Bmw may lose its profitability lead due to increased spending on the new 3-series

Article by Christian Andrei, on November 3, 2011

Volkswagen AG's Audi is on track to replace BMW as the profitability leader as sales of the new 3-Series model are slowing and the costs for developing the model have been rising. Analysts estimate that in the third quarter, BMW's operating margin could drop to 9.5% -- lower than Audi's 13% and a drop from 16% in the previous quarter.

Juergen Pieper, a Frankfurt-based analyst at Bankhaus Metzler, said that this indicates that “the very good quarters are over.” The analysts also said that Audi’s favorable momentum will probably continue for the next two to three quarters.

In the second half of 2011, BMW will spend around 500 million euros to present the next generations of the 1-series compact and the top-selling 3-series sedan. Earnings could erode due to the sluggish demand for high-end cars. An average estimate of 16 analysts surveyed by Bloomberg said that BMW is intended to report earnings before interest and taxes of 1.59 billion euros ($2.17 billion). Its sales are forecast to be at 16.8 billion euros.

The company said that H.R. Owen Plc, a London dealer of BMW, Aston Martin, Ferrari and Lamborghini vehicles, had expected the company to report a loss in the second half due to the challenging financial markets and the decline in the demand in the luxury-car market in the last few weeks.

The BMW 3-Series Sedan is the pioneer in the compact sports sedan segment and is the sixth model generation of the best-selling premium vehicle in the world. Over the years, it has come to symbolize the BMW brand’s aesthetic appeal, athleticism, and dynamics. And with its elegant and dynamic lines, it underscores the sportiness of BMW’s mid-size model.

While the new BMW 3-Series has evolved in all aspects compared to its predecessor, it still keeps a wonderful balance of elegance and sportiness. And just like in previous generations, this sedan’s sweeping bonnet, long wheelbase, short front overhang, and set-back greenhouse – typical of a BMW vehicle – make up its dynamic proportions.

Moreover, the new 3-Series has a wedge-shaped silhouette, a wider track with additional 37 mm at the front and 47 mm at the rear, an accentuated width, and multi-faced surfaces on the front end. These features highlight the sporty look of the new BMW.

The new 3-Series’ stance is emphasized by the upright and slightly forward-leaning BMW kidney grille with a wide and squat interpretation. The new BMW also has LED accent lights looking like eyebrows above the twin headlights with corona rings that give the classic BMW focused appearance an additional intensity. The headlights extend up to the kidney grille frame, with the two merging into a single stylish unit and adding more focus to the BMW’s broad-set stance.

Furthermore, the BMW 3-Series has replaced its predecessor’s central air intake into two larger intakes that are positioned under the headlights to the front end’s outer edges, adding more depth to the car’s sportiness. There are also small vertical intakes on the far left and far right of the main ducts, helping create what is called the “Air Curtain.” The Air Curtain is a new technology designed to improve air flow around the front wheels and to enhance the aerodynamic efficiency as well as reduce fuel usage at higher speeds.

What makes up the most prominent feature of the 3-Series Sedan’s front end design are the kidney grille’s closely spaced squat openings as well as the heavily contoured bonnet finish with smooth lines. These contribute to a front end that looks lower-slung and that give the BMW 3- Series a clear sporting edge.

Topics: bmw, profit

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