Opinion: Can BMW & MINI Sell More Without Selling Out?

Back in 2002, BMW and MINI produced only a handful of models; the 3, 5 and 7 series, X5, Z4 and of course the MINI hatch. With the current model line-up that seems like an eternity ago but in reality we are only a decade removed from it. At that time, the new to the market MINI and the high-end Rolls Royce brands each featured only a single body style a piece. While simpler, things were not all rosy. BMW had reached a sales plateau and supplier parts pricing was through the roof, making profit margins slim. Anything but ideal for an independent manufacturer.

After BMW’s failure with Range Rover and the monetary loss due to its sale- it looked like the company was on the brink of collapse or worse yet, being swallowed by a competitor. The board of management made some decisions that would shape the future of the BMW and the group as a whole, allowing each brand to remain, and for the BMW Group to continue to be independent. Of the three MINI was perhaps the biggest gamble. Opinions were wildly split inside BMW at the time as to whether to move forward with the brand or sell just months before it’s 2001 re-launch. The former group won out and in the time since MINI has become an indispensable part of the BMW Group. But that doesn’t mean the BMW Group as a whole is guaranteed to survive long-term with it’s current sales.

In the car industry there is a magic number. It’s the number of sales that allows both economies of scale and viability to be at their peak or thereabouts; that number is 2 million sales. The BMW Group is on a holy grail like quest to reach it, and it seems the group is well on its way with over 1.6M sold last year (MINI did over 250,000). It is not a goal simply for profits- it is a goal designed to secure the BMW Group’s survival and that MINI, Rolls and BMW can flourish without the worry of a takeover or being priced out of the market. The BMW Group sales for 2011 were 1.66 million units, a new record and the target of 2 million is ever moving. Some predictions point to 2016 as the year 2 million is hit but it is extremely variable because of the world economy and it is unknown how the future small premium models will sell.

Seems like a simple concept- sell more. But it’s not. The three prongs of the BMW Group are all in the “premium” area within their segment. That means buyers tend to be more particular; materials need to be of high quality, electronics have to be the latest and greatest all while producing vehicles that are of the highest level of safety and efficiency. That said, cheaper build cars can’t be produced because of these consumer demands and the Group’s need to maintain each brand’s established reputation. Can’t have a $150,000 car and a $16,000 car in the same showroom can you? The solution is to offer more niche vehicles and broaden the appeal to more consumers while staying true enough to the brands reputation and heritage. For MINI that means products like the Coupe and Roadster on one hand and the Clubman and forthcoming Countryman Coupe on the other.

The Plan

BMW, at last count, has 12 distinct vehicle offerings 1, 3, 5, 5 GT, 6, 6 GC, 7, X1, X3, X5, X6 and Z4 (not including touring, long wheel base, coupe and convertible separations or M). MINI has the hardtop, convertible, roadster, coupe, and Countryman not to mention the JCW variants. Rolls Royce has four models of the top of the line Phantom (sedan, coupe, convertible and long wheel base) and also the newer Ghost (sedan and long wheel bas). That is a lot more product in just 10 years and there are more models coming.

The increase in models also has coincided with an increase in shared parts between models and BMW Group brands, decreasing build costs. BMW has also collaborated with other manufacturers (PSA is one) on development and production of engines, chassis and established larger purchasing agreements with suppliers to obtain cheaper pricing on parts. What this all means is that while the cars are actually featuring improved materials and build quality, profits are being increased.

Profits may sound like a negative as a consumer but the truth is that profits are healthy for everyone as long as some of that profit is returned to the facilities and the development of future product not just pocketed or used to increase share prices. Sustainability and investment in the future are priorities of the BMW Group.

Our Concerns

So far this all sounds great (in theory). However, there are some serious concerns with this approach; market saturation and the threat of badge engineering being the main two. Many a car company has set out on a path for world domination and sputtered because quality declined and too many of the same products in showrooms confused buyers, leading to less sales. Unlike others, the BMW Group has gone down a completely different road.

They are designing products across brands that are different in the target audience. They are not creating three of the same vehicle and using different styling and options to separate them. They are designing separate vehicles entirely that do happen to share some underpinnings and some common parts.

The first vehicle shared across brands within the BMW Group was the Rolls Royce Ghost. In theory its base is the BMW 760Li, but it is a lot more than a rebadged product, in fact it is quite original. The body in white was reengineered, it has a redesigned interior and its drive characteristic is unique. In comparing the two cars back to back you’d be hard pressed to find similarities. That isn’t by chance: most of the shared items are out of view and are not key to the differentiation of the vehicles.

The Ghost is the fastest selling Rolls and has increased sales exponentially- RR has sold more units than ever before thanks in no small part to the Ghost fitting the brand perfectly. It has achieved numerous accolades from auto journalists and has been well accepted by some of the world’s most particular consumers. The Ghost introduced ultra luxury buyers to a vehicle that while being smaller in size is not any smaller in refinement. For Rolls Royce’ it’s not just a one pony show any longer for the brand and that has aided its volume and profits.

Enter the Front Wheel Drive BMW and the Third Generation MINI

BMW will soon introduce a product that is contradictory to everything the brand has stood for. It will bring to market next year a front wheel drive vehicle. It is sacrilege; enthusiasts bemoan the decision as there cannot be anything worse than going against the concept of rear wheel drive as the only answer for true driver’s cars, and the “Ultimate Driving Machine.” BMW has used the rear wheel drive concept since the first cars moved down the lines in early 1900′s Bavaria.

In the quest to hit that magic number BMW has decided that since over 80% of 1 Series customers surveyed in Europe believed that their RWD 1 Series was front wheel drive already, there is no harm in building one. The drive train development and basic platform will be shared with the next generation MINI thus reducing costs across two brands and targeting different customer bases. The front wheel drive sub-1 Series product name is still up for debate but Compact Sports Tourer (Compactive) is one of the finalists. What this translates to is a wagon or MPV with a sloping rear roof. The main focus being on internal space and comfort for the passengers and a Mercedes Benz A/B Class competitor. This smaller more efficient vehicle will also help BMW in the quest to reduce emissions. The concept version of this sub-1 Series product will be displayed this fall in Paris.

The hope is that this twist will give the car some distinctive qualities that set it apart from the forthcoming MINI.

The MINI brand reincarnated celebrated its ten year anniversary not that long ago. For ten years it has been part of the BMW Group and while sales have been consistent, up until recently there was little in terms of growth or profitability. With the introduction of the larger, yet still small by current standards, Countryman the MINI brand is now being made available to more consumers. While the hatch continues to sell well, there is a limit to how many are interested in it, because of its size and styling.

It is true that there are some that will solely buy the car for its unconventional styling, however it is no longer as different or unconventional as it was at launch. In addition to a few million MINIs on the roads worldwide many other brands have gone retro, with features like contrasting roofs as well as offering smaller sized cars similar to the MINI. The competition is now outpacing in some markets and the fear is that MINI is isolated from new conquest sales. That is why the current formula must change.

MINI, (as mentioned earlier) is “premium”, it commands a significant price and with that consumers want perceived value. Soft touch materials, good ergonomics, reliability and modern creature comforts are some of these needs. The sharing of development costs and increased use of common components with the front wheel drive BMW will allow the next MINI to be more premium while remaining in the same pricing segment. Theoretically, sales will increase and customer satisfaction will improve thanks to improved parts and materials.

While there may be some design changes and updates to the car they are not happening just for the sake of it. Some of these changes happened to the original Mini across its life cycle (Moving the speedo from the center, adding roll up windows in place of the sliding ones, adding an auto transmission etc.) and buyers still bought it and the brand had its reasons to modernize at the time. Cars evolve with the wants and needs of consumers, technology, emissions and safety mandates. MINI will remain original just undergo some modernizations, much like wardrobes change and exterior color palettes do but at the core MINI will be MINI.

Like the Ghost and 7 Series, this new cross brand sharing with MINI will yield two completely different products targeting two separate places in the market. The BMW Group has figured out how to not compete with itself and how to keep the differentiation of its brands alive and well.

Competent Individual Products with Shared Components

Having seen both the “F” generation MINI and the front wheel drive BMW test mules in person, I can fully attest to the outward differences. There is little in the way of shared design. If it wasn’t for the fact they are being announced as related their appearance would never lead to that conclusion. Sure they have similarities in the ways the wheels attach to the hubs and the size is small but that is really all that stands out as being related traits. On the inside each will feature its own styling with many of the hidden components (air ducting/blowers/light modules/ electronics etc.) being shared in a similar manner as the Ghost and 760Li.

Talking with engineers familiar with the dynamics of each car and how they perform I was told that each has an individual personality- much like siblings. The appearance and drive are directly related to the target market of each and there is little overlap. Our sources indicate that BMW has “cracked the FWD nut.” One source says that road feel is more in line with the R50 MINI while efficiency and comfort are more in line with the newer F20 1 Series. If that is even partially correct these cars will be a resounding success.

Final Thoughts

No one would like to see BMW or MINI go the route of SAAB or even be the debacle which is Lotus. If that means the BMW Group has to use some unconventional methods to stay viable- so be it. There is one caveat, we still want to be able to go to a dealership and buy a vehicle that is a modern interpretation of the brand’s traditions.

BMW can’t go all front wheel drive and cater to the elderly and a MINI can’t become the size of an X5 or drive like a Lexus. If the day comes when there are no BMWs or MINIs we’d consider buying then that is the day we say auf wiedersehen. To answer the original question; is the group “selling out to sell more cars”, Our answer is NO. If they need to build cars for the masses so we can get our enthusiast’s piece of heaven, that is just evolution and survival of the fittest in our eyes.