Fleet News

BMW puts on a more friendly face for fleets

A devil's advocate would argue that BMW doesn't need a corporate sales department, just an order taking division.

Legions of company car drivers appear to require no persuasion to drive a car with a blue and white propeller on its bonnet, while finance directors have long understood that BMW cars make sound wholelife cost investments.

Unfortunately, perhaps this winning combination of human resource and financial efficiency coloured attitudes at BMW, leaving the manufacturer with a tarred reputation for arrogance.

It's a reputation that BMW is now working hard to overcome, investing in its corporate sales division as it acknowledges that its cars will not simply sell themselves to fleets in an increasingly competitive prestige market.

While the brand remains strong and the keys to a BMW company car represent an essential milestone in the career paths of ambitious executives, the seemingly boundless popularity of the 3-series is generating concerns among certain quarters of the leasing industry with regard to its future residual values.

After all, when a premium car outsells the likes of the Renault Laguna, Toyota Avensis and Citroen C5, residual value risk takers are sure to query demand for a car in such numbers in the used car market in three years' time.

Add into the industry rumour mill the controversial new styling direction adopted by BMW, first seen on the 7-series and more recently on the concept lower-medium sized CS1 – due to be the 1-series – and it's clear that BMW will have to improve its dialogue with corporate customers.

However, none of this comes as startling news to BMW, following detailed market research commissioned by the manufacturer to determine fleet views of its own performance and those of its principal rivals.

'Historically there has been a perception that BMW was not interested in corporate sales,' said Bernard Bradley, BMW general manager, corporate sales. 'That was not the case, but there may have been less of a focus on the corporate market.'

Regardless of where the truth lies between perception and reality, Bradley said the manufacturer was now intent on delivering what corporate clients want and expect, and was making the necessary investments to deliver.

'Until recently, we had a very small resource dedicated to the corporate market, involving just three people, so the amount of contact they could have face-to-face with customers was limited,' said Bradley.

This did not stop thousands of companies from buying BMWs as company cars – company cheques account for about 40% of BMW sales – but their purchasing decisions arguably reflected the quality of the cars and the manufacturer's dealer network, rather than head office performance.

Now, however, the corporate sales team is 11-strong and there is an impetus at BMW GB's headquarters to support fleet buying decisions by presenting face-to-face with clients the wholelife cost and human resource benefits of the BMW model range, and to work more closely with the leasing industry, focusing especially on the top 25 contract hire companies.

Not that corporate customers can expect BMW's new approach to include old-school fleet practices such as discounts and rebates.

'A lot of the claims that we were arrogant were based on the fact that we did not turn up with a cheque book. We are unique in the market, because even some of our closest competitors have started to behave in ways that are different to their traditional business models,' said Bradley.

'It's easy to assume that what is important in the corporate market is for a manufacturer to offer discounts, but I do not believe that is the case. Fleets want to develop relationships with a manufacturer that allows them to make the best decisions for their company cars, and we are there on a consultative basis – dealers negotiate the transaction.'

His vision is for BMW's corporate sales department to enhance the tri-partite relationship between BMW, the customer and the dealer.

The absence of discounts from the armoury of BMW corporate sales staff does at least help the manufacturer answer industry nerves about the future residual values of its products, based on the correlation between high discounts and poor residual values elsewhere in the market.

And setting the record straight on the future supply-demand equation of the 3-series, Bradley highlighted the breadth of the car's range, from Compact to saloon, Touring, Coupe and Cabriolet, all of which are classified as 3-series in the sales charts.

For the first half of this year, sales of the saloon (the volume-seller in the range) are actually down compared to 2001, a deliberate strategy by BMW to avoid any future over-supply difficulties.

For the year-to-date, the saloon accounts for 40% of 3-series sales, compared to 55% for the same period last year.

'The 3-series remains exclusive because of the five body styles, a wide range of engines and the fact that our vehicles are typically individually specified and not built for stock,' said Bradley.

However, he is prepared to question the future residual values of diesel cars at a time when fleet diesel sales are rising exponentially due to the new emissions-based company car tax system.

'Diesel is strong for us, but we are not at the 70-80% penetration of some of our competitors. I do not believe there is that volume of customer looking for diesel in the used car market, and I am not sure there will be in three years' time,' said Bradley. '3-series sales are 35-40% diesel which we are quite happy with.'

And in a further argument in favour of BMW residual values, he cited the manufacturer's absence from the daily rental market, frequently seen as the deathbed of residual values.

'I understand the benefits of daily rental but they do not outweigh the disadvantages of having a lot of nearly new cars coming back to the market which does not fit with our strategy of maintaining our residual values,' he said.

Instead, growing new and used car sales will be more a question of incremental growth through new products arriving on the market and continuing to develop both the driving experience and specification of BMW cars, which has become notably more generous in recent years.

Filling niches between its current principal models will be a 6-series and X3 4x4, alongside a new Z4, while the car with the potential to eclipse the entire range is the new 1-series, a Focus/Golf sized car due for launch in 2004/05, although Bradley insists initial sales targets for the car are 'very conservative'.

He also highlighted the increasingly close partnership between BMW and sister company MINI, the small car offering the manufacturer an entry to fleets for whom the 3-series proves too high a starting point. Yet if new product woos the hearts of company car drivers, BMW still has a job to remind and convince the minds of finance directors that running BMWs is a cost-effective option.

At the extremes of its ranges, the manufacturer has tackled this issue in innovative fashion by launching low cost, long term service and maintenance packages. The MINI's tlc package, for example, offers five years' scheduled servicing for an outlay of just £100, while at the top of the range the company is offering the new 7-series with an all-encompassing five-year maintenance package called Concours for the modest sum of £500.

This has naturally raised hopes that BMW will launch similar packages for its cars between MINI and 7-series, but if it does, Bradley suggested the prices are unlikely to fall within the £100 to £500 range.

Fixed cost motoring has obvious appeals to employees thinking about trading their company car for a cash allowance, although the new emissions-based company car tax may actually woo drivers who have opted out of corporate car schemes back into the fleet fold.

Premium marques, whose drivers suffered the tax consequences of covering few business miles under the old tax system, now have the chance to re-appeal to this audience, and Bradley highlighted the fact that a 318 SE will cost a 40% taxpayer less than £120 per month in tax.

'For the 10 years I have been involved in the fleet market there has been speculation that the company car is about to die, but I do not see this as the end, even if the structure of the market is changing through increased exploration of PCPs and tax-efficient schemes,' he said.

'But what is the alternative for an employer if its staff drive cars on business? It will still want to be represented in an appropriate way, and increased duties of care raise questions over whether employers should allow people to opt out and take part in business activities in a car that is not as roadworthy as it should be.'

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