BMW Not ‘Selling Cylinders’

Special Coverage

CAR Management Briefing Seminars

TRAVERSE CITY, MI – The chief of BMW AG’s U.S. operations predicts an optimistic future for the recession-battered premium-vehicle sector, forecasting low double-digit growth for this year and the following two years.

Sales could grow even more after that, he says, especially as the large emerging markets of China and India begin to create millions of affluent consumers hungry for luxury.

But Jim O’Donnell, president of BMW of North America LLC, cautions today’s – and tomorrow’s – luxury consumer is changing, and premium vehicles will have to adapt to new values and perceptions about what makes a luxury car.

“In 10 years, premium automobiles will be desired for more than size and stature, he says. “Premium vehicles in a wider range of sizes will be desired for the emotional experience. They will be desired not for how fast they go but how they feel going whatever speed one wants to go.”

And that includes BMW. O’Donnell says the ultimate driving machine may not always be defined by its flawless internal-combustion engines in the future. The days of selling 16-, 12- or even 8-cyl. engines as ultra-luxury cars may be numbered.

“At BMW, we will not be selling cylinders,” he tells attendees at the CAR Management Briefing Seminars.

“Former 12-cyl. performance already comes from 8-cyls.; 8-cyl. performance comes from 6-cyls. And 4-cyl. (engines) could become 3-cyls., he says. “But if our customers want an 8-cyl., we should have one and will.”

Jim O’Donnell, president, BMW of North America, LLC cautions

The typical premium vehicle likely will be smaller, and it simply will not have some technology and design cues that signal today’s uber vehicles, O’Donnell says. “Increasingly, premium will be defined by the overall experience rather than the shape, size, method of propulsion, number of cylinders and, yes, even price.”

“It will no longer be about the number of cylinders, or cylinders at all, perhaps. But rather how what’s under the hood performs and how it provides a seamless driving experience filled with delight and joy.”

BMW will continue to emphasize performance and technology, but these characteristics may be manifested in new ways. Technology is becoming increasingly democratized, he says, so auto makers must find more innovative ways to apply it, refine it and integrate it into a vehicle.

“Not everyone can and will be able to do this,” he says.

“Regardless of the configuration, BMW will continue to be about performance and dynamics. And we will create and develop more solutions than ever before to ensure sustainable efficiency. Environmental responsibility will become brand strengths equal to superb dynamics. All will still support the feel of the ultimate driving machine.”

As an example, O’Donnell points to a concept car called Vision EfficientDynamics. It features a 3-cyl., diesel hybrid powertrain that has the performance of an M3 and travels 0-60 mgh (100 km/h) in 4.8 seconds but achieves roughly 62 mpg (3.8 L/100 km) and emits just 99 g/km of carbon dioxide.

Despite today’s challenges, O’Donnell says the premium market will continue to grow around the world.

“Five years ago, there were about 3 million of what would be considered affluent consumers in China. In another five years, that number is expected to reach nearly 10 million, a majority of these today only being in the three main cities of Beijing, Shanghai and Guangzhou. So just wait until all these multi-million second-tier cities start to catch up.

“India is on a slower but equally impressive growth curve. In 15 years, the number of its affluent citizens will be equal to the entire population of Australia (about 22 million).

This growth is being repeated all over Asia, O’Donnell says. “By 2015, China, India and the other top-10 Asian markets will boast 70 million affluent households with discretionary spending of more than $600 billion.”

“Add that to the established bases of wealth in Western Europe and the United States, and there’s incredible potential for premium-brand companies.”

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