Originally Posted by Adem1534
And you know what, people keep saying that 14K separation from the M4 price is unrealistic (meaning the price difference will be lower).
But look at M4 vs M5 - that's nearly 30 thousand dollars. And the M4's base price is lower than it's big brother's, the M6, by nearly 50 thousand dollars.
Who's to say that BMW cares about M2 buyers leaving the M4 behind?
lets look at it from an analysts perspective, as long as any margin lost from people ditching the M4 for the M2 is returned by an increase in new consumers (coming from other brands) and current customers upping their willingness to spend 50,000 dollars on a car, then both BMW and the consumers win.
For instance (these are inferred numbers, but you'll get the idea): Lets say 20% of M4 buyers leave for the M2. The price they paid to walk out with their purchase is ~20 thousand less than what they would have paid for the M4. So, let's say, for every 100current M4 buyers, BWM loses (20 x 20K) = 400,000 dollars. However since the M4 costs more to build (I'm assuming), lets say the loss is about 275,000 dollars. (that's 6,250 dollars out of the 20,000 dollar price difference is lost to increased development costs, which is a pretty conservative estimate considering a typical estimate is 50%, I used 31.25%, meaning about 1/3 of the sale is profit).
But then, let's say for every previous BMW consumer in the midrange sports car market, BMW gains 10% additional customers from other brands, so that's .1 new customers for every current BMW sports car consumer. That means for every 100 cars sold, 10 of them are new profit contributors.
In theory, cars cost about half of their price to manufacture, as mentioned earlier. So that's an additional 250,000 dollars, (.5 * 10 new consumers x 50,000 dollar MSRP)
In addition, lets say 20 percent of M235i (or 240i, whatever they call it when the M2 is released) step up to the M2, and that the 235 is lowered in price: for a profit increase of (50-39)*.5= $5,500 per purchase.
So BMW loses 20 consumers from the M4: but those 20 now purchase an M2.
(20 consumers * 50K)*.5 = $500,000
They gain 10 brand new buyers from other companies for a new profit of (10*50K)*.5 = $250,000.
They gain 20 new consumers from the 235: (20*(50K-49K))*.4 (using .4 as portion kept, because lets say a greater portion of the M2's cost went into manufacturing/research) = $88,000.
Finally, using these estimates, BMW's profit change per 100 M4's after introducing the M2, would be:
(20 consumers from M4 * $50,000 * .5) - (20 lost M4 consumers *65K)*(50% manufacturing cost) + (10 new buyers * 50K * (.5) + (20 new 235i converts * (50K-39K))*.3125
= $168,750 greater profit per 100 M4s.
or $168 greater profit per M4 that would have been sold.
That would be equivalent to raising the price of the M4 by about 300$ without impacting demand.
I don't know why I spent so much time on this, I guess I'm just that bored.
Point is, I don't think BMW M is necessarily going to position the M2 so that people feel obliged to upgrade to the M4. The M2 could very well start at $50,000 to start a new mass produced M price segment.
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