In the early 2000s, BMW had a near free-run in the premium fleet market. While its rivals preferred to slug it out for a share of the private market, corporate played a fundamental role in propelling the carmaker above 100,000 sales – the first of the German trio (which also includes Audi and Mercedes-Benz) to do so.
It sparked the first whispers about whether BMW should now be seen as a volume carmaker and whether residual values would be affected. No, was the straight answer to both.
Since then, Audi has awoken to the opportunities offered by fleet, followed by Mercedes-Benz whose own ambitions extend to becoming the biggest corporate seller of all. Both have joined BMW in the 100,000 club with fleet accounting for a growing proportion of sales. More recently, Jaguar has outlined its own fleet aspirations with the launch of the XE.
So where does all this leave BMW? The company initially scaled back a little on volume while taking stock but has over the past few years set about the fleet sector with renewed vigour. Its decision to put greater emphasis on the fuel and CO2 savings offered by the EfficientDynamics strategy coincided neatly with the growing trend for companies and their drivers to focus on the cost of running cars, whether that be related to fuel or benefit-in-kind (BIK).
This year, BMW has realigned its fleet aspirations. Its priority is sustainable business, according to general manager corporate sales Matt Bristow, which has seen the company pull away from some tactical sales, such as rental and Motability.
“We see rental as strategic partners, not tap on, tap off,” he says. “It’s a sales opportunity for people to experience our cars. Our partners rely on us and we know they will present our product in an appropriate way.”
BMW divides the market into first and second level pricing. First level is retail and true fleet; second is internal and rental. Motability also falls within the former, although it is at the less profitable end of the scale and presents “finite opportunities”, Bristow says.
He adds: “Motability is high cost but it reflects our current model mix and lifecycles. For example, the switchover of X1, which is a big Motability car, means that retail and corporate is our first priority. We have chosen to withdraw.”
At the midway point of 2015, BMW had reduced rental by 15% and cut Motability volumes by 37%. In contrast, retail was up 6% and true fleet by 16%.
Four models have provided the main impetus for growth this year: 1 Series, up 12%; 2 Series, up 272%; 4 Series, up 78%; and X5, up 59%. The 3 Series, on run-out as the new model launches this month (see page 76 for review), is down almost 19%, while the 5 Series is steady, dipping 5%.
“Excluding rental, we are up 7-8% this year, and 10% the year before – so that’s 17-18% which is bang on where we planned to be,” says Bristow. “We are looking for modest but significant growth.
“This is an aggressive market. Jaguar is a new entrant, which adds to the level of competition, but that doesn’t scare us.
“However, there will always be a point at which we look at the profitability of the business. It will never be volume at any cost. That’s why our growth plans are in line with the market growth.”
Bristow has three key strategic objectives this year. The first concerns retailer engagement in the corporate sector. BMW has reshaped its sales structure, moving from a regimented direct approach to a more flexible one, which gives greater responsibility to its business centres.
Retailers, previously restricted to SME business, are now able to handle larger fleets, supported by BMW’s regional team. It is managed on relative purchases per year – generally up to 15 cars which equates to a fleet size of 150-200 vehicles.
The corporate development managers are key to making this new process work. Bristow is looking to double the size of the team to six over the next couple of months, his second key objective.
“The idea is we grow our support in line with our retailers’ businesses,” he says. “Direct sales had a wide portfolio of clients, large and small, managed by the same people. We have now segmented them and have increased our resource to improve our customer service. This will increase our engagement with customers to tackle the rising level of competition.”
Courting major clients
The new structure has freed-up BMW’s key account managers to spend more time with major customers – each now has around one-third of their previous client base.
“They will be able to position our products appropriately, understand the benchmark grades and be up-to-date with model changes,” says Bristow. “We see opportunIties in corporate and SME with the new structure – it’s a double benefit.”
He has also identified the public sector and the ‘i’ range of electric vehicles as opportunities. Additional resource is being put into both, including a corporate sales manager for BMW i.
The range is currently just i3 and i8. However, Bristow says: “Over time, the majority of our range will have plug-in hybrid technology.”
Customer service is the third area. BMW introduced a five-star ratings scheme on its website just under three years ago, giving customers the opportunity to evaluate the level of service they received from dealers for sales and aftersales.
It drives a self-regulatory environment with average ratings rising from around three stars to almost five stars since the programme started. Among the service improvements is extended hours for servicing, typically 7am-8pm, with some retailers now open seven days a week for sales and aftersales. This reduces downtime for fleet customers and also enables retailers to sweat their assets.
Aftersales service is important for BMW, not least because it retains a high level of business through its TLC service package which most fleets take up. Extended opening hours support this. Since last year, BMW has also opened up access on its website portal to data on component wear rates, enabling fleets and leasing companies to accurately budget on service, maintenance and repair.
When BMW broke through 100,000 registrations in 2004, industry watchers questioned whether this would have a negative impact on residual values. BMW will sell around 158,000 cars this year, half to fleet, and its RVs are as strong as ever. Bristow says this is down to careful handling of used cars. As a company, BMW has a lot of experience from its own internal fleet of around 4,000 employees. Bristow used to run the internal car scheme, as well as the used car and remarketing programme prior to his current role.
“We are confident we have the right processes in place to dispose of significant volumes of product without being concerned about it,” he says. “We focus on hygiene factors – appropriate specification and our used car programme, which handles the largest volume of any premium brand.”
BMW offers leasing companies a free repatriation service whereby they use its auction programme and dealer contacts. “We have a lot of success with this programme and good uptake from leasing companies,” says Bristow.
A core part of BMW’s future growth aspirations centres on the user-chooser. Bristow believes they will play an increasingly vital role in options list decisions, with choices likely to widen.
“They are not paying with their own cash, but they are paying for the car, whether via salary sacrifice, BIK or a contribution,” he says.
“They will make a decision about how much of their income they choose to spend and they will have a choice about what to go for. We have to get the message of support and customer care to those people.
“This is about engagement with fleet managers and leasing companies – that’s a ‘must-do’ – but we also have to go that extra step and engage with the driver. From product advertising to the retailer network, we have to make sure that they have the best possible experience. Our underlying objective is to make it easy to deal with us.”