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BMW NA's 50th Anniversary: Addressing New Luxury Competition From Japan In The Automotive Market
BMW of North America experienced significant growth in its early years, with automobile sales increasing steadily from 26,040 units in 1976 to 96,759 by 1986. This success was largely due to an efficient sales network and limited competition in the premium sector. While Cadillac and Lincoln focused on comfort, BMW offered well-engineered cars that were enjoyable to drive.
However, the fluctuating exchange rate between the Deutschmark and the dollar posed challenges for BMW. In the 1980s, this volatility affected car prices significantly. For instance, the cost of a four-door 3 Series rose from $20,055 in 1986 to $28,400 by 1988. This increase only partially reflected the impact of currency changes on import costs.
The introduction of Japanese luxury brands like Lexus and Infiniti in the late 1980s presented new challenges for BMW. These brands offered high-quality vehicles at competitive prices with low maintenance costs. The Lexus LS 400 debuted in 1989 with features American drivers desired, such as a quiet cabin and good fuel economy.
With a starting price of $35,000, the LS400 was thousands cheaper than comparable BMW models. It included features like an automatic transmission and power sunroof as standard. Lexus's approach to customer service also set new industry standards, particularly during recalls.
In response to these challenges, BMW had to rethink its pricing strategies and improve customer service. The company began including scheduled maintenance in the purchase price of new cars to counter its reputation for high ownership costs. This move aimed to enhance customer satisfaction and loyalty.
BMW also recognised the need for more reliable vehicles to compete with Japanese brands known for trouble-free operation. The company introduced new models like the four-cylinder 318i in 1991 at a lower price point to attract budget-conscious buyers.
Lexus's Impact on BMW Sales
Lexus quickly gained traction in the US market, matching BMW's sales volume by February 1990. By year-end, Lexus sold 63,594 cars compared to BMW's 63,646 units. Despite this competition, BMW's president Karl Gerlinger noted that most Lexus customers were moving up from other Japanese or domestic luxury cars rather than switching from BMW.
To regain lost ground, BMW needed a strong product initiative alongside improved customer service practices. The company worked closely with dealers to ensure they represented the brand effectively and focused on customer needs.
BMW's Path Forward
The introduction of models like the V12-powered 850i showcased BMW's commitment to innovation and style but did not immediately boost sales against Lexus. However, by investing in attractive automobiles and enhancing its dealer network's focus on customer care, BMW saw sales rise again by 1992.
This upward trend continued for nearly two decades as BMW strengthened its presence in the US market through strategic pricing adjustments and improved business practices. The company's dedication to delivering quality vehicles helped it navigate challenges posed by strong competitors from Japan.
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