WEekly News - 9 July 2007

BMW in china - the long March

Fiat 500 - Something old, something new...

Saab hides behind chevrolet




BMW in china - the long march



BMW is marching ahead in China at the moment,

with a 38% increase in sales for the first half of

2007. This can be broken down into a 36%

stride forwards for the BMW brands and a

gigantic leap for Minis, up by 131%. With one

plant operating at full capacity there are now

plans to open a second plant. If this makes

it sound like the iron rice bowl is shaped like the

Bavarian propeller badge then a closer look at the

numbers is advised.


Actual sales this year amount to 22,891 BMWs and 776 Minis, and this in the most populated country in the world with one of the fastest growing economies. In 2003, with foreign auto makers confined to forming joint ventures with domestic suppliers, BMW believed that they had pulled off something of a coup in securing the services of Brilliance China Automotive after MG Rover had failed so ignominiously. The Germans believed that local production would provide them with a bridgehead into the fast growing Chinese luxury car market. As things turned out, having escaped the MG Rover frying pan BMW must have thought that it had landed in the Brilliance China fire.


In 2004 the Chinese car market was taking a breather, slowing to a growth rate of 15%, and there were worries that the market had overheated. BMW made 15,138 vehicles but had sold only 8,708 vehicles, leaving thousands in stock. The company went into 2005 expecting the worst and discounted the 3-Series and 5-Series by up to 15% just to get shot of them. In the event, the year turned out better than feared: after an initial downturn the market rose by 27% for the year and BMW sales doubled to 17,582 units. Production, though, fell below 10,000 units as BMW let the joint venture take all the strain of the previous year’s overproduction.


In 2006 the Chinese luxury car market rose by 60% while BMW’s increase was encouraging at 49.6% but still below the overall trend. Furthermore, while production was ramped up it still only rose by 35%, the shortfall being taken up by imports. Rivals meanwhile have been tucking into the feast with Audi, established in China since 1988, enjoying a sales increase in mainland China of 39% to 80,808 units. Lexus sold as many in the first half of this year as it did in the whole of 2006 and is looking for a final annual tally of 22,000 units. Mercedes-Benz was a late starter in the market but still sold around 21,000 last year, of which the 8,000 made locally represented a 600% increase in production. DaimlerChrysler installed for production capacity of 100,000 units a year for a range of group models; it is uncertain whether the sale of Chrysler will liberate more capacity for the Mercedes-Benz brand.


BMW have managed to increase current capacity at the Chinese joint venture plant to 41,000 a year while a proposed second plant will add another 20,000 annual units. The current expansion will involve sourcing parts from another 30 suppliers on top of the current 50 and result in an annual spend of $389m, a rise of 50%. However, only 20 more dealers are sought this year to bring the total up to 90 or so. Behind all the talk of big numbers BMW is not getting carried away.



Saab Hides behind Chevrolet

In Europe at least, GM has been celebrating an overall increase in sales and market share. For the first half of 2007 the company shifted a record 1,127,871 units, a rise of 5.3% and attaining 9.6% of the total market. The company claims that this is due to a successful marketing policy of dividing Europe into east and west. As an example, last month GM increased sales by 10.3%, selling 214,918 units in the process, this success mainly due to the buoyancy of budget brand Chevrolet in Central and Eastern Europe. Chevrolet has enjoyed 50 successive months of growth, rising by 34% in the first half of the year to 215,315 units. Since 2005 the marque has displaced Daewoo as GM’s Korean brand in most markets.


Fortunately for GM this overshadows shrinking European sales at Saab which dropped by 10.7% to 45,275 vehicles. GM bought the Swedish auto maker in 1990, just a year after Ford snared Jaguar and both marques have struggled to justify the investment made in them ever since. In the UK, first half sales for 2007 reveal Saab falling by nearly 14% while Jaguar are off the pace by over 19%. Over the past 3 years, though, Saab has suffered only a gentle decline in its production rates, its Opel based cars being manufactured at a rate of around 120,000 a year. Jaguar, with a model range more independent of its parent, has nearly halved its production over the same period, dropping from a Saab-like 126,000 in 2003 to 70,000 for last year.


The good news from GM Europe is not enough to counter the losses still being made at home in the States. GM’s sales are down by 21.3% for the year to date, resulting in a market share of 23% for the period. More bad news is sure to come since June’s market share plumbed a record low for the company of 22.3%. Saab was yet again as robust as a walking stick made of jelly as sales drooped by 3.9% for the first half of the year, while Chevrolet was weighed own by its US models and fell by 7.2%. Still, at least attention was diverted away by stellar performance elsewhere in the group: Saturn a shooting star with a rise of 21.4%, Buick a crashing meteor with a fall of 27.9%.



Fiat 500 - something old, something new...




















Despite the detractors, marriage does have its benefits and it seems that Fiat has gone through a quiet little ceremony with Ford in order to produce the new 500. Like the MINI and the Beetle it is a pet car majoring on nostalgia with its retro styling. Yet though it has the cuteness of a toy soldier it has the very grown-up job of reclaiming a corner of the market that Fiat once called its own.


The original 500 had a similar task to such cars as the Citroën 2CV and the ur-Beetle. The 1957 500 cinquecento took the inspiration for its layout from the Beetle with an air-cooled engine installed in the rear. However, the Beetle was designed to accommodate full-size Germans on an autobahn cruise, while the 500 offered cheap transport to light-weight Italian peasants more used to clinging to every protuberance of a Vespa. Its diminutive style and hyperactive engine also managed to convey an impression of sportiness when it could barely pull the crust off a lasagne. Abarth then put enough pep into it to achieve a certain legendary status in racing circles but Fiat made a bigger impact on mobilising the proletariat with such variants as the Giardiniera miniature people carrier.


The new 500 is intended to appeal to what used to be known as yuppies but which are now considered to be bourgeois bohemians. This crowd are young and affluent with a desire to flaunt their success while showing that they have a soft, fun-loving side. It certainly has the charm of the old car, designed by Roberto Giolito and the same Frank Stephenson who did the BMW Mini; it looks cute enough to bounce on your knee. There is scope in the options list for a bit of personal creativity with embellishments in décor and gadgets, up to 549,936 variations being possible. It has a fire in its belly this time, delivering a 100bhp eruption of power from its front-mounted 1.4litre petrol engine. This results in a genuine sprinting ability, discarding the 60mph mark in a little over 10 seconds and is said to have few rivals when scampering across the cobbles. It also offers decent accommodation for modern adults with a reasonable boot in the back.


Unlike its predecessor, it is unlikely that this 500 will become a ubiquitous presence on the streets of Europe. The price is quite affordable, probably ranging from £8,500 to £11,500 in the UK, but no longer in the peasant class. For this reason Fiat could not have afforded to develop this vehicle as a standalone product and so it borrows much of its architecture from the Panda. This is a sensible policy and like VW allows Fiat to recreate the magic of the old car whilst allowing the accountants have their own kind of fun with their calculators. This is also where Ford is allowed to cuddle up since the next Ka will be based on the same platform. It rather suggests that BMW, having the Mini as a largely standalone product, may be celebrating its success through the gritted teeth of a rictus grin: the bean counters will not be impressed.


The Mini continues to define the sector, though, and in answer to the Cooper the blue racing stripes will adorn an Abarth version of the 500 next year. This will have a turbocharged version of the 1.4litre engine, producing a piazza pummelling 135bhp. There are even plans for a screaming 900cc turbocharged vertical twin. A soft-top is due and a Giardinetta family car, though it seems more appropriate to translate that directly as “little garden” rather than full-sized estate. Clearly Fiat is in the family way and for the next few years will be enjoying its own little baby boom



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