Bmw In Line To Score More Top Marques With Australians

The Age

Tuesday March 15, 2005

IAN PORTER

THE sentence is guaranteed to strike fear into the heart of a Reserve Bank board member or any student of the trade deficit.

"Australians just love their BMWs," says BMW Australia managing director Franz Sauter.

This is no idle boast. Last year, the Munich-based marque snatched luxury car leadership from German arch-rival Mercedes-Benz. BMW lifted sales 14.5 per cent to 14,860 vehicles - and that is before adding 1499 Minis.

This growth trebled the overall market's 5 per cent gain and gave BMW a 1.9 per cent share of passenger and four-wheel-drive markets.

If that does not sound much, it is significant to BMW.

In Germany and some other European countries, BMW's market share is higher, but the performance in Australia is better than in any country outside Europe, including the US.

The strong market share, and the brand power that BMW exercises in Australia, translate into attractive earnings.

The company made $32.7 million in calendar 2003 on $1.12 billion revenue, although adverse currency moves depressed the result.

The year before, BMW Australia made $55.4 million after tax, on $1.05 billion revenue.

"Australia is more lucrative than your average market," Mr Sauter says. "We are significantly more profitable (than other BMW operations)."

He says this is partly because of Australians' love of engine power, which mass producers have shown many times.

"Australians love big engines," Mr Sauter says. "We sell a much higher share of big engines than BMW does in the rest of the world."

He says this is why Australians cannot buy a six-cylinder 7 series car, even though the in-line six is a BMW brand touchstone. "We only offer the eight-cylinder models," he says.

The story is the same with the company's biggest seller, the 3 series, which was the entry level model until the recent 1 series.

"Internationally, the biggest seller is the 316, but we don't offer that here," Mr Sauter says. "Our volume seller is the 318, and we sell many 325s."

Certainly, profit margins on bigger engines are better. The other aspect that sets Australia apart in the BMW world is the ready acceptance of the four-wheel-drive X5 and X3 models.

BMW Australia sells more than twice as many 4WDs than the group does as a whole. The 4053 X3 and X5 models sold last year represent 27 per cent of BMW sales, whereas the 4WDs represent only about 20 per cent. Mr Sauter says directors expect another strong lift in volume this year, thanks to the new model 3 series, unveiled in Melbourne last week, and last October's release of the entry-level BMW, the 1 series.

BMW launched the 120 last year and will soon launch the 118 and the 116, which will reduce the cheapest BMW to $34,900. "We have a 70 per cent loyalty among our customers," Mr Sauter says. "But to grow, we need new customers, and that is what the 1 series is expected to do."

© 2005 The Age

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