GOTLAND, Sweden — BMW proved skeptics wrong when its 1-series entry-luxury car became a hit in Europe. Now the automaker wants to do the same in North America.
BMW will launch its first 1-series variant — a coupe — in the United States in the spring. The 1-series coupe launches in Europe next month.
By daring to sell its smallest car in the United States, BMW is braver than its rival Mercedes-Benz. Mercedes dropped plans to sell its B class in North America in 2005, citing the weak dollar and competitive market.
But Falko Radomski, project manager for the 1 series, said the coupe will reach North America at a favorable moment as U.S. buyers turn to smaller cars because of rising fuel prices.
"We believe there is a change happening in this market. Increasing gasoline prices mean that customers are becoming more interested in fuel-efficient cars," Radomski said at the car's press launch here.
CSM Worldwide automotive analyst Arne Behlmer said: "The environmental debate has led American drivers to look for more fuel-efficient vehicles. BMW has an excellent brand position in the U.S., and I would say that this vehicle is going to be a success."
When the 1 series launched in Europe in 2004, some industry observers were skeptical about whether the car would succeed in the entry-luxury segment where Audi's A2 failed — production stopped in 2005 — and Mercedes still struggles to make money with its A class and B class.
After three years, the 1 series is BMW's No. 2 seller in Europe after the 3 series with 81,486 five- and three-door hatchback variants sold in the first eight months of 2007, according to JATO Dynamics.
But BMW still needs the 1 series to do well in North America to make the car profitable. Analysts say profit margins on the model are thin, and BMW probably has not recouped the estimated $850 million to $1 billion in development costs for the car.
"The pricing of the 1 series is only 10 percent higher than models from volume manufacturers in the compact segment," said one analyst, who did not want to be named. "Add on top of that the higher production costs (compared with mass-market cars), and it's not a great formula."
Juergen Pieper, an analyst at Metz-ler Bank in Frankfurt, said the profit margin for the 1 series is about 2 to 3 percent. "This is not ideal when you build a car in Germany, where production costs are higher," he said.
But a BMW spokesman said profit margins on the 1 series are more than 10 percent. "If there was no business case for this car," he said, "we wouldn't build it."