BMW dealers assured they won't wait for awd variants
Dealer since: 1990
Dealerships: Irvine BMW, Irvine, Calif.; Shelly BMW, Buena Park, Calif.
Other brands: Mercedes-Benz, Mini
Average monthly sales at BMW dealerships in 2012: 270 new, 230 used
Quote: "We are not the most profitable — that is why it is a challenge. We would like to be in the top three."
BMW dealers were miffed that they had to wait six months last year to get the popular all-wheel-drive variant of the redesigned 3-series sedan.
The redesigned sedan went on sale in February. The awd version didn't come until late August. The 3-series sedan is BMW's highest-volume car in the United States.
BMW of North America has assured dealers that in the future awd models will be available at the launch of sales of a redesigned or new model, said Damon Shelly, chairman of the BMW National Dealer Forum.
The 3-series coupe arrives this fall with a new name: the 4 series.
"I like the idea of differentiating the coupe," Shelly said. "The plan is that visually it will look different and more sporty and aggressive. The idea makes some sense."
Shelly owns two BMW dealerships in California. He spoke with Staff Reporter Diana T. Kurylko.
How was 2012 for BMW dealers?
It was better than 2011. We sold more cars. There were a couple of stresses; we had some inventory shortages in the first six to nine months.
That created a lot of pressure to make it up in the last quarter. Part of the inventory shortage was the lack of all-wheel drive in the new 3 series, which we got in the third quarter.
Did last year's sales slump in Europe help supply in the United States?
The shortage was in the first two-thirds of the year.
What major issues do BMW dealers face this year?
We want to continue to improve profitability. We have a target to be among the most profitable in the industry. We are not the most profitable -- that is why it is a challenge. We would like to be in the top three. Also, to build a better understanding between BMW NA and its dealers.
Are BMW dealers profitable?
By and large they are profitable [and] the return on sales is similar to last year. We have profited from an increase in sales volume. My personal experience is we are operating on an identical return on sales but with an increased sales volume.
Did things improve between BMW and the dealers this year? You've had several years of tense relations.
That's a complicated question. The NADA [dealer attitude] survey did not show much improvement. It was pretty flat, which, given the amount of work being done at the Dealer Forum and with the committees, surprised and disappointed me because of the quality of the dialogue at the forum and committee level.
If the dealers did not register an improved attitude, then that is an important goal for this coming year to try to improve that. That is a goal shared by me as the forum chairman and BMW leadership.
Was the loaner car program earlier this year -- when BMW paid dealers up to $7,000 to put vehicles into the loaner program -- typical of the company's sales strategy for the future? How many dealerships were left with little inventory after BMW put all that cash on the hood?
No, it is not typical. This was a short-term strategy, and we do not believe it will be typical going forward. In certain areas we ended up with a shortage of stock because there were certain models in short supply -- for example, the awd 3 series. We had less inventory than we had demand.
Why do you think that happened?
I am not sure. Maybe they did not anticipate the demand. It could have been planning or some strategic decisions they made.
Were the heavy incentives BMW put on for the 2012 year-end sale necessary to move the metal?
Oh yeah, they had a load of incentives, a ton. I cannot articulate them all. They invested a lot to make sure that 2012 was successful.
The redesigned 3 series is still being rolled out. Is it doing as well as in prior years, considering the competition is getting tougher?
We think it is doing very well and we are very pleased. We were hampered by the fact that we did not have the awd; now we do.
Was renaming the redesigned 3-series coupe and convertible the 4 series the right move? Will the cars be priced considerably higher than today's two-door 3-series cars?
First on the pricing, I don't know. I would hope not. They hold pricing strategy close to the chest. I like the idea of differentiating the coupe. The plan is that visually it will look different and more sporty and aggressive. The idea makes some sense.
What's missing in the product lineup?
We have a great lineup when you add the 4 series. The X4, a smaller version of the X6, is coming. There is a commitment to introduce awd at the start of each model launch. That is positive stuff. My personal wish list is for a seven-passenger model larger than the X5 and a halo sports car.
How are dealers preparing for the launch of the electric i3 next fall?
That is still under development. We are expecting some facility requirements. The dealers who elect to be i3 dealers will have to make fairly minor investments in equipment and maybe for a showroom area and training. As I see it, that is about it. The i3 will not initially be high-volume. It will not put a lot pressure on our infrastructure.
And the new front-wheel-drive cars coming in 2014?
I don't know. A car was presented at some international auto shows. I like the idea because the market is shifting. If BMW is able to stick to their values as a sport and luxury sport brand and maintain the driving dynamics with the fwd technology, it could open up a whole new market and help them bring costs down. It is a positive move.
What are the highlights of the new facilities standards that will be rolled out early this year?
It is still under development. It is being refined. We are calling it the future retail initiative. It is about multiple things and preparing the dealers for the expansion of the BMW product lineup. It will expand over the next few years. It will be a more complicated lineup in terms of the range of models. We have to cope with how we will display the merchandise and the lineup.
The other piece is BMW has made a strategic decision to somewhat soften the environment. It has been black and white and gray. One of the goals is to make it warmer and more comforting
The third piece is to adapt to how the new consumer wants to do business, particularly from a technology standpoint where you are talking about PDAs and tablets.
We understand the standards will not require a lot of brick and mortar change.
No, there is not. There may be some dealers that have a shortage of vehicle display. BMW feels like we have capacity for the volume -- and that very encouraging for us.
What major policy changes did BMW make that affected dealers in 2012? Any controversial takebacks like in prior years?
No, nothing major like that. There are lots of little things we are working on to improve the situation, and I do not want to sugarcoat it. There is a lot of work to do to enhance things and make the relationship better and build the brand.
How is the central stocking program working, under which BMW holds dealer allocation of the 5-series sedan, allowing for easier and less costly swaps?
It hasn't been a big deal of late. There have been other priorities. They are doing it in a pilot-based way. They haven't rolled it out in a major way. We aren't using it.
How can BMW's certified-used program be improved?
For years, it's been the No. 1 industry-leading certified preowned program of the luxury manufacturers. We slipped against Mercedes last year and they outsold BMW. The dealer forum and the pre-owned committee are working with the BMW team on advertising and creative and dealership merchandizing, examining the details and looking at a sales recognition program. We are looking at a variety to things to make it a top program.
Is the no-cost 4-year/50,000-mile maintenance program helping the back end?
It obviously brings people into the service department. It is a huge advantage for BMW and its dealers. It adds to BMW's value proposition. I think it is the reason BMW was the luxury leader in 2011 and last year.
How would BMW dealers like to see the factory's Web-based marketing improved?
That is another project we are looking at -- refreshing some of the programs and upgrading the CPO site. There is this push-pull to create a consistent BMW look and feel but to give dealers some individuality.
Is BMW doing enough on the social media front?
They are pretty active in social media. Obviously, dealers have to do a lot of their own. Something being addressed is how we connect with our clients in the future retail initiative. BMW is pretty active on Facebook and Twitter.
Are dealers satisfied with the stepped-up marketing?
The new agency and new creative they brought to the table is encouraging. I am encouraged about the process that we used to select the agency. We are now starting to see some of that work, and I feel that we are working better with BMW on marketing strategy. I am pleased and happier than I was in 2011.