The global automotive world is going small and so is the world’s largest premium car manufacturer BMW. The German automobile giant announced it is developing a new small car platform in collaboration with sister company Mini to step up its penetration into the premium sub-compact segment in Europe and Asia.
The company has witnessed two years of decline in sales but has expressed confidence that 2010 will see growth both in sales and profitability as it prepares itself to withstand competition and remain at the top of the premium car segment.
“We are heading into the new business year with cautious optimism and are targeting group earnings well above the level reported last year,” said Chairman Norbert Reithofer.
“We intend to remain world’s leading provider of premium cars in 2010 and plan to increase sales within a solid single digit percentage range to over 1.3 million vehicles.”
BMW Group sold 12.86 lakh cars in 2009, down 10.4 per cent from the 14.35 lakh cars it had sold in 2008. Its revenues for the year decreased 4.7 per cent to 50.7 billion euros (Rs 3.17 lakh crore) against 53.2 billion euros (Rs 3.3 lakh crore) in 2008. Net profit was down 36.4 per cent to 210 million euros (Rs1,313 crore) from 330 million euros (Rs 2,063 crore) in 2008.
But with the effects of global recession in 2008 and 2009, diminishing with every passing week, the company is aiming at overall sales of over 2 million vehicles by 2020.
Development of small cars, a segment that has seen a major shift in the last few years both in emerging markets as well as Europe, will be central to achieving the target.
“We will launch more Mini and BMW models and variants also in the small car segment, which is expected to grow further,” Reithofer added.
“We are exploring the possibility of developing a joint architecture between BMW and Mini for front- and four-wheel-drive systems for these vehicles.”
This will be the first time BMW will develop front-wheel-drive vehicles. The cars will have a length between 3.8 and 4.3 metres and the first product will hit the roads in Europe by 2014.
Though newer customers are an attraction, the company will have to adjust with the lower margins that small cars enjoy globally.
“We all know that the cost structure in the small car segment is different from that of larger model classes and we will seek to strike the right balance. We intend to grow profitably in this (small car) segment as well,” he said.
Another big focus area for the carmaker will be its “look East” policy where it has witnessed significant growth in China and India. In fact, Asia is the only region in its portfolio to have grown significantly in the last few years. From around 10.6 per cent in 2007, Asia now contributes over 14.2 per cent to BMW Group’s overall sales.