BMW’s automotive brand portfolio only consists of 3 different brands: BMW, Mini and Rolls-Royce. In 2015, the company sold only 338,466 models of its MINI cars and 3,785 models of its Rolls-Royce cars out of its total 2,247,485 vehicles sold. Considering that automotive sales of EUR85,536 billion make up 92.8% of the total BMW Group’s revenue and the majority of those automotive sales are just BMW cars, the company is heavily dependent on its luxury BMW cars’ sales.
Additionally, small to medium luxury cars and a line of crossovers make up the majority of the company’s product portfolio. The company does not offer any pickup trucks, light and heavy commercial vehicles or busses in order to differentiate its offerings. The business does not own any auto brands that are marketed to consumers with lower or intermediate incomes who cannot purchase luxury vehicles.
Poor car brand portfolio with minimal product differentiation leaves BMW at a disadvantage when the economic conditions worsen, consumers’ tastes shift or the brand suffers lots of unfavorable attention.
In This Article...
BMW’s benefits include being a luxury not everyone can afford.
a name that has a high market value. One of BMW’s most significant advantages is this. It is valued at more over $40 billion in the United States as a global brand. As a car, it’s third to only Toyota and Mercedes-Benz.
It’s safe to argue there’s a correlation between brand familiarity and value. Its great brand value indicates that it is a widely known and coveted vehicle for individuals all around the world. When you see it, you know it. You desire it. And maybe, you get it.
BMW is more than just a vehicle for after-school kid pick-up. Or a car for an urgent Saturday morning grocery run. BMWs are regarded as status symbols. The car exudes luxury in every way, from the exterior to the advertising. A BMW must indicate that you are at the top of the social scale. Not to mention that the brand has an almost faultless track record of creating immaculate automobiles while keeping its opulent appeal.
With a brand so highly identifiable, BMW can push out related products without breaking their marketing budget. Once you hear the name, it inspires confidence in consumers. Particularly the brand devotees.
Conclusion
BMW is the market leader in the automotive industry, has a solid reputation, offers top-notch services globally, and has a positive brand image. By raising awareness, locating a new audience, and engaging them on various social media platforms by providing top-notch content, the company has developed a strong online presence. It has a considerable market presence as well, due to the century-long goodwill of the brand. Yet as it is afflicted by increased competition, the corporation needs to invest more in the innovation side to stay relevant. To outperform the competitors and maintain their place in the automotive business, they must penetrate new markets. BMW’s SWOT analysis has shown that even the most well-known corporations can experience difficulties.
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Strengths
1. One of the strongest brand names for a car company in the world is BMW. BMW established a reputation for dependability and high-quality construction. This has been visible throughout its career, with a strong heritage of luxury and performance. These brand values have ensured that BMW is continually regarded as a premium car brand, associated with luxury, safety, reliability and status. The brand incorporates BMW, MINI and Rolls Royce, as well as BMW Motoraad, its successful motorcycle department.
2. BMW continues to have a stable, globally diverse revenue base. Despite having its home market in Europe, BMW’s biggest markets are in the East, with the Chinese market being its biggest sales region. In both Europe and North America, BMW holds a competitive market position. The continents of Africa and South America have much of potential for development.
3. High-quality product offers are closely associated with the BMW brand. BMW owners have extraordinarily high levels of brand loyalty as a result of the company’s tight commitment to its fundamental brand principles of quality and performance. Due to its success in motorsport competitions and the durability of its vehicles on the road, BMW continues to enjoy a very loyal following across the globe.
BMW had the second-highest number of sales for a luxury automobile manufacturer with 2.17 million units sold. (Statista)
4. BMW has been actively involved in green technology for over thirty years. Following the severe fuel crisis of the previous century, BMW began experimenting with electric cars in the 1970s. BMW was able to launch its i3 and i8 hybrid and electric vehicle models among the first thanks to this running start. This current momentum in environmentally friendly products will guarantee BMW stays a competitive competitor moving forward.
5. BMW has production sites in several different nations to assure regional acclaim. BMW has established manufacturing facilities all over the world as a cost-effective method of breaking into markets, gaining political support in various countries, and managing the impact and risk of trade tariffs. These facilities assist governments to expand their exports, as well as create jobs for their local labor forces.
BMW operates 31 production and assembly facilities in 15 countries worldwide. (BMW)
6. BMW continues to improve its automobiles with one of the industry’s biggest investments on research and development. BMW spends among the most in the industry on research and development to keep its brand at the top of its game. This provides a level of innovation in BMW’s products that is industry-beating, providing the business a level of competitive advantage not only through its goods, but also through efficiencies in its production capabilities and operations.
Thesis
My thesis on BMW is:
- The company is a fundamentally good, above-average quality corporation with exceptional products both now and going forward.
- However, valuation is what matters most, and given the current EV debate, which is unlikely to provide the company with any clarity in the near future, I don’t see the kind of stable, market-beating upside that I’m looking for.
- BMW’s price has decreased by 12% since my previous essay, but for the time being, I still think it’s too expensive because the risk/reward ratio remains unfavorably asymmetrical and there are better alternatives on the market.
Keep in mind what I’m all about:
1. acquiring undervalued companies at a discount, even if the undervaluation is minor and not mind-numbingly large, allowing them to normalize over time, and collecting capital gains and dividends in the interim.
2. If the firm exceeds normalization and enters an overvalued state, I harvest gains and repeat #1 while rotating my investment into other inexpensive equities.
3. If the company doesn’t go into overvaluation, but hovers within a fair value, or goes back down to undervaluation, I buy more as time allows.
4. I reinvest income from dividends, savings from labor, or other cash inflows as described in #1.
I was able to treble my net worth using this technique in less than 7 years, and that is all I intend to keep doing (even if I don’t anticipate the same rates of return for the foreseeable future).
I’m probably not for you if you’re looking for returns that are significantly higher. I’m not for you either if 10% yields are your thing.
If you nevertheless want to build your money wisely, safely, and collect well-covered dividends while doing so, and your timescale is 5-30 years, then I might be for you.
Senior analyst/DGI investor, age 36, managing a small number of clients’ private portfolios in Sweden. invests in the United States, Canada, Germany, Scandinavia, France, the UK, and Belgium. My purpose is to solely buy undervalued/fairly valued stocks and to be an authority on value investments as well as related topics.
Additional disclosure: While this post may sound like financial advice, please remark that the author is not a CFA or in any way licensed to give financial advice. Although it might be set up that way, it is not financial advice. Prior to making any investment, investors are expected to conduct their own due diligence and research. Futures trading, option trading, and short-term trading are all potentially very dangerous investment strategies. They generally are not appropriate for someone with limited capital, limited investment experience, or a lack of understanding for the necessary risk tolerance involved.
I possess the European/Scandinavian tickers (not the ADRs) of all European/Scandinavian companies included in my publications. I own the Canadian tickers of all Canadian stocks I write about.
related investing news
Brands that traditionally targeted to the top end of the American auto market are now producing smaller, less expensive models in an effort to increase volume and capture a larger share of the new car market.
BMW and Mercedes-Benz have on different occasions tried their hands at delivering lower-priced automobiles with the intention of drawing younger, less wealthy purchasers into the fold and turning them into satisfied and loyal customers for life.
However, some of these wagers, like the Mercedes-Benz 320 sport coupe and the small BMW 318ti, did not pay off.
However, premium and luxury manufacturers continue to attempt, and many now offer many models at the lower end of the price spectrum.
Increasing the number of cars they sell overall is a key goal for the larger manufacturers, and it is especially critical now as firms are faced with the need to make substantial expenditures in new expensive technologies with little near-term payoff, especially in electrification and autonomous driving.
For premium automotive brands, however, there is a conflict. Some automakers created separate brands for their mainstream and premium lineups. Ford and General Motors sell their luxury vehicles under the Lincoln and Cadillac names, while Toyota sells its higher-end vehicles under the Lexus label. Even Volkswagen Group can distinguish its Volkswagen automobiles, aimed more for the typical buyers, from its pricier Audi and Porsche brands.
However, there are no distinct mainstream brands for Mercedes-Benz or BMW. They are only allowed to work with one brand. The risk here, say some auto industry insiders, is that in trying to reach every corner of the market they could dilute their high-end brand identity.
Why some people worry that BMW isn’t the “ultimate driving machine”
BMW has long called itself the ultimate driving machine, but lately some investors say the German luxury leader needs a shot in the arm.
The BMW brand has yet to recapture the leading global sales position it lost in 2016 to competitor Mercedes-Benz.
To be fair, investors and analysts are eager to point out what while Mercedes is surpassing BMW in volume, BMW is ahead on other criteria, such as cash flow and profitability. Some claim that those figures matter more.
But the automaker replaced its CEO in 2019 in what investors say is a move to reinvigorate a brand that might be growing a bit complacent.
According to RBC analyst Tom Narayan, Mercedes-Benz has more models available for customers looking to enter the luxury market. This has made it possible for it to sell more cars.
Additionally, some worry that BMW’s engineering and design have grown a little stale and that the company may be losing its distinctive character as a luxury performance brand as it becomes more and more dependent on sport utility vehicle sales. Over 37% of BMW’s sales in 2018 were “sport activity cars,” an increase from just over a third of sales in 2017.
Federal securities regulators in the US are looking into whether BMW manipulated sales numbers, and the automaker is the subject of their investigation. The company is one of several automakers targeted by similar probes.
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BMW AG said operating returns for its automotive business will remain robust this year, even as the war in Ukraine and a global semiconductor shortage weigh on production.
On Wednesday, the company revised its forecast for 2022 automaking returns to 7% to 9%, noting that the target range would have been 8% to 10% but for Russia’s invasion. BMW expects deliveries to remain flat at about 2.5 million.