Dealer Demos / new car stock

Herbert

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Definitely a supply side problem. Jardine BMW (Milton Keynes) had one (1) new unregistered car in the showroom this week; an X5MX7M huge SUV thing.

Rest of the showroom was filled with best of their used stock. And much of that had "sold" signs on.
 

Zee Germanz

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If the factories are operating at near capacity (be interesting if anyone has stats), this supply/demand imbalance will only be adjusted if they create new factories to clear the backlog, or there is an economic downturn that reduces demand.

Could this pricing be the new norm for several years to come…

Looking further down the road than now.
 
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JappaM2

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If the factories are operating at near capacity (be interesting if anyone has stats), this supply/demand imbalance will only be adjusted if they create new factories to clear the backlog, or there is an economic downturn that reduces demand.

Could this pricing be the new norm for several years to come…

Looking further down the road than now.
Remember reading someone in the industry stating that it will be the new normal, but I feel it must me a short term ( next 12 -18 months ) issue. Surely simple economics dictate that with unemployment sure to rise and inflation on the up that demand will drop and manufacturers will be back to offer contributions!
 

adymi16

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What car brands? They all offer massive discounts unless its a halo brand. If they sell less cars they cost more so they dont make any more money. Why you think they force dealers to take a minimum of each type of car? Car dealers are not making any money extra right now when their cars are sitting in the ports with 12 week delays and parts missing off them and production lines that cannot run. If it wasnt for government bailouts they would all be in serious trouble when they had to furlough everyone. BMW must be in a right mess.

Half the sales people are thinking about quiting because they work on 15k basic and commission which doesnt get paid until delivery which is currently 6 months out.

You referring to their old business model here. Once chip supply resumes they can move cars at the normal pace, but not revert to the over supply model.

Then charge as close to list as possible.

This situation has given them opportunity to make a change. From what I've read and watched it seems like they will move away from volume model.

Means they will need fewer factories to produce and a smaller dealer network to sell them. If the limit supply model works, it won't take long for them to adjust the rest of the production and selling arms of BMW to support this.

Ultimately BMW want to make as much profit as possible and I'd say nothing is off the table in this unique climate.

I'd love a new G80 m3, but I can see that in this climate its unaffordable for me. I can also see thats unlikely to change. BMW don't need me to shift these its seems. So I'm no longer the 'desired' target buyer for M3/M4 when new.
 

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You referring to their old business model here. Once chip supply resumes they can move cars at the normal pace, but not revert to the over supply model.

Then charge as close to list as possible.

This situation has given them opportunity to make a change. From what I've read and watched it seems like they will move away from volume model.

Means they will need fewer factories to produce and a smaller dealer network to sell them. If the limit supply model works, it won't take long for them to adjust the rest of the production and selling arms of BMW to support this.

Ultimately BMW want to make as much profit as possible and I'd say nothing is off the table in this unique climate.

I'd love a new G80 m3, but I can see that in this climate its unaffordable for me. I can also see thats unlikely to change. BMW don't need me to shift these its seems. So I'm no longer the 'desired' target buyer for M3/M4 when new.

It is not their old business model. It is THE business model. BMW will get back to full production as fast as they can. That will drive volumes up and eventually the supply will rebalance and the discount will be back. You also seem to be ignoring the product lifecycle. The big discounts start when the model loses its new model appeal. Even in a shortage of cars you can get a stonking discount on an X3M and 2.9%. So actually nothing has changed.
 

JohnM3E90

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You referring to their old business model here. Once chip supply resumes they can move cars at the normal pace, but not revert to the over supply model.

Then charge as close to list as possible.

This situation has given them opportunity to make a change. From what I've read and watched it seems like they will move away from volume model.

Means they will need fewer factories to produce and a smaller dealer network to sell them. If the limit supply model works, it won't take long for them to adjust the rest of the production and selling arms of BMW to support this.

Ultimately BMW want to make as much profit as possible and I'd say nothing is off the table in this unique climate.

I'd love a new G80 m3, but I can see that in this climate its unaffordable for me. I can also see thats unlikely to change. BMW don't need me to shift these its seems. So I'm no longer the 'desired' target buyer for M3/M4 when new.
After a long day at BMW I have gleaned that they are working towards a "New Model" as you say, they are trimming staffing levels and production staffing also, if things stay like this for a while prices will keep high and residuals will be up too.
Not good news for the PCP crowd though IMO.
 

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After a long day at BMW I have gleaned that they are working towards a "New Model" as you say, they are trimming staffing levels and production staffing also, if things stay like this for a while prices will keep high and residuals will be up too.
Not good news for the PCP crowd though IMO.

That would only be to address shortages in parts though. Low volume, low staffing is not a sustainable business model for BMW or their dealers.
 

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adymi16

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But there won't be cars sitting in fields, that's the point. They only discount because they had too. They won't have to if stock is artificially limited. I wish it wasn't heading this way, but all the signs and BMW themselves say it is changing its model to one of under supply and selling as close to list as possible. . I want a new M3 and without the discounts of old I can't afford one, I'm just calling it as it seems to be.
 

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This is what I've been saying. I think it would be mad of them to go back to the old ways without trying this current approach a little longer. At the very least, they should start with a clean sheet and keep prices high to see if they can make it work. However, if one of their competitors blinks, then who knows if it will start a cascade of discounting in the sector. There is probably a monopolies commission problem too, if the main German players get together to keep prices high?? In the mid to long term it shouldn’t matter too much as secondhand values will roughly track to cover the higher purchase price. You will lose out a little if the price tracks purely based on a percentage rather than a pure difference in price between new and old (say for instance secondhand values such as 40% of a discounted new £60k car is less difference than 40% of a £70K car) and the extra money that needs pumping into the system to fund all the new more costly cars has to come out of our pockets, but after that initial pain, things should be slightly better, if not in absolute terms compared to recent times.

Don't get me wrong, It's not something I want, but in these uncertain times, it is better for a business to start off with high prices before throwing away that hard fought for increased profit margin per vehicle made.
 

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But there won't be cars sitting in fields, that's the point. They only discount because they had too. They won't have to if stock is artificially limited. I wish it wasn't heading this way, but all the signs and BMW themselves say it is changing its model to one of under supply and selling as close to list as possible. . I want a new M3 and without the discounts of old I can't afford one, I'm just calling it as it seems to be.

Of course there will. You think BMW is going to shut production lines and let their competition gain market share? BMW is opening more production capacity around the world, not less. Tesla is eating in to the global market right in its segment. Its got a massive lead in terms of technology and volume in the EV market. Company cars are moving away at a rapid pace. Half the people i know who would be driving 3 or 5 series right now have Teslas because of the tax savings in BIK. Tesla is selling 32k cars a year already and the growth is rapid. Most of those sales used to be BMW 3 series and Audi A4's. Tesla has them beaten in terms of range and price and technology.

There is no scenario where BMW can maintain its margin for more than a short term boost due to lack of supply.
 

zerouali

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Of course there will. You think BMW is going to shut production lines and let their competition gain market share? BMW is opening more production capacity around the world, not less. Tesla is eating in to the global market right in its segment. Its got a massive lead in terms of technology and volume in the EV market. Company cars are moving away at a rapid pace. Half the people i know who would be driving 3 or 5 series right now have Teslas because of the tax savings in BIK. Tesla is selling 32k cars a year already and the growth is rapid. Most of those sales used to be BMW 3 series and Audi A4's. Tesla has them beaten in terms of range and price and technology.

There is no scenario where BMW can maintain its margin for more than a short term boost due to lack of supply.

If it was just BMW making these decisions you might be right but this is a market wide correction. Every manufacturer will be thinking the same thing, why chase volume sales and 6% profit margin when a lower volume eliminates deep discounts and provides 16% profit margin?

There will be a market contraction, less new cars will be built and the days of changing cars every 2 years might be over, but if the money men decide it’s what makes sense then that’s what will happen.
 

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Of course there will. You think BMW is going to shut production lines and let their competition gain market share? BMW is opening more production capacity around the world, not less. Tesla is eating in to the global market right in its segment. Its got a massive lead in terms of technology and volume in the EV market. Company cars are moving away at a rapid pace. Half the people i know who would be driving 3 or 5 series right now have Teslas because of the tax savings in BIK. Tesla is selling 32k cars a year already and the growth is rapid. Most of those sales used to be BMW 3 series and Audi A4's. Tesla has them beaten in terms of range and price and technology.

There is no scenario where BMW can maintain its margin for more than a short term boost due to lack of supply.

I think the world as a whole is in very changeable state currently. What we once thought was the way things will always be, is very much open to a re shuffle.
 

MaximumBob

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I haven't been in the trade for a while so may be a bit out of date but...
Isn't it the case that a typical car manufacturer (BMW) sells cars for a fixed price into the UK market via its importer.
So the factory gets its money regardless of a cars final selling price [1].
Extensive forward allocations by the factory is essential for JIT planning and production.
So the UK importer has a fixed volume of cars to share out into its dealer network on a rolling basis.
Not all cars always make it into the dealerships and the importer may have unsold stock to store.
Planning manufacture of cars for the UK market being RHD is less flexible to volume changes than the ROTW.
Dealerships contract to buy a number of cars per year to sell...apparently usually more than the new car market can stand if selling at list.
The larger the number of cars a dealer contracts to buy, the higher the on target bonuses.
The dealerships sell the stock (with 90 day free stocking) at a price relative to availability and if oversupply use high discounts.
So its the dealerships that bare the brunt of selling with high discounts and low profit margins rather than the factory.
Economy of manufacture usually means the more cars BMW can manufacture the higher its overall profit assuming all cars can be sold.
[1] If an importer (usually owned by the manufacturer) has fields of unsold cars then that obviously affects the bottom line.

This sort of disorderly market caused by building too many cars and having to use high discounts is pretty much bad for everyone (except perhaps the factory).
If the factory produced less cars then dealers wouldn't have to discount to sell and their profit margins would rise significantly
The importer could then reduce the % profit margin for the dealerships...to balance that out...so ultimately more profit for the factory.
 

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I haven't been in the trade for a while so may be a bit out of date but...
Isn't it the case that a typical car manufacturer (BMW) sells cars for a fixed price into the UK market via its importer.
So the factory gets its money regardless of a cars final selling price [1].
Extensive forward allocations by the factory is essential for JIT planning and production.
So the UK importer has a fixed volume of cars to share out into its dealer network on a rolling basis.
Not all cars always make it into the dealerships and the importer may have unsold stock to store.
Planning manufacture of cars for the UK market being RHD is less flexible to volume changes than the ROTW.
Dealerships contract to buy a number of cars per year to sell...apparently usually more than the new car market can stand if selling at list.
The larger the number of cars a dealer contract to buy, the higher the on target bonuses.
The dealerships sell the stock (with 90 day free stocking) at a price relative to availability and if oversupply use high discounts.
So its the dealerships that bare the brunt of selling with high discounts and low profit margins rather than the factory.
Economy of manufacture usually means the more cars BMW can manufacture the higher its overall profit assuming all cars can be sold.
[1] If an importer (usually owned by the manufacturer) has fields of unsold cars then that obviously affects the bottom line.

This sort of disorderly market caused by building too many cars and having to use high discounts is pretty much bad for everyone (except perhaps the factory).
If the factory produced less cars then dealers wouldn't have to discount to sell and their profit margins would rise significantly
The importer could then reduce the % profit margin for the dealerships...to balance that out...so ultimately more profit for the factory.

I have been trying to tell everyone and its clearly not sinking in to them.

Factories run at 100% unless they physically cant. If they dont then they lose money fast. The margins in cars is not big enough to lose volume.

If BMW slows down production then Tesla will increase it and take their market share which means Tesla's costs go down and BMW's go up. Thus making the problem worse for BMW because they no longer can discount because their costs are too high.

New car sales are down 33% this month versus 2020. Thats how bad it is. Automakers have ZERO leverage in the chip market because they buy junk chips at low margin on low volume and that shortage is way worse than in high end chips in high volume. JLR is down 50% in volume.

These numbers are bankruptcy type of numbers if they continue. Full retail versus discount on an M4 is currently around 7k if you are lucky and BMW wont see a penny of that, thats dealers money. The only place they can save money is in contributions and finance and finance has plenty of competition.
 

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There are many more factors at play than just restricting supply to keep selling prices buoyant. BMW is a volume producer and will never in my opinion get to the Halo of Porsche who seldom need to discount especially their aspirational models

Inflation is rampant which probably means an interest rate hike is on the cards. This means the 95% of people who purchase on PCP or HP will pay more each month, for some this will push the car outside of affordability. This applies downwards pressure on prices which means either BMW has to subsidise with lower rates or a chassis incentive, both of which impact profitability. Dealers will also feel the pinch with cars outside of the 90 day free funding window, so what do they do - discount

In a normal interest rate environment, cars are too expensive. Some of the monthlies I've seen on here at 2.9% or 3.9% are laughable. Will the general public really pay £1k+ for an M3/M4 on the drive. Some will but most won't. You can obviously see the issue with keeping prices at top dollar - they won't sell

I'm keen to come out of my 3yr old F83 M4 but at the current deals its not going to happen. Can I afford it - Yes; Do I feel its worth what is currently being asked - No
 

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There are many more factors at play than just restricting supply to keep selling prices buoyant. BMW is a volume producer and will never in my opinion get to the Halo of Porsche who seldom need to discount especially their aspirational models

Inflation is rampant which probably means an interest rate hike is on the cards. This means the 95% of people who purchase on PCP or HP will pay more each month, for some this will push the car outside of affordability. This applies downwards pressure on prices which means either BMW has to subsidise with lower rates or a chassis incentive, both of which impact profitability. Dealers will also feel the pinch with cars outside of the 90 day free funding window, so what do they do - discount

In a normal interest rate environment, cars are too expensive. Some of the monthlies I've seen on here at 2.9% or 3.9% are laughable. Will the general public really pay £1k+ for an M3/M4 on the drive. Some will but most won't. You can obviously see the issue with keeping prices at top dollar - they won't sell

I'm keen to come out of my 3yr old F83 M4 but at the current deals its not going to happen. Can I afford it - Yes; Do I feel its worth what is currently being asked - No


With you here. I'm WFH, running round in a brand new Micra that I bought my youngest as she is learning to drive. It's perfectly capable and paid for. i managed a great discount even in these challenging times.

Do I want an M3? Yes absolutely, got my quote from PL and was ready to pull the trigger in May. Just waited for the XDrive numbers to come out. Since then I've also looked at the Rs3 as an alternative, then EVs such as the Kia, Seat Born etc. Fact is I don't need a car at the moment.

Going forward the Micra has taught me I'd rather spend my money on something else than £800-900 a month on a car that I'm barely going to use. Yes a lovely status symbol, and nice to drive for the 8000 miles a year allowed. £500-600 a month, yeah now you are talking.

We've had 15 years of very low inflation and corresponding low wage rises. Maybe these higher prices will eventually filter through wages and become acceptable, but all those years paying the same price still mean that £5 a pint seems a lot. Maybe I'm just getting old.
 

as7920

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With you here. I'm WFH, running round in a brand new Micra that I bought my youngest as she is learning to drive. It's perfectly capable and paid for. i managed a great discount even in these challenging times.

Do I want an M3? Yes absolutely, got my quote from PL and was ready to pull the trigger in May. Just waited for the XDrive numbers to come out. Since then I've also looked at the Rs3 as an alternative, then EVs such as the Kia, Seat Born etc. Fact is I don't need a car at the moment.

Going forward the Micra has taught me I'd rather spend my money on something else than £800-900 a month on a car that I'm barely going to use. Yes a lovely status symbol, and nice to drive for the 8000 miles a year allowed. £500-600 a month, yeah now you are talking.

We've had 15 years of very low inflation and corresponding low wage rises. Maybe these higher prices will eventually filter through wages and become acceptable, but all those years paying the same price still mean that £5 a pint seems a lot. Maybe I'm just getting old.

Sums it up nicely. Did the same. 6 year old golf that will become eldest sons first car.

but man it sucks. So missing my old M3 and desperate to get back in something tasty but all the points you make do make you consider the situation.
 

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I haven't been in the trade for a while so may be a bit out of date but...
Isn't it the case that a typical car manufacturer (BMW) sells cars for a fixed price into the UK market via its importer.
So the factory gets its money regardless of a cars final selling price [1].
Extensive forward allocations by the factory is essential for JIT planning and production.
So the UK importer has a fixed volume of cars to share out into its dealer network on a rolling basis.
Not all cars always make it into the dealerships and the importer may have unsold stock to store.
Planning manufacture of cars for the UK market being RHD is less flexible to volume changes than the ROTW.
Dealerships contract to buy a number of cars per year to sell...apparently usually more than the new car market can stand if selling at list.
The larger the number of cars a dealer contracts to buy, the higher the on target bonuses.
The dealerships sell the stock (with 90 day free stocking) at a price relative to availability and if oversupply use high discounts.
So its the dealerships that bare the brunt of selling with high discounts and low profit margins rather than the factory.
Economy of manufacture usually means the more cars BMW can manufacture the higher its overall profit assuming all cars can be sold.
[1] If an importer (usually owned by the manufacturer) has fields of unsold cars then that obviously affects the bottom line.

This sort of disorderly market caused by building too many cars and having to use high discounts is pretty much bad for everyone (except perhaps the factory).
If the factory produced less cars then dealers wouldn't have to discount to sell and their profit margins would rise significantly
The importer could then reduce the % profit margin for the dealerships...to balance that out...so ultimately more profit for the factory.


I think it's more complicated than that nowadays. Cash is king went away decades ago and so much profit can be and often is made, on the finance package, rather than in the metal. So it then depends on how the financial services are linked to the manufacturer and the dealership. Merc took back control of many dealerships several years ago, although it is now looking to sell many of it's London dealerships, so I have no idea how their financial structure will work. Many years ago I remember when we sold new mk3 Nissan Micra, we were targeted with £650 profit per unit! Barely covered the biscuits and hot chocolate I drank when selling them (obviously nobody drinks the coffee out of the machines for too long as you get heart palpitations). Dealer support from the manufacture has to paid for from somewhere and if it's the manufacturer providing the support then discounting will hurt the bottom line. I don't believe it's as clear cut as just 'print more cars'
 

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