By Jorn Madslien

Business reporter, BBC News, Geneva motor show

If the new 5-series fails to wow customers, the whole company could suffer

Amidst the thousands of cars on display at the Geneva motor show there is one that stands out, if not for its looks than for its importance for the company that makes it. For the first time since 2003, BMW has redesigned its 5-series executive model range. No other model on display at the Geneva motor show means as much to its marque as the sixth-generation 5-series - with the obvious exception of small manufacturers with only one or two models in their arsenal. Getting the 5-series right is crucial for BMW as it is the biggest single contributor to the company's bottom line. Get it wrong and the world's largest luxury car maker will almost certainly be knocked back from the top spot by its chief rivals, Mercedes and Audi. Brand builder As a brand builder, the 5-series' job is to shine a bright light on BMW's other models. "The 5-series, for me, is right at the centre of the brand," Ian Robertson, BMW Group board member in charge of sales and marketing, tells BBC News in an interview. So far, we have more than 2.500 orders, and that is before anyone's even driven it

Ian Robertson, sales and marketing director, BMW Group "This is the successful businessman's car, really. It carries the BMW brand." Hence, if the sixth-generation 5-series is deemed desirable, then so will its smaller siblings, such as the new 3-series, which is up for renewal in 2012, and its small 1-series, which will be renewed next year. If not, then nor will they. Profit driver But the 5-series is more than simply a driver of sales across the BMW marque. It is also much more profitable than its siblings. It costs roughly the same to make the more expensive 5-series as it costs to make the cheaper 3-series; in essence, it is much harder to make decent profit margins from small cars. Mr Robertson is eager to dismiss the myth that the 5-series accounts for more than 50% of the BMW Group's profits, even though it accounts for just 25% of sales. But he acknowledges that it contributes "a significant proportion" - though one that is gradually being reduced as the group's UK Mini and Rolls-Royce subsidiaries continue to grow, and as the BMW marque's own model line-up is extended. Sales driver The 5-series is nevertheless central to BMW's strategy to raise its profit margin to some 8-10% by 2012, in part because it is cheaper to make than its predecessor, in spite of being longer, wider and heavier. Rivals Audi and Mercedes are investing in new models to overtake BMW BMW invested a third less to get the car into production and its manufacturing costs have been reduced by 15% compared with its predecessor. The 5-series should also help raise BMW Group sales back to more than 1.3 million cars this year after a 10.4% fall in sales in 2009, the company hopes. Indeed, although the fifth-generation 5-series sold 1.1 million cars during its lifetime, BMW believes the new one could beat that record. "So far, we have advance orders for the next two-and-a-half to three months, and that is before anyone's even driven it," says Mr Robertson. Crucially, as well as in Germany the 5-series is produced in China, which has overtaken the US as the world's biggest car market. There the previous 5-series has been popular with owners who have private chauffeurs, thus helping boost BMW sales in the country by 37.5% in 2009. Small cars The 5-series has changed dramatically over the years, yet the biggest new development has been the growth of the series' family of derivatives. The Rolls-Royce and Mini brands have reduced the 5's relative importance Last year, BMW launched the 5-series GT, which is larger and arguably more luxurious than its conventional saloon models. And there is also a sports utility vehicle in the series, the X5. Such differentiation can be seen across the luxury segment, with German rival Audi, for instance, set to increase the number of models it offers from 32 last year to 42 by 2015. Most notably, Audi is displaying its small A1 at the motor show, a car that is widely seen as the first serious rival to BMW's Mini, except for its own 1-series. Mercedes, meanwhile, is still relatively weak in the small car market, where demand is expected to grow quite fast in the next few months and years. But neither of BMW's main rivals are standing still. All three are investing heavily in new model development, so there are no guarantees that BMW will retain the top spot in the future.



Bookmark with: Delicious

Digg

reddit

Facebook

StumbleUpon What are these? E-mail this to a friend Printable version