Money can’t buy you love. But, in the automotive industry it can buy you a whole lot of other things, such as advertising and research and development. According to Automotive News, BMW is coming to second in the profit margins race to Audi.
That is despite BMW’s lead as the world’s best-selling premium manufacturer last year. Both Audi and BMW are experiencing record global sales, profits and profit margins. Audi is just growing at a faster rate, in addition to generating higher margins. That is a no brainer. Why, when BMW is known for its ability to command high asking prices? It is because Audi’s products are based on Volkswagen Group platforms.
Audi has the benefits of being under a huge corporate umbrella that enables large economies of scale for purchasing materials, as well as the amortization of R&D dollars. The BMW Group, on the other hand, has no such advantages. Still, the spread between the two in terms of margins isn’t all that big: 11.8 percent versus 12.1 percent by Audi.
How an analyst called that “disappointing” is beyond us. That is just .3 percent of difference – we’re surprised the spread isn’t bigger. BMW’s ability to charge higher premiums for its vehicles does mitigate some of Audi’s advantages. For BMW, the 11.8 percent result is up significantly from last year’s 8.0 percent. This is all riveting stuff, we know – but it sheds some insight at some of the trends underneath the surface at the luxury manufacturers. Every one of the top three global manufacturers, BMW, Audi and Mercedes-Benz is growing by every metric. This has all been happening in the face of financial difficulties in the European market.
Last year, 1.67 million BMW Group vehicles were sold. This year, with the new 3-Series launching, BMW plans to push sales well above that mark. In the future, the brand’s front-wheel drive platform is planned as a basis for a lot of future growth, much to the chagrin of enthusiasts. Mercedes-Benz has similar plans in achieving future sales growth.