BMW Suffers from Oversupply of New Cars
Automotive News reports that BMW will spend the rest of the first half of this year liquidating inventories in the U.S. as it attempts to reduce a heavy stock overhang stemming from the end of last year, when it edged out Mercedes-Benz and Lexus for the U.S. luxury sales crown.
“We are adjusting our production plans and reallocating more SUVs to the U.S.,” CFO Friedrich Eichiner said, planning to increase the share of light trucks sold – such as the X5 – to 40 percent from last year’s 33 percent. “The fourth quarter was not as strong as expected, and we took a decision early on to clean up inventories to prepare for maybe a flatter market. That is what we are doing, and we think it should come to an end in the second quarter.”
BMW nameplates such as the 2 Series had dramatic sales declines this year through April. From January to March 31, BMW reduced the supply from 77 to 43 days. As a result of the cutbacks in stock, volume for BMW sank to 95,564 vehicles for the first four months this year. This decline of 9.4 percent meant it fell behind Lexus and came up nearly 20,000 cars short of new segment leader Mercedes. Some nameplates such as the 3-series sedan, 6-series coupe and convertible and i3 electric car saw dramatic declines. Meanwhile the overall U.S. market grew 3.3 percent through April as Americans took advantage of affordable gasoline prices to drive off lots with new light trucks.
However, “The premium-car segment in the USA during Q1 in total declined for the first time,” CEO Harald Krueger said during a conference call after publishing results for the group.
Alexander Bilgeri, spokesman for BMW North America, said all luxury brands have suffered slower U.S. sales in the early part of the year, mainly because energy industry problems have rippled into the financial sector.
AutoNation, the largest U.S. new-vehicle retailer, warned in early January that there was a bulging inventory of unsold cars, especially luxury models. Late last month, Group 1 said it planned to cut orders, particularly for luxury cars, and claimed BMW, Mercedes and Audi each had more than 90 days of supply at its stores.
When asked about the number of days supply or whether BMW was now suffering from the after-effects of trying to win the sales crown, spokespeople for BMW declined to comment.
In its interim report, BMW warned of a “trend towards deteriorating financing conditions” in the U.S. car market, estimating overall industry sales growth will drop to a rate of 1.3 percent from last year’s 5.7 percent. This should bring the market to 17.7 million for the year, the company said.
BMW is now pinning its hopes on a strong second half, during which it will complete the three-year expansion of its SUV production capacity that costs $1 billion. By the end of this year, BMW’s South Carolina plant, now the company’s largest worldwide, will total 450,000 annually. Additionally, Krueger said imports from Germany of its X1 and 7 series should help boost U.S. sales.