Robertson: BMW's i subbrand will lift margins

There's a nice pricing advantage to be had for early entrants in new segments, says Ian Robertson, BMW Group board member in charge of BMW brand sales and marketing and group retail operations.

Robertson, 56, says that's what happened with BMW's X models, and he predicted it will happen again with its i subbrand models: the i3 battery-powered compact and i8 plug-in hybrid.

Robertson spoke with Automotive News Europe Editor Luca Ciferri about the company's i strategy and provided some early insights into who has been placing orders.

Q: Are prices for premium cars influenced by market trends or by product cycles?

A: There is always a competitive model in the marketplace, and all manufacturers are on different cycles. At the same time, being first to market with new segments, as we did with our X models, helps to grow margins. In this regard, the i3 and i8 are off to a strong start. In the run-out phases at BMW, we normally increase specifications. This way of motivating a customer to buy a car at the end of its product cycle is far better than any normal incentive could ever be.

How do the major markets differ for luxury carmakers?

In Europe, the picture is skewed because the economic situation in individual countries varies so much. But if you look at a more normalized environment -- such as Asia or, in recent times, the U.S. -- you will find incentives for the luxury market are significantly lower.

How is China's premium market evolving?

It is clearly maturing. We have sold more than a million cars in the last four years. This means a replacement cycle is starting now. It also means that as well as a huge new-car market a significant market in used cars is starting to appear in China.

So China is normalizing?

Not exactly, because there are other factors there. In Beijing, for example, last year only 240,000 new registration plates were allowed.

This is a city with a far higher volume potential than that, which leads to a situation where thousands of existing cars have to be sold out of Beijing so that people can take their registration plate off in order to buy a new car. This means many used cars originally registered in Beijing are re-sold outside the city, which significantly distorts the market.

Is the i3 off to a strong start?

We have sold more than 3,000 i3s since the car went on sale in Europe last November. Sales are expected to rise as the car becomes increasingly available over the coming months. Customer deliveries in the U.S., a major market for the i3, only started at the end of April.

What is the current production rate?

In preparation for the U.S. launch, we increased production [in Leipzig, Germany] in April by more than 40 percent -- from about 70 to 100 units a day.

How would you characterize the i3 customer base?

Very broad. The i3 sets out to appeal to new groups of customers who lead cosmopolitan, socially responsible and sustainable lifestyles.

These buyers place great importance on design quality, innovation and durability. Clearly, we have a lot of new technology early adopters.

Apart from this, when it comes to a purchase decision for an electric vehicle, government incentives also play a big role. In Norway, for example, the government offers a very comprehensive program to promote electric mobility, including removal of all toll fees, dedicated lanes on highways, the right to use bus lanes in the cities, free parking, free charging and a number of other purchase incentives. So it's not surprising we have more orders in Norway than we do in most other European countries.

Is Norway your No. 1 European market in sales volume?

In unit terms it is currently a close run between the U.K., Germany and Norway. But allowing for the obvious discrepancies in population and market size, Norway is where we have the greatest i3 penetration at the moment.

How many i3 buyers are new to BMW?

About 80 percent, although their provenance is mixed. Some are coming from premium brands, but a significant portion are from volume segments. Interestingly, some of them never owned a car before but decided to buy a zero-emission vehicle with the i3. So it's clearly providing them with something they have never found in a car before.

Are there similarities between the i3 and i8 order books?

Just like the i3, the i8 is already proving a success. Although deliveries are only just about to start, demand for the BMW i8 is already exceeding the planned production volume during ramp-up. But the makeup of the order book is different, with lots of existing BMW customers looking to also add an i8 to their garages.

Some i8 early adopters are similar to Rolls-Royce customers, with multiple cars in multiple garages.

Have any ultrawealthy customers already fallen for the i8?

Yes, one has ordered three of them, one per continent.

You can reach Luca Ciferri at lciferri@crain.com

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