|Name||Bayerische Motoren Werke AG (BMW)|
|Headquarter||Munich, Bavaria, Germany|
|Revenue||EUR 96.6 billion|
|Profit||EUR 4.8 billion (4.6% net margin)|
|Competitors||Mercedes, Audi, Porsche|
BMW manufactures and sells luxury cars and motorcycles, ranging from sports cars to luxury sedan, touring, and racing motorcycle with large displacement engines. It is ranked among the top 10 automakers in the world and is a pioneer in premium automotive sales. The company owns BMW, MINI, and Rolls-Royce brands, and it sells over 2.5 million cars under those brands. Its retail network worldwide is made up of company branches, dealers, subsidiary, and importer. The BMW Group is divided into three segments: Automotive, Motorcycles, and Financial Service. Automotive is the most important segment that contributes nearly 75% of total group revenue, while Motorcycles only make up less than 5% of sales. The Financial Service segment offers leasing and financing to customers through agreements with local financial service providers. BMW operates about 30 production plants in 15 countries, as well as 45 sales subsidiaries and financial services locations. It’s time to go over a detailed SWOT Analysis of the company.
BMW Strengths 2020:
- More than 100 years of experience in engine building and automotive manufacturing make BMW one of the most exciting cars to drive.
Starting with the first aircraft engine with aluminum pistons in 1917 to the world’s first aluminum V8 engine in 1954, BMW gears it innovation toward speed enthusiastic who seek the sheer pleasure of handling such a machine. BMW owners stick with the brand for precise handling, power & responsiveness of the engine, and top-of-the-class safety standards.
- Eye-catching, timeless design attracts many different customers, from classy managers to speed demons.
BMW designs are separated by different series models. For businessmen and women who prefer an elegant, less aggressive design but not old and boring, series 5 and series 7 are their choices. For younger people who want to want to be on the sportier side, the coupe models, especially the M-series, would be their dream vehicles since those cars have an aggressive look of a track car.
- A broad product portfolio allows BMW to appeal to customers with different budgets and needs.
The series 5, introduced in 1972, laid the foundation for today’s BMW model series structure and aimed at the upper-middle-class customers. The company now offers a range of products from USD 35,000 series 2 cars to a top-of-the-line USD 160,000 series 7 sedan. The M series, a high-performance line, aims to please customers who seek performance similar to a Porsche 911 GT3. Besides regular gasoline cars, BMW also has hybrid and electric models.
- Research and Development are embedded in the brand’s core strategy.
BMW currently has 16 research & development centers globally with 15,000 employees churning out new technological innovation for more efficient, more attractive cars. The company’s R&D budget grew by 12.8% from 2017 to 2018 and this trend is not expected to subside anytime soon.
BMW Weaknesses 2020:
- BMW vehicles are complicated and expensive to maintain.
BMW engineering is very sophisticated, especially in the engines and car electronic systems. Therefore, BMW cars and motorcycles needed to be taken care of by BMW-specialized dealers and mechanics. In addition, the company uses premium parts for its products, therefore owners have to pay premiums to buy them directly from BMW or brand-name third-party manufacturers.
- Autonomous-driving features may not appeal to all BMW drivers.
BMW is testing autonomic-driving vehicles on its campus in Munich, and the company expects to offer these new features, known as iNext BEV, for its future cars. This movement would make BMW’s tagline “Ultimate Driving Machine” become redundant, and hard-core fans may reconsider their future purchases since they are the ones who seek to control the cars at their purest.
- By offering cheaper models, such as the X1 SUV or series 2, BMW is diluting its brand value as a premium car manufacturer.
Many customers own a BMW because it is a status symbol rather than just a vehicle, but now they have to share the brand name with $30,000 models, the same tier as a Toyota Camry.
BMW Opportunities 2020:
- Increase R&D investment in electric vehicles (EV) to compete with Tesla.
European automakers’ stocks are trading at a low price-to-earnings ratio, compared to the market, while Tesla enjoys high expectations from analysts, reflects in its fly-high stock price. BMW has already offered an electric vehicle, the i-series, yet isn’t gaining recognition. The i3 model is not attractive enough, in terms of design and technology, to compete with a Tesla, and the i8 is geared toward supercar collectors rather than EV drivers.
- As China is overtaking the U.S to be the biggest market for BMW, the company should build more cars in China to avoid importing tariffs and save on transportation costs.
So far, only the X5 and the new electric model iX3 is made in China, the rest is imported from the EU and the U.S. The U.S – China trade war creates new import tariffs in passenger vehicles.
- Continue to increase strategic partnerships in key markets and fields to gain collaboration in expertise, skills, and resources.
BMW has partnerships in automotive and technology companies, most notably is the BMW-Daimler cooperation in developing autonomous vehicles. The company also forms a joint venture with Brilliance China Automotive Holdings Ltd. in China to form the BMW Brilliance Automotive (BBA) to produce BMW cars in China.
BMW Threats 2020:
- As BWM focuses on rolling out new EVs, it sacrifices the sales of internal – combustion cars, which has always been the cash cow of the company.
EVs are more expensive and have a lower margin, but they are necessary to meet new emissions legislations and compete with Tesla. Net margin will be affected negatively in the short-term, during the transition phase.
- China and potential Brexit tariffs are a challenge to the BMW import-export business.
BMW imported more than 63,000 vehicles to China and sold 233,000 units in the U.K during 2019, as well as assembled around 228,000 MINI and Rolls-Royce in the U.K. The company’s ability to pass on the 10% import tariff, results from no-deal Brexit to customers is limited; therefore, there will be a trade-off between maintaining margin or losing sales volumes.
- New regulations on safety and emission standards are putting pressure on the automotive industry.
Compliance costs will grow larger and put a big dent in the margin. Small errors could also lead to hefty fines and negative public images.
BMW SWOT Analysis Conclusion 2020:
Being one of the German’s trinity in the luxury auto industry along with Mercedes and Audi, BMW has always differentiated itself for being the speed and sporty one, producing cars that owners like to take the wheel for their own pleasures. BMW is expanding its territory to the electric vehicle market to compete fair and square with Tesla and diversify its income from tightly-regulated internal combustion vehicles. The company also has a stake in the future autonomous vehicle market.
BMW AG. (2020). Investor Presentation.
Michael Dean, G. D. (2020). BMW Research. Bloomberg Intelligence.