tristatez28lt1
Tire Trailblazer
Exactly the picture that I have gotten talking to multiple Audi and BMW dealers in the US. Salespeople at Audi dealerships receive significantly less commission per sold car. The golden years are over because Audi is chasing sales. I remember when there were absolutely no discounts available for Audis, now $500 is a given and customers can get up to $1,500 off without too much work.
Multiple salespeople have said that their commission has gone down from about $550 per car to around $350 per car.
Video
http://www.wsj.com/video/bmw-audi-m...sts/2C3CECB9-CEEA-4B4E-9BD8-8C48E1703A38.html
Article:
http://www.wsj.com/articles/in-luxury-race-profits-get-dented-1426208841
As BMW, Audi and Mercedes-Benz Race for Luxury-Car Sales Crown, Profits Get Dented
Spending by German auto makers is beginning to erode profits
A spending race among BMW, Audi and Mercedes Benz to be the worldwide luxury car leader is putting the brakes on profits and upsetting investors. Photo: Getty
By
WILLIAM BOSTON
March 12, 2015 9:07 p.m. ET
German auto makers BMW AG, Audi AG, and Mercedes-Benz are racing pell-mell against each other for the industry’s luxury-car sales crown, but the huge sums they are spending to get ahead are beginning to erode profits.
In their quest for growth, the three German brands that dominate the global market for premium cars and sport-utility vehicles are spending tens of billions of euros to develop new technologies, build factories and churn out new models.
BMW defended its global lead last year, selling 1.81 million BMW brand cars, outpacing Volkswagen AG’s Audi, which sold 1.74 million cars, and Daimler AG’s Mercedes-Benz, which sold 1.65 million vehicles.
But the competition is accelerating. BMW sales were up 9.5% last year while Mercedes-Benz sales rose a faster 13% and Audi posted a 10% gain. And in the first two months of this year, Audi outdistanced BMW in world-wide sales.
The automotive brinkmanship is starting to hit profits. The trio’s 2014 earnings were up on strong volumes, but profit margins except at Daimler are showing signs of slipping. Mercedes-Benz earlier spent heavily on developing new models, lifting its return on car sales last year to 8%, from 6.2% in 2013.
The weakening euro should give German auto makers more leverage in the U.S. to wage price wars in the months ahead, but the companies’ extensive production in North America and other parts of the world means the euro’s slide against the dollar won’t immediately translate to fatter returns.
ENLARGE
Audi said higher spending would continue to erode margins in 2015. PHOTO: EUROPEAN PRESSPHOTO AGENCY
Worried investors sold BMW stock on Thursday after it reported preliminary 2014 results indicating its automotive division’s margin slipped to 8.2% of sales in the fourth quarter from 9.4% in the third quarter. BMW said net profit in the full year rose 9.2% to €5.8 billion ($6.15 billion) and revenue climbed 5.7% to €80.4 billion.
“We are targeting further sales volume growth world-wide in the current year and hence a new record level for deliveries,” said BMW Chief Executive Norbert Reithofer in a statement on Thursday.
The mixed earnings report at BMW followed a warning by Audi on Tuesday that its high rate of spending would continue to erode profits in 2015. Its profit margins declined to 9.6% of sales last year, from 10.1% the year before.
Audi has earmarked €26 billion for new investment over the next five years. The company is building new factories in Mexico and Brazil and is preparing to expand its line of luxury cars and sport-utility vehicles to 60 models by 2020 from 52 models now. “The profit development will continue to reflect our company’s extensive expenditure for the future,” Axel Strotbek, Audi’s finance chief, said during a news conference on Tuesday. “We are shouldering massive upfront investments.”
In addition to investing in new models, factories and dealerships to boost sales, the luxury-car makers also have been engaged in intense price competition, offering buyers steep discounts, analysts said.
Audi, which was just 70,000 cars behind BMW last year and is pushing hard to knock its rival from the throne this year, has offered discounts “comparable to volume brands,” said Arndt Ellinghorst, automotive analyst at London-based Evercore ISI research.
The luxury-car makers are pursuing larger sales volumes by shifting into more affordable vehicles such as smaller compact cars. But this is a risky strategy, says Ferdinand Dudenhöffer, head of the Center for Automotive Research at the University of Duisburg-Essen.
In a study published this month, Mr. Dudenhöffer concluded that Audi’s profit per car has fallen further than Mercedes-Benz because Audi’s sales growth is more dependent on smaller cars such as its A3 sedan, one of its best-selling models.
ENLARGE
A Mercedes-Benz production line in Hungary. Efforts to overhaul the brand and redesign the cars are paying off: Sales rose 13% last year. PHOTO: BLOOMBERG NEWS
Audi’s pretax profit per car was €2,958 in 2014 compared to €3,398 at Mercedes-Benz, according to Mr. Dudenhöffer’s analysis of its data.
“Because Mercedes is selling at a higher value and larger models, profit per car is growing at Mercedes while profit per car is falling at Audi,” said Mr. Dudenhöffer.
The rivalry among the three companies is so intense that when Volkswagen, Audi’s parent, holds its annual earnings conference, BMW runs interference by publishing a “pre-release” of its own earnings.
“We like to stick it to them,” said one BMW executive.
One Audi executive suggests that all it takes to get the green light for a new project is to point to the competition.
“If I want to get something past my board, I just have to say BMW is already doing it and it goes through,” said the member of Audi’s executive board.
In the German luxury battle, brand is everything. Max Warburton, automotive analyst at Bernstein Research, said in a recent report that European car makers are spending more money on ads to sell their cars than on the steel to build them.
Daimler is spending about €6,000 a car on advertising and marketing compared to €1,500 at Ford Motor Co. and General Motors Co., he wrote.
VW has the highest per-car spending on marketing and advertising—about 14% of total spending, or twice the amount that Ford spends, said Mr. Warburton.
Mr. Warburton said the gaps can illustrate the different quality of manufacturers and their brands. BMW has long enjoyed a better reputation than Mercedes, he said. But Mercedes-Benz’s efforts to overhaul its brand and redesign its cars are paying off, giving it an opportunity to spend less to sell its cars.
“We believe Mercedes [marketing and advertising] spending will probably trend downwards on a per unit basis,” wrote Mr. Warburton in the study.
That may be, but Daimler CEO Dieter Zetsche shows no signs of slowing down.
“We were the fastest-growing premium brand last year and intend to keep that momentum this year or to accelerate,” he said when the company announced 2014 earnings in February. “The gap is closing.”
Multiple salespeople have said that their commission has gone down from about $550 per car to around $350 per car.
Video
http://www.wsj.com/video/bmw-audi-m...sts/2C3CECB9-CEEA-4B4E-9BD8-8C48E1703A38.html
Article:
http://www.wsj.com/articles/in-luxury-race-profits-get-dented-1426208841
As BMW, Audi and Mercedes-Benz Race for Luxury-Car Sales Crown, Profits Get Dented
Spending by German auto makers is beginning to erode profits
A spending race among BMW, Audi and Mercedes Benz to be the worldwide luxury car leader is putting the brakes on profits and upsetting investors. Photo: Getty
By
WILLIAM BOSTON
March 12, 2015 9:07 p.m. ET
German auto makers BMW AG, Audi AG, and Mercedes-Benz are racing pell-mell against each other for the industry’s luxury-car sales crown, but the huge sums they are spending to get ahead are beginning to erode profits.
In their quest for growth, the three German brands that dominate the global market for premium cars and sport-utility vehicles are spending tens of billions of euros to develop new technologies, build factories and churn out new models.
BMW defended its global lead last year, selling 1.81 million BMW brand cars, outpacing Volkswagen AG’s Audi, which sold 1.74 million cars, and Daimler AG’s Mercedes-Benz, which sold 1.65 million vehicles.
But the competition is accelerating. BMW sales were up 9.5% last year while Mercedes-Benz sales rose a faster 13% and Audi posted a 10% gain. And in the first two months of this year, Audi outdistanced BMW in world-wide sales.
The automotive brinkmanship is starting to hit profits. The trio’s 2014 earnings were up on strong volumes, but profit margins except at Daimler are showing signs of slipping. Mercedes-Benz earlier spent heavily on developing new models, lifting its return on car sales last year to 8%, from 6.2% in 2013.
The weakening euro should give German auto makers more leverage in the U.S. to wage price wars in the months ahead, but the companies’ extensive production in North America and other parts of the world means the euro’s slide against the dollar won’t immediately translate to fatter returns.
Audi said higher spending would continue to erode margins in 2015. PHOTO: EUROPEAN PRESSPHOTO AGENCY
Worried investors sold BMW stock on Thursday after it reported preliminary 2014 results indicating its automotive division’s margin slipped to 8.2% of sales in the fourth quarter from 9.4% in the third quarter. BMW said net profit in the full year rose 9.2% to €5.8 billion ($6.15 billion) and revenue climbed 5.7% to €80.4 billion.
“We are targeting further sales volume growth world-wide in the current year and hence a new record level for deliveries,” said BMW Chief Executive Norbert Reithofer in a statement on Thursday.
The mixed earnings report at BMW followed a warning by Audi on Tuesday that its high rate of spending would continue to erode profits in 2015. Its profit margins declined to 9.6% of sales last year, from 10.1% the year before.
Audi has earmarked €26 billion for new investment over the next five years. The company is building new factories in Mexico and Brazil and is preparing to expand its line of luxury cars and sport-utility vehicles to 60 models by 2020 from 52 models now. “The profit development will continue to reflect our company’s extensive expenditure for the future,” Axel Strotbek, Audi’s finance chief, said during a news conference on Tuesday. “We are shouldering massive upfront investments.”
In addition to investing in new models, factories and dealerships to boost sales, the luxury-car makers also have been engaged in intense price competition, offering buyers steep discounts, analysts said.
Audi, which was just 70,000 cars behind BMW last year and is pushing hard to knock its rival from the throne this year, has offered discounts “comparable to volume brands,” said Arndt Ellinghorst, automotive analyst at London-based Evercore ISI research.
The luxury-car makers are pursuing larger sales volumes by shifting into more affordable vehicles such as smaller compact cars. But this is a risky strategy, says Ferdinand Dudenhöffer, head of the Center for Automotive Research at the University of Duisburg-Essen.
In a study published this month, Mr. Dudenhöffer concluded that Audi’s profit per car has fallen further than Mercedes-Benz because Audi’s sales growth is more dependent on smaller cars such as its A3 sedan, one of its best-selling models.
A Mercedes-Benz production line in Hungary. Efforts to overhaul the brand and redesign the cars are paying off: Sales rose 13% last year. PHOTO: BLOOMBERG NEWS
Audi’s pretax profit per car was €2,958 in 2014 compared to €3,398 at Mercedes-Benz, according to Mr. Dudenhöffer’s analysis of its data.
“Because Mercedes is selling at a higher value and larger models, profit per car is growing at Mercedes while profit per car is falling at Audi,” said Mr. Dudenhöffer.
The rivalry among the three companies is so intense that when Volkswagen, Audi’s parent, holds its annual earnings conference, BMW runs interference by publishing a “pre-release” of its own earnings.
“We like to stick it to them,” said one BMW executive.
One Audi executive suggests that all it takes to get the green light for a new project is to point to the competition.
“If I want to get something past my board, I just have to say BMW is already doing it and it goes through,” said the member of Audi’s executive board.
In the German luxury battle, brand is everything. Max Warburton, automotive analyst at Bernstein Research, said in a recent report that European car makers are spending more money on ads to sell their cars than on the steel to build them.
Daimler is spending about €6,000 a car on advertising and marketing compared to €1,500 at Ford Motor Co. and General Motors Co., he wrote.
VW has the highest per-car spending on marketing and advertising—about 14% of total spending, or twice the amount that Ford spends, said Mr. Warburton.
Mr. Warburton said the gaps can illustrate the different quality of manufacturers and their brands. BMW has long enjoyed a better reputation than Mercedes, he said. But Mercedes-Benz’s efforts to overhaul its brand and redesign its cars are paying off, giving it an opportunity to spend less to sell its cars.
“We believe Mercedes [marketing and advertising] spending will probably trend downwards on a per unit basis,” wrote Mr. Warburton in the study.
That may be, but Daimler CEO Dieter Zetsche shows no signs of slowing down.
“We were the fastest-growing premium brand last year and intend to keep that momentum this year or to accelerate,” he said when the company announced 2014 earnings in February. “The gap is closing.”
