Why are lease cancellations increasing?
This is due to rising interest rates and reduced factory sales support. These things lead to higher lease fees.
People are paying buyers. People will buy the car if the payments are $800 a month for a 60 month loan and $780 for a lease.
Our business relies on leasing and a three-year sales cycle. Not only do we sell cars every 3 years, we also do one owner local trade-ins. Acquiring used cars is quite a challenge, and getting those customers to come back and bring us off-lease vehicles is key to keeping more BMWs in our dealer network.
What are the headwinds for BMW dealers in 2023?
Rising interest rates will continue to affect the used car market. When interest rates were low, people could buy his two-year-old car at the original suggested retail price and still get paid less than a new car. But these payments increase when interest rates more than double his.
Managing supply and demand will become more difficult in 2023 as shortages ease and production capacity increases. A proper balance must be maintained.
What can BMW do to help dealers sell cars as interest rates rise?
You will need support from your OEM through discounted rates on new car loans and leases.
It is difficult to spend money in an environment with few days. But when you’re losing this many customers each month from your leasing portfolio, you can look at it like an expense, or like an investment in the future to keep people with your brand. Typically, it costs more to acquire these customers than it currently costs to retain them.
How do dealers deal with inventory constraints?
Inventory is improving, but we’re pitching into the pipeline. Certain product lines have more availability, such as the X5 and Spartanburg-manufactured crossovers.
supply of days [in late 2022] It was 12-15 days versus 5-10 days. [in 2021] 40-60 days pre-pandemic. BMW aims to supply cars for about 15 days. [2023]Dealers don’t want to go back to more than 45 days of stock.
Having the car on the ground for impulse purchases and for people to test drive is important.But when demand is more than supply, business is much better for us. This means factories have to spend less on incentives and dealers have to discount [the vehicles] the following.
Will conditions in the used car market require dealers to modify their acquisition strategies?
Acquiring a used car is more difficult and fewer cars come back out of lease. Therefore, dealers are also focusing on other channels such as auctions, street purchases, and getting existing customers to upgrade to newer vehicles.
In recent years, it has become difficult to find deals at auctions. Carvanas and Vrooms from all over the world hit the auction lanes, driving prices up. However, the auction prices may drop as these companies face problems.
What does BMW advise dealers regarding vehicle markups?
BMW hasn’t been overly loud about it. They urge dealers to keep turn rates high. They made it clear that markup is not a good customer experience and that dealers should take a long-term view of this.
Unlike some competitors who are going all-in on EVs, BMW is sticking to internal combustion engines for the foreseeable future. Do you agree with that strategy?
The move to electric vehicles is an evolution. Public charging infrastructure still has a long way to go.i don’t know that [battery-electric vehicles] Work for every consumer in every region of the United States
We want to give our customers choice. BMW plans to offer a wide range of powertrains, including internal combustion engines, plug-in hybrids, BEVs and, in the future, hydrogen.
A diversified powertrain strategy means BMW doesn’t have to bet on one technology. If it turns out to be wrong and not appealing to many customers, going one direction is expensive.
Demand for BMW’s electric models is strong. Are you surprised by the pace of hiring?
Consumer demand for the BMW i4 and iX was very high. The product checks boxes in terms of price, range and driving performance.
The decision to adopt the familiar styling of BMW’s EV resonates with customers. The i4 looks like a 4 series and the i7 looks like a 7 series.
We have loyal customers who love BMW’s design language. People want to opt for a zero-emissions powertrain without sacrificing styling.
Are dealer margins different for BMW electric models?
Dealer margins are the same for gasoline and electric vehicles. There was no other discussion.
The brand needs a profitable dealer network to invest in facilities and employee training. Dealers need an incentive to sell electric cars, so it would be shortsighted to cut dealer margins on products BMW needs to succeed in the market.
How did BMW take back the top spot from Tesla in this year’s US luxury goods race?
We sell everything we buy, so all we have to do is deliver the goods to the dealer.
The Model 3 sedan and Model Y crossover are driving Tesla’s sales. There is demand in the electric segment of midsize sedans and SUVs.
This is a segment where traditional OEMs are just beginning to compete. So as more products enter the market and production increases, it will become more and more of a conversation.
This year we will see significant growth in EVs with the addition of the i5 electric sedan. Coming in 2025, the Neue Klasse electric platform will allow BMW to introduce his BEV at a more competitive price.
It’s also the time when the cruising range increases significantly.
What niche will the new XM flagship crossover fill?
The XM is a halo car with incredible performance and luxury equipment. It will bring in new buyers who may not have considered BMW before. The XM will compete with high-performance luxury SUVs such as the Lamborghini Urus, Bentley Bentayga and Porsche Cayenne GT. There is a lot of competition in that field.
BMW’s direction in XM design is polarizing. But getting people to talk about cars with bold designs attracts more people than you lose.
How should dealers be compensated for subscription-based feature and performance upgrades offered by automakers through software updates?
We cannot refuse to fight technology and deliver a better customer experience.
But when these subscription features don’t work or customers have questions, dealers need to be compensated fairly because we are the front line answering customer questions. Margins for subscription features should be the same regardless of how the customer purchases the option.
How will wireless service updates affect my fixed-operation business?
OTA service updates keep customers away from dealers. This is a concern as it reduces customer touchpoints and can lead to lower retention and loyalty rates. Any time you talk to a customer, it’s an opportunity to build a relationship and, where applicable, provide a sales context. So when it comes to big issues, you should look at your customer retention metrics.
How will EVs transform the fixed-job workforce?
Our customer payments business is up over 10% year-over-year. People are keeping cars and putting money into them instead of buying new cars.
But electric vehicles could threaten the profitability of fixed businesses as the majority of parking lots transition to low-maintenance electric vehicles. EVs require more diagnostic service work than maintenance. The concern is how it will affect the profitability of our parts and services division.
We are working with BMW on recruiting and training service technicians for EVs. This is a top priority for our dealer forums.
Is digital retail threatening to obsolete brick-and-mortar showrooms?
There is no doubt that customers are part of the car-buying process online. We are working with BMW to make that digital journey even more seamless.
But consumers still have a long way to go before they buy cars from their sofas. As cars become more complex and technology rich, it becomes even more important for consumers to have a place to try tires and consult with client advisors.