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X1 and 1 Series no more a priority for BMW India


BMW will focus less on its entry-level models like the 1 Series and the X1 and will instead look at higher margin offerings like SUVs and M cars

BMW X1

BMW’s Chief Executive Norbert Reithofer has said that his company will focus more on improving pricing and margins rather than chase volumes. He, of course, spoke about BMW’s global approach. Closer of home, BMW in India is following the same strategy. BMW India will cut its focus towards entry-level models like the 1 Series and the X1, and will instead concentrate on higher margin offerings like the 3 Series, the 5 Series and the newly launched X5. The BMW M cars will continue to be the Indian arm’s focus area as well.

This approach is not only dramatically opposite to what BMW’s competitors – Audi and Mercedes – are doing, but it is, in fact, a U Turn in BMW’s own strategy of almost half a decade back. BMW was the first luxury car maker to go down the price spiral and to great effect. The launch of the X1 at a price point of under Rs 30 lakh got it enough volumes to become the number one luxury car maker in the country. And it stayed there till Audi came in with the Q3.

Now, of course, Audi is number one and it hasn’t ditched the low pricing strategy. Launch of the Q3 S with a manual gearbox was only the start, now it has the A3 sedan coming which will redefine the price points for luxury car makers in the country. Mercedes has been playing the low price card for a while as well. It has the A-and the B-Class on sale in India, and though both these products are imports, their pricing is one of the lowest in the luxury car game. The Mercedes A-class for instance is priced lower than the locally assembled BMW 1 Series.

BMW 1 Series

So, should BMW be exiting a strategy that got it volumes in the first place? BMW, of course, has a different reason for it, which we will get to later. But, for now, we feel, it is the lack of competitive products in the 1 Series and the X1 that has led to this call. There’s nothing wrong with either car and both the 1 Series and the X1 are great cars to drive, but their pricing compared to competition doesn’t give them a fighting chance.

There’s also the question of visual presence. The Mercedes A-class is better, more attractive looking than the 1 series and similarly, the Audi Q3 looks more like an SUV than the X1 does, and therefore commands a higher aspirational co-efficient. And, the Indian car buyers, increasingly, are basing their buying decision on design and style as well. On both fronts – pricing and styling – BMW doesn’t have a quick fix solution. So, instead of getting into the discounts game and trying overly hard to draw buyers’ away from competition in this class, a simpler and more profitable approach is to concentrate on models that don’t need hard selling, even on the pricing front.

BMW X5

BMW India’s side of the story, however, revolves around re-building the brand of sorts. It wants to be seen right at the top of the luxury car market stack, but not in volume terms; more for aspiration and quality and of course, luxury. To do that, it must move above the entry-level models and focus on its traditional mainstay offerings like the 3 Series and the 5 Series. The X5 is key to achieving BMW’s new goal and not surprisingly then BMW has pulled out all stops when it comes to the SUV. It has started local assembly for the X5 to get its pricing right. It has loaded the car as standard with everything that a customer in this Rs 70-80 lakh price bracket could ask for. And, because it now looks more modern and richer, BMW is confident it will find more buyers than ever before in the country.

The upliftment of the brand will also happen with the introduction of M models for BMW, as in the M3, the M4, the new M5 and even Ms in the SUV space. Besides, there will be cars like the i8 and the 7 Series ActiveHybrid. These models will give BMW something more to talk about than just luxury. BMW can harp about performance, cutting edge technology and create a halo with these cars that its traditional models don’t allow. It is a strategy that all three German luxury car makers seem to accept. Mercedes, of course, has been the quickest of the line on this front.

BMW M3

Mercedes has introduced everything from E63 AMG to the GL63 AMG in the market. And, it will continue to introduce more AMG cars in the near future. Building AMG performance centres around their high-performing dealerships in bigger cities is another important step towards brand building. BMW has no plans for similar centres yet, but its focus for M cars is clear. These cars will also help BMW make more money per unit.

There’s a third school of thought about BMW’s reduced focus on its entry-level cars in India. Some say, most people buying the X1 and the 1 Series are upgraders. Upgraders aren’t your traditionally well to do individuals who are buying their second or third luxury car, but those upgrading from larger executive sedans and the like. These customers are harder to sell to because even though brand in important for them, so is drawing a good deal. Plus, there’s also the fear of diluting the customer experience for the traditional luxury car buying audience for they expect a different approach.

Does this mean the BMW 1 Series and the BMW X1 will go off the market in India? No. It doesn’t. Not just yet. But, yes, BMW is clear that it will not focus on these two models as it has done in the past and would rather use its means more effectively to sell, promote and make money on models that are traditionally BMW.

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