BMW dealers go bankrupt while carmaker makes record profits
03-01-06, 11:18 PM
#1
Guest
Posts: n/a
BMW dealers go bankrupt while carmaker makes record profits
BMW dealers go bankrupt while carmaker makes record profits
Average return on revenues approached zero in 2005
Harald Hamprecht
Bettina John
Automotive News / February 13, 2006 - 1:20 pm
Advertisement
Click Here!
Munich. As BMW has been recording record profits in recent years, the financial situation of its German dealerships has steadily worsened.
Last year, six BMW dealers in Germany declared themselves insolvent. Others staved off bankruptcy by merging with other companies.
The discrepancy between the dealers' and the company's financial results "is greater than it has ever been," said Peter Enders, president of the BMW authorized dealers association in Germany.
Enders said the dealers' average return on revenues is trending toward zero percent.
"It is becoming clear to see that there are more operations that aren't earning any money," Enders said.
In 2003 the average BMW dealership margin was 1.4 percent, but last November it was just 0.4 percent.
Ludwig Willisch, the head of BMW Germany, expects the average dealership margin to be 0.4 percent for 2005.
That would bring the BMW dealers under the industry average of 0.5 percent expected by ZDK, the German association for motor trades and repairs.
"Naturally, this situation is anything but comforting," Willisch said.
One of Willisch's stated goals is to boost the average return to 1.5 percent over the next two to three years.
Shrinking network
BMW's German retail network shrank from 350 to 322 authorized dealers within a year.
On top of that, BMW has 18 directly owned sales subsidiaries with 46 sub dealers.
One reason for the authorized dealers' troubles is the "aggressive" sales policy of BMW's own sales subsidiaries, Enders said.
The BMW-owned operations discount heavily on new models and pay too much for used cars, he said.
Willisch disputes this: "Our subsidiaries are often just smarter," he said.
Willisch said some BMW dealers have "too little product knowledge" and resort "too quickly to rebates, instead of creative marketing measures."
BMW is taking measures to help its dealers sell more cars.
In June 2004, the company launched its "Sell" program, which supported the market development of its dealer network.
Since January, there also has been a simplified price system, which contains new ingredients for the dealer profit margin, such as an equipment bonus.
Starting in March, BMW plans an "innovation offensive" that will combine attractive prices for car buyers with equipment offers.
Willisch is so satisfied with the incoming orders in January and February that he expects a "moderate sales growth" for 2006.
Average return on revenues approached zero in 2005
Harald Hamprecht
Bettina John
Automotive News / February 13, 2006 - 1:20 pm
Advertisement
Click Here!
Munich. As BMW has been recording record profits in recent years, the financial situation of its German dealerships has steadily worsened.
Last year, six BMW dealers in Germany declared themselves insolvent. Others staved off bankruptcy by merging with other companies.
The discrepancy between the dealers' and the company's financial results "is greater than it has ever been," said Peter Enders, president of the BMW authorized dealers association in Germany.
Enders said the dealers' average return on revenues is trending toward zero percent.
"It is becoming clear to see that there are more operations that aren't earning any money," Enders said.
In 2003 the average BMW dealership margin was 1.4 percent, but last November it was just 0.4 percent.
Ludwig Willisch, the head of BMW Germany, expects the average dealership margin to be 0.4 percent for 2005.
That would bring the BMW dealers under the industry average of 0.5 percent expected by ZDK, the German association for motor trades and repairs.
"Naturally, this situation is anything but comforting," Willisch said.
One of Willisch's stated goals is to boost the average return to 1.5 percent over the next two to three years.
Shrinking network
BMW's German retail network shrank from 350 to 322 authorized dealers within a year.
On top of that, BMW has 18 directly owned sales subsidiaries with 46 sub dealers.
One reason for the authorized dealers' troubles is the "aggressive" sales policy of BMW's own sales subsidiaries, Enders said.
The BMW-owned operations discount heavily on new models and pay too much for used cars, he said.
Willisch disputes this: "Our subsidiaries are often just smarter," he said.
Willisch said some BMW dealers have "too little product knowledge" and resort "too quickly to rebates, instead of creative marketing measures."
BMW is taking measures to help its dealers sell more cars.
In June 2004, the company launched its "Sell" program, which supported the market development of its dealer network.
Since January, there also has been a simplified price system, which contains new ingredients for the dealer profit margin, such as an equipment bonus.
Starting in March, BMW plans an "innovation offensive" that will combine attractive prices for car buyers with equipment offers.
Willisch is so satisfied with the incoming orders in January and February that he expects a "moderate sales growth" for 2006.
03-02-06, 09:57 AM
#2
Lexus Fanatic
Join Date: Jul 2001
Location: California
Posts: 6,084
Likes: 0
Received 0 Likes
on
0 Posts
Has there been any spillover to US dealers? I certainly haven't heard anything around here. Makes you wonder if there aren't some unique aspects to the German market driving this. Private dealers competing with factory stores might not be a great thing.
I was curious if the included maintenance was going to eat into dealership financial viability. My dealer made a lot of bucks off each car sold with maintenance work. Being under warranty made little difference to the size of the bills. I am sure bimmer is telling the dealers what they will reimburse for service and if I were a bimmer customer, I wouldn't expect any bills on the car if I bought it new for a long time. Bimmer might have moved that income from the service work to their bottom line by including it in the price of the car. Still, I haven't heard anything like this from dealers here.
I was curious if the included maintenance was going to eat into dealership financial viability. My dealer made a lot of bucks off each car sold with maintenance work. Being under warranty made little difference to the size of the bills. I am sure bimmer is telling the dealers what they will reimburse for service and if I were a bimmer customer, I wouldn't expect any bills on the car if I bought it new for a long time. Bimmer might have moved that income from the service work to their bottom line by including it in the price of the car. Still, I haven't heard anything like this from dealers here.
03-02-06, 10:10 PM
#3
Rookie
Join Date: Jan 2006
Location: CA
Posts: 55
Likes: 0
Received 0 Likes
on
0 Posts
Originally Posted by RON430
Has there been any spillover to US dealers? I certainly haven't heard anything around here. Makes you wonder if there aren't some unique aspects to the German market driving this. Private dealers competing with factory stores might not be a great thing.
I would like to mention what brought me to Lexus recently. I never would have considered a Lexus a few years ago because the styling ... well there wasn't any. In the meantime, I no longer have time to work on cars. I literally never had good service work done at a dealer (except for the car wash part), and this forced me to look for a car that doesn't need to go to the dealer. As far as styling, Mercedes E class or Audi A6 (not the latest version, but the one before) would have been my choice, but the reliabilty record was so bad that I just couldn't buy one of those. The BMW quality and styling put that brand out of the picture for me (I once was quite fond of BMW and owned several 2002s and a 320i). The 2nd gen GS300 I recently purchased replaces an aging Jaguar XJ6. At first, it was really difficult to ignore the vast amounts of plastic in the Lexus (the glove box door grossed me out), even though the car is much more fun to drive. Now that I have fixed some of the more annoying rattles, I am starting to really like the Lexus and have no regrets about buying it. Conclusion: people buy a Lexus because they hope to minimize service visits to the dealer. Jaguar will have a hard time surviving in this market. They ran out of styling ideas, the quality, inspite of all the PR is not great, and the parts and service organization is really bad. My local Lexus dealer also has no parts in stock, but the hope is that I will not need them as much as I would for an European car.
As I get older, I have less and less tolerance for time wasting, and that is where Lexus probably stands to appeal most. I hope this car delivers on that account.
VT
Thread
Thread Starter
Forum
Replies
Last Post
association, average, bankrupt, bankruptcies, bankruptcy, bmw, dealer, dealers, dealership, dealerships, german, industry, lasts, margin, margins, profit, years
