What is going wrong at BMW?
10 March 2019
Last November I wrote an article based on the annual accounts of BMW retailer, William Morgan, which warned that the manufacturer force-feeding stock through its retailers to deliver volume risked eroding profit.
As it unveiled a 2017 loss of £486,000 against a profit of £1.6 million the previous year, the directors pulled no punches in laying a large part of the blame on BMW, saying, “volume targets exceeded natural customer demand (and) put considerable pressure on retained gross margin and weakened our overall profitability”, before adding: “Future growth in volumes driven by BMW Group has the potential to continue to dilute margins in pursuit of volume targets… the pressure on retained margin will continue until supply equals demand.”
We knew there was unhappiness within the BMW network but I bet few outside it were prepared for the brutal exposure of the depth and breadth of that resentment and lack of trust which was laid bare in the latest NFDA survey.
BMW recorded the biggest drop of any, in several business-critical areas, of which just a few were, ‘How satisfied are you with the current profit return from representing your business?’ (ditto future profit return), with the required level of capital investment and also the return on said investment, and for the question, `How satisfied are you that the management of your manufacturer actually takes dealers’ views and opinions into account?’.
When asked how the retailer rated their manufacturer overall on scale of 1 to 10 BMW scored just 4.4 and taking the average of all the results in the survey it again produced the biggest fall from a year ago.
What on earth is going wrong?
You’d expect BMW GB to say it is under pressure from the factories to shift the metal – which is true – in an argument which ultimately comes back to saying there are too many cars chasing too few customers, but there needs to be a better relationship between the importer/retailer than it currently has.
However, when we asked BMW about the survey our interview requests were denied.
We are at a time when mergers or takeovers in car retail are/will be common but if business people making hard-headed decisions on where and how to invest either their own money or that of shareholders, pension funds and others are looking around at various options, would they be tempted by BMW? On the evidence of the NFDA study, perhaps not if there are alternatives available.
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