BMW overcame the pandemic doldrums to clutch the U.S. luxury sales crown last year, even as sales slid 18 percent from 2019.
BMW National Dealer Forum Chairman David Sloane credited the performance to decisive and early action by BMW to mitigate the effects of the COVID shutdown on the business and production.
When COVID hit, BMW and the dealer board quickly assembled a crisis committee to communicate weekly on the status of the business in different regions and the pressing needs of dealers, Sloane, 35, told Automotive News.
BMW of North America instituted a sweeping relief plan for retailers that includes financial incentives, relaxed performance objectives and loan payment relief.
“Communication and flexibility were key in helping dealers manage through the pandemic,” said Sloane, president of Sloane Automotive Group in suburban Philadelphia.
BMW’s 349 U.S. dealers, meanwhile, had to step up and make their own sacrifices.
The pandemic “forced us to really work hard at our businesses in terms of our expense structures and personnel needs,” Sloane said.
An unexpected bounce back in demand in the second half of the year saved the day and has Sloane guardedly optimistic about BMW’s prospects for the new year.
“It’s an uncertain year ahead,” he said. “Until the pandemic is behind us, with the vaccine being widely available, we need BMW’s commitment that they’re going to continue to monitor the business levels and be flexible with target-setting.”
Sloane spoke with Staff Reporter Urvaksh Karkaria about the products, challenges and opportunities BMW dealers should expect. Here are edited excerpts.
Q: What are the top issues on the dealer board’s agenda this year?
A: In addition to dealer profitability, the dealer forum continues to focus on marketing, including the spend in 2021 and beyond. As a brand, we are looking to retail more cars in 2021 than in the previous two years, and we want to make sure the marketing investment supports the overall plan.
We have to make sure BMW is top of mind when people are in the market for a new vehicle. We’re entering new product segments with the EVs BMW has coming. There needs to be plenty of awareness of these new products, and we need to make sure that consumers understand why they are viable. There’s also an increased push with PHEVs. Dealers want to make sure that there’s ample marketing support. In the dealer’s eyes, there can never be too much Tier 1 marketing. Conversations are ongoing, and the dialogue is more transparent and productive than it’s ever been with BMW on this topic.
What is BMW’s sales target for 2021?
We expect there to be a slight percentage increase over 2019 — probably in the mid-to-high single digits.
Should automakers continue with their COVID-era digital offerings after the pandemic is over?
The consumer is going to tell us how we proceed with digital retailing. The number of customers who want to go digital from start to finish is still a very small percentage. In COVID times, that spiked. Coming out of COVID, we’ve seen it flatten, but at a higher level than it was pre-pandemic. Nobody has figured out this digital retailing process, but collectively we are trying to make the consumer journey more transparent and seamless from online to offline.
Has BMW asked dealers to use a specific digital retailing tool or process?
BMW has not mandated a standardized digital solution. We don’t want a branded experience on this. The key is ensuring the consumer is provided with the same high-level experience online as they are accustomed to when they come to our showrooms.
We’ve created a digital retailing working group with BMW. BMW [must] remain flexible and recognize that there’s no one-size-fits-all solution. There isn’t a winning digital retail tool that offers a better experience yet. So it’s premature to start dictating tools. We’re entrepreneurs. The strength of the BMW network is that everybody has different ideas and we can learn from each other.
What is the objection to a standardized tool?
Mandating a solution across the network does not make sense because dealers operate differently. The large public groups have the scale to develop their digital solutions, while smaller retailers might need more support in this area. That’s why we need a flexible approach.
How much emphasis should be placed on eliminating wet-signature requirements in 2021?
The need to comply with state requirements for wet signatures has been a challenge to the adoption of 100 percent digital retailing. BMW and its finance captive are rolling out an electronic signature option to dealers for their contracts, but that doesn’t eliminate the need to get the wet-ink signatures for state documents. This is an area where AIADA and NADA can help the dealers with local legislation and in trying to advance digital signatures.
Are BMW’s production and inventory levels coming back in line with demand?
Through the end of the summer and fall, inventory was tight. BMW did a great job of getting cars to dealers for the holidays, and it reflected in the annual sales performance. There were inventory shortages in some sedan models due to COVID plant shutdowns. But [sports activity vehicle] production at [BMW’s Spartanburg, S.C.,] plant remained strong. [Sports activity vehicles] continue to drive our business; it is what dealers are asking for.
Has the pandemic resulted in any change in facility image programs?
BMW extended deadlines on some facility improvement projects. Prior to COVID, the factory had relaxed facility improvement demands. BMW has said it will continue to work with center operators and owners in meeting facility obligations.
As the digital side of the business picks up steam and the need for huge showrooms is uncertain, continued flexibility is what dealers are asking for. We want BMW to realize that we’re moving into a different and uncertain retail environment, and there has to be intelligent collaboration on facility improvements.
Is a brand-level national platform for used-vehicle sales something that dealers support?
It’s not a huge focus for dealers. The used-car inventory is on the national Tier 1 site now, so it’s accessible. I don’t know that this is something that dealers are concerned about or are really asking for. We still want to try to sell these cars in our local markets.
How has salesperson productivity at BMW dealerships changed during the pandemic?
Coming out of the COVID lockdowns [in the spring], we saw a spike in business. We’ve maintained the same, or slightly fewer, salespeople coming out of the pandemic. So productivity has gone up. We’ll see what it looks like going forward. We’re looking at how to do business more efficiently and using digital tools to communicate more effectively with customers.
How are BMW dealerships’ fixed operations doing?
Fixed op revenues are beginning to return to pre-COVID levels. It took a lot longer than the sales side to catch up. Fixed operations revenues are still down significantly in certain areas of the country, while getting close to even on a year-over-year basis in other regions. People were driving their cars far less during COVID and still are as we start to come out of it. This continues to result in fewer visits to our dealerships. With the vaccine becoming available, I think we’ll see revenues and visits start to pick up and return to normal levels.
How is the factory helping dealers with loaner car liability exposure?
There have been preliminary discussions with BMW about creating a dealerwide loaner liability insurance program. But at this point, it’s still conversations. With the size of loaner car fleets, it’s definitely an exposure that dealers have.
BMW has shifted marketing to experiential events such as customer drives. Does that make sense for the brand?
BMW has always been a proponent of experiential driving events. BMW is a driver’s brand, and it’s a great way to get customers in our vehicles. The events have been well attended and show a good ROI in producing sales for the dealer.
What products are you looking forward to in 2021?
The all-new M3 and M4 are two exciting and highly anticipated vehicles that are arriving this year.
Two-door coupes are a shrinking segment, but the dramatic redesign of the 4 Series has been well received and created some buzz. The convertible variant should also be a nice addition this year.
Tesla has made significant inroads at the expense of the German luxury brands. What can BMW do to defend its share against the electric vehicle maker?
What you hear negatively about some of the new EV entrants are related to the service side of the business and customer support. BMW has the advantage there with a strong dealer network. We have factory-trained technicians and knowledgeable sales consultants. What we need are products that are competitive with Tesla in performance and pricing. The iX will compete with [Tesla’s] Model X on the high end of the EV market. Hopefully, the i4 can compete for market share with [Tesla’s] Model 3.
BMW plans to launch a fleet of EVs. Does U.S. consumer demand support these plans?
Much of the EV push by automakers is driven by emissions regulations and supported with government subsidies. While Tesla has demonstrated that there is some demand for EVs, there remain questions about broader consumer adoption. Electric vehicles account for a small percentage of car sales. That number will most likely continue to rise with more competitors, but concerns about charging infrastructure, convenience and price when compared to gas vehicles will continue to be unknowns.
Will the factory subsidize dealer investments in selling and servicing EVs?
That’s to be determined. BMW is helping dealers assess their needs in terms of charging infrastructure. But there is no discussion on sharing costs around equipment purchases. Financial support would be appreciated. We have to work together with the factory on figuring out the true forecast on how many of these EVs are projected to be sold and the financial impact on the dealers.
Did the decision to drop plans to launch the iX3 electric crossover in the U.S. come as a surprise?
The decision was made jointly by the BMW dealer forum product subcommittee and the BMW executive team. The iX3 lacked the range that we need from any full-electric vehicle that comes to the U.S. The consensus is that a BMW EV must have a minimum of 300 miles of range, and all-wheel drive, to be competitive in this market.
Does BMW’s model lineup need trimming?
The number of model variants has gotten difficult for dealers to manage and stock. It is hard to support marketing and incentive programs when you have such a large lineup. The variants, especially in the high-end sedan nameplates, can do with a reduction. BMW made some adjustments in the M model line packaging. Those are positive changes, more of which should happen.
What’s your opinion on the vehicle subscription experiments BMW and other automakers are piloting?
Subscription programs have proved not to make financial sense for the dealer, for the manufacturer or the consumer. It’s been difficult for automakers to figure out subscription fleet sizes and product mix. It is important manufacturers test these different business models, but it’s also good that, when they don’t work, they acknowledge that.