Has The Plan Of Total Domination Failed? BMW And Mercedes Losing Sales Inspite Of Massive Lineups

There are several reasons for BMW and Mercedes-Benz's falling U.S. sales:

1) Too many models are cannibalizing sales due to not enough differentiation between models. For example the difference between a BMW 3-Series Sedan, 4-Series Gran Coupe and 3-Series Gran Turismo is so small that the market is not large enough to support all three models. Likewise, the difference between a 5-Series sedan, 6-Series Gran Coupe and now 6-Series Gran Turismo is so small that the market can't support all three models. This leads to a sale of one of the three models reducing the sale from the other two.

2) Inventory mismanagement - SUVs are stealing marketshare from sedans. Part of BMW's 9.5% sales decline in 2016 was due to building too many sedans and not enough SUVs. As a result, when buyers came looking to buy SUVs, BMW didn't have enough of them to meet demand. As a result buyers could have purchased a competitor's SUV.

3) Changing customer needs - Millennials are buying fewer cars than generations before them. They by and large want to live in dense urban environments where car ownership with its parking fees, gas/charging, insurance and repairs/maintenance is something they want to avoid. Millennials use services like Uber, Lyft, etc. to get around and avoid the issues that come with car ownership as mentioned above. This leads to fewer customers overall.

You nailed it.

Nuttie:
1) This theory of sales cannibalization should have zero impact on bottom-line sales. Intra-brand overlap with models still leads to one thing: a car sale. Yes, it means there are more choices, but even in your description it ends in a sale.

2) BMW's shortage on crossovers was 2 years ago. Is that still occurring now? Its SUV lineup is 12% ahead of last year's numbers so I do wonder if BMW's Spartansburg facility is fully upgrades to handle the demand.

3) I'd be interested to know where you gathered this data from. Several articles published in 2016 indicated Millenials are in fact driving the industry and are buying more cars than originally anticipated.

@cidflekken You're WRONG on sales canibalization and Nuttie is 100% correct! If I'm selling one model at 100K units and I add a companion model and still only sell 100K units, then the business model is a failure.

BMW's "GC" models have not sold well in addition to their respective conventional sedans. Moreover, the 3GT and an X3 target the similar buyers.

BMW has a lot of product variation, but they have been stunningly bad at making those variations produce big sales.

OK, Darringer, I hear you. However, that does not correlate correctly to a DECREASE in sales, which is the point of this article. So, my point of sales cannibalization having an impact on a decrease in sales is, in fact, correct.

Sales cannibalization hurts sales because even though it may result in a sale of one model, it results in no sale of the other two very similar models. That's the problem with the model proliferation strategy. All BMW is doing is increasing its costs by producing a 3-Series Sedan, 4-Series Gran Coupe and 3-Series GT but still only generating one sale.

Producing one model for one sale makes more business sense than producing three different models and still only getting one sale.

The sales numbers show this impact very clearly. As the number of models increases, sales are supposed to increase. In BMW's case, as the number of models increases, the sales have declined. The only conclusion from this is that the market is not big enough to support the additional models and so sales decline. That is what cannibalization does.

Nuttie, no one is denying that the more models you have, the more sales you should have. Nor are you incorrect in stating that this is impacting profit margins.

However, the cannibalization here is NOT, I repeat NOT, causing a DECREASE in sales, which is the topic of this article.

So, you and Darringer are not incorrect by saying BMW "should" have increased sales with more model options. However, you are both incorrect in relation to this article stating BMW (and Mercedes) are losing sales. Two very different topics. As Darringer used in his own example above: 100k units sold is equal to 100k units sold.

@cidflekken You are still WRONG. It DOES correlate when simultaneously you start producing new cars that look 10 years old and people give up on the brand for its confusing product portfolio and the perception that BMWs are outdated.

PS There is no such thing as a "correct" correlation. Did you mean DIRECT correlation? A correlation can neither be correct or incorrect. It can be "direct" or causal however.

cidflekken, can you prove that customers do not get so confused by the similarities between the 3-Series Sedan, 4-Series Gran Coupe and 3-Series Gran Turismo that they can't figure out which model to buy, proceed to leave the dealer and never return to buy a BMW.

In that example, 100K units sold is no longer 100K units sold because the model differentiation was so small that it lead to no sale. However, BMW produced three models and still ended up with no sale. I am sure this has happened on more than one occasion.

Oh no... *puts safety goggles on*

@GNut you do realise that this article is about Mercedes and BMW right? Why are you only using BMW examples? I mean we all know why but I thought I would just point it out. Is the original culprit, in your eyes, not the CLS, the car that started all the 4 door coupes and inspired 4 door SUVs? Selling different versions of cars on the same platform but with different styling to attract new customers?

The article is about U.S. sales so we'll keep everything in that context. Using your 5/6 series comparison I'm very confused because doesn't Audi do the same thing?

A4 Sedan, A4 Allroad, A5 coupe / A5 Convertible / A5 Sportback. Is this not the same as your BMW example? It certainly is and yet as you point out every day Audi sales are up in the U.S. and yet it also has a huge amount of models. Going to just leave this here with you.

I've said this before, I'm not here to teach you about Math but using an example of one person buying one car from 3 choices from the same brand and, in that scenario, the other 2 cars are a waste is just so wrong. Are you therefore saying if the same person chooses a 2.0L engine in that car that there was no reason to make a 3.0L. Makes no sense.

Using platforms to create different models is cost-effective way of expanding, as a VAG company Audi surely understands that? And when certain models become really popular there may be an attraction to something similar but that stands out more. Audi is following BMW into Coupe SUVs which is a case in point.

Finally, MB and BMW are going to see a knock because the whole industry is down in the U.S. How is Audi still seeing growth? Well, they are coming from a very low base. If we take June's figures for example, looking at the figures based on this site recently, BMW outsold the entire Audi line-up, all of its models, with just the sales of it's sedans / coupes / Convertibles. No SUVs. So every sale for Audi counts a bit more I suppose.

I know you're attracted to a BMW article like moth to a flame because there's something weird going on with how secure you are about Audi's success or lack thereof but just try and think things over in your mind before blurting out inaccuracies and you'll probably get less push-back... unless that's what you want? In which case, again, looking forward to the next one.

@GNut one last thing, on cannibalization, the Audi A3 sedan cannibalization of A4 sales cited often in the motoring press.

@MD not sure what you do for a living but um, coupes don't generally sell as well as their sedan counterparts... why would that be any different for BMW? And in many markets the GC models outsell the coupe and convertible together so sales for the 4 and 6 series are better and people have to fork out more for those cars over a 3 or 5 series, not really seeing the downside here?

@Firewombat, maybe you're blind, but the 4 and 6 GC models are SEDANS called coupes.

Your rant still doesn't address the question, how we do we know that buyers don't get so confused by a 3-Series Sedan, 4-Series Gran Coupe and 3-Series Gran Turismo that they leave the dealership and don't buy any BMW?

When the number of models rise, the sales should rise too. When the number of models rise, and sales fall it represents a clear problem.

Your rant still doesn't address the question, how we do we know that buyers don't get so confused by a 3-Series Sedan, 4-Series Gran Coupe and 3-Series Gran Turismo that they leave the dealership and don't buy any BMW? When the number of models rise, the sales should rise too. When the number of models rise, and sales fall it represents a clear problem.

@MD you're the one who mentioned them as something other than sedans, direct quote from your comment "BMW's "GC" models have not sold well in addition to their respective conventional sedans"

@GNut, not sure my response is called a rant? Bit overly sensitive. I'm simply responding to your comment which has very little logic attached to it. Not the first time.

To address your question about whether anyone has any proof that people don't get confused with too many models, do you have any proof that they do?

You're the one who came up with the question, it's your own crazy theory, no one elses, so by all means, provide us with a study or a survey to prove that this is a valid question instead of asking others to provide proof so you can validate your claim.

You asked for proof, so here you go. By the way, this was from March 2017, so only a few months ago. Directly from BMW and Mercedes-Benz's top executives.


“We’ve got an X2 and an X7 coming, and there are a few others, but I also know—because we’ve taken decisions—that some body styles will be removed in the future.” That was by BMW Sales and Marketing Chief Ian Robertson.

BMW's Ian Robertson also added, "“There’s definitely more of a move toward four-door coupes,” he said. “We’ve done the Gran Coupes; they’ve really worked. People like the lower seating position and the sporty dynamics but also the fact there’s a door in the back. It’s fair to say that when we look at the checkerboard, because of the new things we’re putting in, there are some things we can take out.”

"Dieter Zetsche (whom Americans will remember as Dr. Z), now overall head of Mercedes-Benz Cars, agrees. “The specialty cars, these coupes and convertibles, were always niche cars,” he told journalists at Geneva. “The expansion into China and other emerging markets [has given] huge opportunities for sedans, but they did not take up these specialty cars. Which makes the business case for these vehicles less easy.”

Although Zetsche insisted that Mercedes will continue to offer two-door models, he admitted they will not come “in the variety we are having them right now.” With both coupe and cabriolet versions of the C-class, E-class, and S-class currently being offered alongside the SLK and SL roadsters and the AMG GT coupe and convertible, there’s obvious potential to simplify the range.

http://blog.caranddriver.com/mercedes-and-bmw-admit-they-have-too-many-models-but-the-solution-is-a-bummer/

It is very clear that the market is saturated with too many models and BMW and Mercedes-Benz have already made the decision to reduce the number of variants from what is currently available.

I dont't see any proof unfortunately, can't see anything about declining sales in what you've quoted?

Your question was, can anyone provide you with proof that customers don't get confused with so many models on offer and therefore walk out and don't buy a car at all. Causing a decline in sales. So then?

Also, if both BMW and MB are seeing sales growth globally and simplifying their ranges, then why is Audi, which is in a sales decline for 2017 adding to theirs? Doesn't make much sense...

I certainly see proof. If the market could absorb additional models with increasing sales, the executives would not make the decision to reduce the number of models. The market obviously can't absorb them and that is why the executives decided to take the action they did, which is to reduce the number of models. While sales are currently rising for BMW and Mercedes-Benz globally, if the executives believed sales would continue to rise with the existing model portfolio, then why would they reduce the number of models? That makes no sense. Obviously the executives believe the current model portfolio is unsustainable and there isn't enough demand.

“The expansion into China and other emerging markets [has given] huge opportunities for sedans, but they did not take up these specialty cars. Which makes the business case for these vehicles less easy.”

"With both coupe and cabriolet versions of the C-class, E-class, and S-class currently being offered alongside the SLK and SL roadsters and the AMG GT coupe and convertible, there’s obvious potential to simplify the range.
With both coupe and cabriolet versions of the C-class, E-class, and S-class currently being offered alongside the SLK and SL roadsters and the AMG GT coupe and convertible, there’s obvious potential to simplify the range."

Still not hearing anything from you or seeing anything in your quotes or reasoning that blames declining sales on the number of models on offer in the USA.

Are there valid reasons behind simplifying the number of models on offer? Yes, I think there are. Is "declining sales because of customer confusion based on the number of models on offer" one of those reasons? You've yet to show us anything. How many comments are we into this now and nothing from your side.

Just to point this out to you because you do it quite often. This article is about negative sales for MB and BMW in the U.S.A. Unable to come up with a response you're now using quotes from those company's reps regarding a global product strategy to try and salvage a point. In the end the global sales of each of those 2 brands are not in decline so any comments about overall declining sales is irrelevant and incorrect from your side and we're still asking you to answer the question. I can't imagine how this doesn't get tiring for you.

On top of all of that you the glaring proof that your reasoning (sans proof) is illogical is that the 3rd party here (4th in the USA) Audi, is adding to its number of models globally, to mimic model ranges from MB and BMW, while its global sales are in decline.

This isn't tiring for me because it proves my point with facts from the company's executives.

You wrote, "Just to point this out to you because you do it quite often. This article is about negative sales for MB and BMW in the U.S.A. Unable to come up with a response you're now using quotes from those company's reps regarding a global product strategy to try and salvage a point."

Knowing that the decision has already been made by BMW and Mercedes-Benz executives to reduce the number of models because there is not enough demand to make the business case for all of them, it would make sense to apply the model reduction strategy in markets where sales are in decline, which would be the United States. You'll see in due time that the number of models is reduced in the United States market.

That reduction will take place due to the overlap. If there was a clear distinction between each model, buyers wouldn't be confused, and all the existing models would remain with new models added. That's not going to happen in the United States.

I'm done commenting on this article but look forward to the next one. Remember this article when you hear of BMW reducing a model or two from its U.S. lineup. By that shouldn't be surprising given the 9.5% sales decline in 2016 and 2.8% decline YTD in 2017 resulting in a drop from first to third in the U.S. market.

Still don't see any facts that prove your question was valid so I suppose you're looking forward to losing the next argument? Again. As always.

Not sure why you still keep referencing just BMW but to add the final nail to the coffin in which your theory lies and which has no basis in reality, adding 3 new model lines in X2, X7, and 8 series doesn't look like reducing the number of model lines to me.

Suppose it's just your interesting taking on it :)

In case you haven't heard, the global car market has gone soft recently.

1 - Yes indeed the global car market has gone soft - causing the need to add higher incentives for most brands.

2 - But the BMW and Mercedes problem "IS" Massive" line ups. A luxury brand that goes to heavily for entry level has a problem - the lack of exclusivity. THe more they sell these cars - the less they are desirable to the upper class. AUdi has that problem as well - since they sell mostly small sports sedans that look just like their uber expensive A8 -and the A8 sells in small numbers for the same reason the 7 series is not selling well.

There comes a point when an exclusive car brand sells so many cars that they are ubiquitous - and they appear in every driveway - and then are parked on the street - that they are essentially a mass market brand. The complete lack of long term residual value means that they are not the investment they once were as well. It is hard to believe that BUICK is more exclusive than Mercedes or BMW. THe move to the CLA class will hurt these manufacturers - who would have been better off with another brand for the low end (Opel would have done nicely there)

The model proliferation strategy leads to a decrease in profits which in turn reduces BMW's ability to invest in new models and therefore increase sales in the future. Also, how do we know that customers aren't getting so confused by the three different choices that they just simply leave and decide not to purchase a BMW at all?

That would mean three different but very similar models and no sale.

Germanut you're right and this is very serious. Please phone Audi immediately with this info because they have stated that they are going to launch at least 2 more SUV models in the next 2 years, growing their line-up even further and therefore seeing a proliferation of models and a decrease in profits. You have to warn them now, their profits are going to decrease, phone now before it's too late.

Too many models + uber/lyft = soft sales.

There's a multiplicity of reasons - many of which are stated above.
Luxury, drive-ability, performance and features only found in the upscale Euro brands are now common in downscale American and Asian brands. In fact, many luxury features which are optional on Euro brands are standard on many of the Asian and some American brands.
MB, BMW and Audi once somewhat rare status symbols are now ubiquitous.
As well, brands (ie BMW) known for handling and performance grew the size their nimble fun-to-drive vehicles into land yachts to the point where it's it's entry level and smallest series (ie 2-series) is now considered the most fun to drive vehicles in the BMW line-up.

Your rant still doesn't address the question, how we do we know that buyers don't get so confused by a 3-Series Sedan, 4-Series Gran Coupe and 3-Series Gran Turismo that they leave the dealership and don't buy any BMW?

When the number of models rise, the sales should rise too. When the number of models rise, and sales fall it represents a clear problem.

But - YOUR question fails to consider the possibility that it is just a time for soft sales of high end sports sedans - not that there are many seemingly competing models from each manufacturer.

Your statement - when the number of models rise - the sales should rise - also is not true. AND there can be many reasons - not the least of which is that there is a finite number of buyers. Adding additional choices may just split up that group of buyers among the choices and not result in any increase.

@Tom it's very hard to argue against GNut's logic because it's based on so much bias, he will literally say anything just for the sake of responding.

TomM, that's an interesting take on it. Would you say it's just a "soft time for sales of high end sports sedans" if BMW's sales fall for the second consecutive year in the U.S.? Perhaps it is representative of a larger, more fundamental shift in consumer preferences (less need for a car), advancements in technology (autonomous driving, electric etc.) and the preference to spend less on materialistic things like cars versus experiences.

Maybe you are correct that sales will start growing again, but then again maybe the trends I pointed to above are too strong for the car manufacturers to overcome.

To your second point, if the number of buyers is finite and the market size is not growing, wouldn't it make sense to reduce the potential overlap and have each model serve a clear and distinct purpose so as not to confuse and run the risk of creating such a high level of confusion that a sale is ultimately not made and the customer walks out due to an inability to decide between models?