BMW needs to better balance its SUV/crossover supply with cars to meet demand and stop pushing cars, said Damon Shelly, whose term as chairman of the BMW National Dealer Forum ended Feb. 29.
BMW light-truck sales were 33.4 percent of last year's U.S. sales and the percentage needs to be about 40 percent, said Shelly, owner of two California stores, Shelly BMW in Buena Park and Irvine BMW in Irvine.
Shelly said having more SUVs and crossovers "will make a lot of difference because they are not trying to force the greater share of passenger cars and will more closely meet natural demand."
With light-truck supply in better balance, Shelly, 57, predicts BMW will set a new U.S. record this year.
He spoke with Staff Reporter Diana T. Kurylko.
Q: BMW set a U.S. sales record in 2015. Can it improve that in 2016?
A: I believe so.
Based on what?
The headwind that we experienced in 2015 was the model mix. I do not think BMW had enough share of SUVs, the relationship between them was out of whack. They have to bump that share from 30 to about 40 percent.
BMW has changed dealers' margin and made 1 percent nonvariable. Why did dealers agree to that?
It took a point as an expense abatement to help the rising structure cost. They did that and they added margin which is a huge one for the dealers. The vast majority get the margin because it is part of their added-value program. The vast majority will earn it.
The scheduled free maintenance is three years now vs. four years. Will that drive some customers away?
That was part of a whole holistic package and what we got for it was the nonvariable expense abatement and that increase in margin. We felt as dealers that it would be OK. This is a package that we asked for.
Is the new 7 series conquesting new buyers?
At the moment I would say, and I don't have specifics, it is predominantly retention buyers.
The 7 series just came out last fall but BMW put $3,000 on the hood already. Isn't that early for an incentive?
It is a highly competitive market -- the dealers are glad BMW is coming in and supporting all of its products rather than waiting.
Do BMW dealers want the compact 2-series Active Tourer in the U.S.?
I don't think so. It isn't really a crossover -- it is front-wheel drive and a very European looking wagonish thing. We as a product committee were concerned; we did not want to distract ourselves with that.
Will a 1-series front-wheel-drive compact sedan sell in the United States? It's apparently coming in the next year or so.
I think it could.
What has made BMW so successful in the United States? The brand is celebrating its 100th anniversary.
And another sales record. I think BMW has over the years built a really competent dealer network and the fact that it has a strong dealer network with high quality facilities is probably an obstacle to other franchises that may be doing better worldwide but not locally. And its culture. I have been to Munich many times and they are constantly innovating and trying to reinvent themselves and thinking about where we need to be -- they want to get ahead of the market.
They do take risks. They were the first out with the X5, the X6 was innovative and they are taking a risk with the i3 and i8. They are really innovative and they are fabulous engineers and they build incredible cars. There will always be demand for innovation and quality especially as baby boomers age. They have to keep broadening their reach.
They have made a huge effort to stay true to the notion of a true driving machine.
Can BMW grow sales of the i3 compact electric?
Yes it can. I am biased and do quite well with the i3 in this market. I would like to add range, which we will get. The look has grown on people. It is a more edgy and interesting car. Our experience from a maintenance perspective is it is doing very well. My general manager in Irvine has had one for six months and they love it and it hasn't had one problem.
I would like to see a more mainstream model.
With the chairman change, [Harald Krueger] has to put his stamp on it. Krueger has spent time in America and I am optimistic on how he views the American market.