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      12-27-2007, 01:26 PM   #9
Voltigeur
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Quote:
Originally Posted by Sick Speed View Post
So let the rest of the world pay a premium price since the US market will account for roughly 25% of M3 sales at 5% of the
This is an interesting question (and I don't know the answer): but what % / global sales of e46 M3s were sold in the U.S?
I expect that BMW may be thinking of allocating less of the e92 due to the oft-cited price asymmetries of this car's (likely) US selling price vis-a-vis other major markets. Indeed, in relation to the CEO's / mgmt objective, that would be a good strategy given the dollar.

Quote:
Originally Posted by Sick Speed View Post
As opposed to your scenario where you propose BMW should lower the cost to the US consumer because our dollar is weak meaning when it gets converted back into EUR they lose even MORE profit.
In a simple business model why do you think BMW would do this? I am being serious with this question.
Actually, that's not my scenario. If I were Herr Pischetsrieder I would send enough e92 M3's to the U.S. to keep up its usefulness as a "halo" car for the best-selling 3-series, and re-direct % / global production (at higher ASPs) to the newly emerging rich in NJA, BRICs etc. But I'd also want to hit that life-cycle production run 100k or so units so that I (1) maximize return on R&D/Sales on this car and (2) still be able to say it's the world's best selling high-performance car - this also helps sales in the aspirational set in the non-developed markets - BMW has massive cachet in CN, IN etc.

As far as US pricing goes: the issue is, will this be a good macro back-drop to extract the highest ASP arising from BMW NA's pricing model? (there has to be a cost + variable margin range, so how high to make that intitial margin?)

Quote:
Originally Posted by Sick Speed View Post
I did some currency conversions off of a few of BMW's highest selling M markets and the rough estimates for base pricing in the US IF BMW kept it consistent with the rest of the world converts to an average of $93K.
Doesn't sound unreasonable.

Quote:
Originally Posted by Sick Speed View Post
If you are saying that the "premium" BMW owner will most likely be unwilling to pay this cost for the M then I would disagree. And I would agree with you that the standard BMW owner who may have been considering upgrading to an M would not with a price of $93K staring at them.
We both know the aficionados will pay up - provided they didn't tank their finances in the real estate markets. But it would also be good to consider the comp and still snatch sales (at the margin) from Audi / MB. It's no secret that Audi is gunning for BMW (the R8 is a huge halo product), so BMW needs to keep it close enough so that the choice is not made easy to defect (-vs- stay w/ MB, Porsche & co.)

Quote:
Originally Posted by Sick Speed View Post
earnings on sales which translates to INCREASED share holder equity which means job security for the CEO. And the sole purpose for existence of any CEO in a publicly traded company is to do one thing and one thing only. INCREASE SHAREHOLDER EQUITY AND RETURN.
Absolutely. I'd also want the CEO to be up-to-date enough also to target higher ROI/RoTC and EVA. But then we're getting into a much larger case study on how BMW sees its global strategy / profitability. Even the delay in pricing / release is making me think the US is not as important as it was in the 1990s - and w/ EUR/USD at 1.40+, who can blame BMW?! With the M3's costs being primarily denominated in EUR. If I were senior mgmt I'd be thinking about getting more sales in RMB - likely going to go up in EUR terms over the long-run.

Quote:
Originally Posted by Sick Speed View Post
The price will be higher than what most people on this board want and BMW will make less of them.
Yes to first and possibly to second - but I would go back to a proposition that it's better to max Tot Revenue over the product's life-cycle - to amortize all that R&D and lower SG&A / unit. Also, one has to consider Y/Y% comps ... which may argue in favor of a HIGHER ASP up-front, then as USD strengthens and you raise prices a bit, then the car will be more profitable to BMW AG and the Y/Y comps would be easier for BMW AG to digest (and to pass on to US consumers as we get past this macro slowdown).

One thing that will likely be a tailwind for BMW AG (not talking about NA here) is that the EUR/USD is likely to come down in '08. If you want to discuss why then we can PM. These kinds of questions are critical to how I do my work.
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Last edited by Voltigeur; 12-27-2007 at 01:42 PM.. Reason: erratum
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