Reduced BMW / MINI Availability?

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

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.

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

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.

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.