BMW calls it yuppie love, and moves on. Youngsters spurned car after '87; company now woos older buyers
These are tough times for BMW, the archetypal European ``yuppie car.'' The West German manufacturer of upscale sedans and coupes has seen a sharp erosion in its sales in the United States after last year's stock market plunge. While BMW officials believe they can stage a modest comeback over the next few years, they will do it by shifting their target market away from young overreachers to older, better-established luxury car buyers. During the early 1980s, BMW was transformed from a small importer of performance-oriented cars into a brand of choice for the Perrier generation. In 1986, US sales peaked at 96,759. Some company officials predicted BMW would soon top 100,000.
But they didn't count on the sudden, dramatic shift in exchange rates, which have driven up prices nearly 50 percent since mid-1985, nor did they foresee the impact of the October 1987 market dive.
``A year ago ... we predicted the stock market crash would not have a long-term impact on BMW,'' says G"unter Kramer, president of BMW of North America Inc. It was, he admits, ``a prediction based on hope'' more than on hard data. In hindsight, it was wrong.
In the final months of 1987, the market plunged and BMW closed the year with sales of 87,000 units. Company planners expect to finish up 1988 with sales of about 75,000 cars.
The sharpest drop has occurred in the so-called ``entry level'' market covered by BMW's 3-series vehicles, including the popular 325.
``One-third of our 1989 sales will come from the $25,000-to-$30,000 market,'' Mr. Kramer says. But that is down from 50 percent just two years ago.
Marketing vice-president Carl Flesher says there will be ``a re-positioning of the 3-series in the 1990s to gain volume,'' but the days when yuppie buyers dominated sales and marketing plans are over.
Instead, BMW is focusing more attention on high-end products, such as the $70,000, 12-cylinder, ultra-luxury sedan, the 750il. With a per-unit profit of around $15,000, it is a keystone of the company's long-term viability. Demand for the 750il has exceeded initial expectations and is expected to top 3,400 this year.
For 1989, the automaker hopes for a modest rebound, with sales of between 82,000 and 85,000 cars. Most of that growth should come from BMW's newest models, the totally redesigned 525i and 535i, with price tags of $37,500 and $43,600, respectively.
Sleek and handsomely aerodynamic, the new 5-series models are expected to be the big hits for BMW this coming year, with sales forecast to reach as high as 25,000 cars this year, which would be an increase of nearly 40 percent over last year's figures for the old 5-series models.
Over the long term, Mr. Flesher says, ``We plan to get back to 90,000 or more sales by the mid-1990s.'' But some skeptics remain.
For one thing, they note, rising import costs and concerns about the economy have eaten into the luxury car market. From a 1986 peak of 1.370 million units, sales of automobiles costing $25,000 or more will dip to barely 1.1 million for all of 1988.
And even if the luxury market comes back, European and American manufacturers will be facing stiff new competition from Japan. Some of the fastest growth in the luxury segment has been posted by Acura, the upscale division of Honda. And over the next year, Nissan and Toyota will open their own second divisions devoted exclusively to luxury products, some with price tags of $40,000 or more.