BMW is not (I think) stupid. That’s why the company has manufacturing in different countries (including the U.S.) and, undoubtedly, currency hedges. Mr. Purves’s marketing and operating expenses are now euro-cheaper as well. (Mr. Purves’s dollar salary costs less in euros.) Currency impacts are not all one direction for a multinational company like BMW, and any competently run multinational takes steps to protect against normal currency fluctuations. It’s a pretty minor issue from the perspective of auto buyers, especially in this very competitive industry.

The price of oil is up, too, increasing the price of plastics and the energy used to produce vehicles, worldwide. Also remember that MINI engines are, at least currently, built in Brazil. The Brazilian Real has surged in the past year versus both the U.S. dollar and euro. Moving engine production to Europe, assuming at least equal productivity, will actually make the car cheaper (also assuming no change in currencies).

Mr. Purves is simply doing his job, talking up how “scarce” the vehicles are. (If it wasn’t this it’d be something else.) But remember also that BMW could tolerate selling MINIs at a loss because every MINI sold means another mega-profitable X5 can also be sold under CAFE rules. No MINIs, many fewer X5s — or a sales-killing gas guzzler tax. The same goes for the other models, so BMW can’t really adjust the allocation mix too much against the more fuel efficient models.

Eric May 23rd, 2005 Link

Timothy, good points, but using parenthesis every other sentence makes them hard to read.

Also, BMW doesn’t care about gas-guzzling taxes and neither does the dude shelling out $55,000+ for the vehicle.

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