[cptobvious]

Hey guys, great discussion!

I guess I should add a disclaimer: I am not in any way involved in the auto industry, so this is all pure armchair theorizing. When I'm not being a BMW fanboy, in real life I am a private equity operations / strategy guy, where we buy up a company, completely overhaul it, etc., etc., so this is the type of analysis we would do on any due diligence assignment.

But, if anybody here is an industry veteran and has insights into real margins, would LOVE to hear your thoughts. Just find this all really fascinating.

[gnx]

Originally Posted by cptobvious

Hey guys, great discussion!

I guess I should add a disclaimer: I am not in any way involved in the auto industry, so this is all pure armchair theorizing. When I'm not being a BMW fanboy, in real life I am a private equity operations / strategy guy, where we buy up a company, completely overhaul it, etc., etc., so this is the type of analysis we would do on any due diligence assignment.

But, if anybody here is an industry veteran and has insights into real margins, would LOVE to hear your thoughts. Just find this all really fascinating.

M division products are the highest grossing products of the group, not breakeven. 2018 automotive EBIT target is around 9%. It has fluctuated between 8% to 9% for the past several quarters. It reached 11% in 2011 if my memory serves me well.

They make money on the Ms, both full blown, m performance as well.

[cptobvious]

Originally Posted by gnx

M division products are the highest grossing products of the group, not breakeven. 2018 automotive EBIT target is around 9%. It has fluctuated between 8% to 9% for the past several quarters. It reached 11% in 2011 if my memory serves me well.

They make money on the Ms, both full blown, m performance as well.

Wow! Thank you! Damn, there goes my armchair theorizing out the window!

That's incredible that in such a competitive industry they can continue to make such high margins. I would have thought that given such a crowded field, there's no possible way they could and would simply use the division as a loss leader. Amazing.

Gnx, do you happen to know, why doesn't Audi or Mercedes simply undercut slightly and take all the market share? Or have they learned how to play nicely with one another over the years?

[gnx]

Originally Posted by cptobvious

Wow! Thank you! Damn, there goes my armchair theorizing out the window!

That's incredible that in such a competitive industry they can continue to make such high margins. I would have thought that given such a crowded field, there's no possible way they could and would simply use the division as a loss leader. Amazing.

Gnx, do you happen to know, why doesn't Audi or Mercedes simply undercut slightly and take all the market share? Or have they learned how to play nicely with one another over the years?

Ok, time for me to theorize I guess.

Is everything a matter of price exclusively? Where should Merc (AMG) and Audi (Sport) pricing be for M quantity to go to where exactly depending on price elasticity?

Bottom line is that all three subsidiaries are the most profitable within the respective companies and increasing the sales of full blown and half way performance versions are accretive to earnings. They know it , we' ll see if we will get a z4 m coupe this time around

[akkando]

Originally Posted by cptobvious

Hey guys, great discussion!

I guess I should add a disclaimer: I am not in any way involved in the auto industry, so this is all pure armchair theorizing. When I'm not being a BMW fanboy, in real life I am a private equity operations / strategy guy, where we buy up a company, completely overhaul it, etc., etc., so this is the type of analysis we would do on any due diligence assignment.

But, if anybody here is an industry veteran and has insights into real margins, would LOVE to hear your thoughts. Just find this all really fascinating.

"overhaul"

interesting

[AESZ4]

Originally Posted by Transfer

OP don't quit your day job.

sounds like he works for BMW.

[BOhio]

Originally Posted by Transfer

OP don't quit your day job.

Hope you got a refund on the charm school tuition. Comments like yours are why some people equate BMW to porcupines, except the latter has the pricks on the outside.

[cptobvious]

Originally Posted by gnx

Ok, time for me to theorize I guess.

Is everything a matter of price exclusively? Where should Merc (AMG) and Audi (Sport) pricing be for M quantity to go to where exactly depending on price elasticity?

Bottom line is that all three subsidiaries are the most profitable within the respective companies and increasing the sales of full blown and half way performance versions are accretive to earnings. They know it , we' ll see if we will get a z4 m coupe this time around

Super interesting. You're right. These companies have been around for forever, and it's not just a matter of pricing exclusively. They've probably figured out over time how to co-exist and not upset each others' apple carts.

[COChris]

Originally Posted by BOhio

Hope you got a refund on the charm school tuition. Comments like yours are why some people equate BMW to porcupines, except the latter has the pricks on the outside.

I thought they all switched to Audi they way they drive now!

[dmk08]

Originally Posted by BOhio

Hope you got a refund on the charm school tuition. Comments like yours are why some people equate BMW to porcupines, except the latter has the pricks on the outside.

Mostly those angry 1 series owners...

[10"]

Originally Posted by IAF

You start off sounding like you know more than the OP .... then you say this LOL

Well it's software tuning. I am exaggerating of course but you get my point....of course it takes more effort than that but my point is that it's not a new engine yknow? It's been around. They probably already have different tunings developed from past research.

[Free Spirit]

Half of the 60k for the base vehicle is what it probably cost BMW in parts and labor for the M2C.

The rest is R&D and overhead.. I am pretty sure they make at least 30% profit or 18k per vehicle.

Everybody has to make a profit or they cease to exist; from the corner-boy hustler to the mega corporations.

BMW is not doing anyone any favors; they eating good..

https://f30.bimmerpost.com/forums/sh....php?t=1366240

[10"]

Originally Posted by Free Spirit

Half of the 60k for the base vehicle is what it probably cost BMW in parts and labor for the M2C.

The rest is R&D and overhead.. I am pretty sure they make at least 30% profit or 18k per vehicle.

Everybody has to make a profit or they cease to exist; from the corner-boy hustler to the mega corporations.

BMW is not doing anyone any favors; they eating good..

https://f30.bimmerpost.com/forums/sh....php?t=1366240

$18k sounds like too much, man. Less than $10k for sure. Porsche makes 15% on their cars and they are waaaaaaay more profitable than other carmakers...

[GoneIn4Secs]

I did a comparison on the canadian website, between '18 M4 and '18 M2

With the same amount of addons and options, like mperf exhaust , adaptive led, etc etc,

Pretty much maxed out m2 vs m4

M2 came out to 75k m4 was 111k beforr taxes,


Myself i got a 18 m2, which had mpe, 763m wheels, m suspension and other cosmetic addons , got from dealer for 86k

[Transfer]

Originally Posted by BOhio

Hope you got a refund on the charm school tuition. Comments like yours are why some people equate BMW to porcupines, except the latter has the pricks on the outside.

Aw gee sorry mister!

Great joke BTW. Never heard it before.

[Ramos]

They key factor that invalidates OP's theory is the cost of R&D for an M model above and beyond the regular series model it's derived from.
BMW has the formula nailed down, with the turbo engines even more so. Software tuning plus some strengthened internals, wide body, suspension upgrades (probably the highest cost) and some slap on visuals and exhaust which pays for itself with high take on the M-performance version. Everything else is recycled parts such as brakes, seats, wheels and mirrors (again shared among many M models)

Every expensive option such as DCT and carbon fiber roofs more than pay for their R&D with insane margins to boot.

In conclusion, unlike a bespoke sports car such as the Audi R8 (which itself was half based on the Gallardo) series derived performance versions are not loss leaders, they are in fact cash cows with the added benefit of marketing and brand image building that helps sell the volume vehicles.

[chris719]

Originally Posted by Ramos

They key factor that invalidates OP's theory is the cost of R&D for an M model above and beyond the regular series model it's derived from.
BMW has the formula nailed down, with the turbo engines even more so. Software tuning plus some strengthened internals, wide body, suspension upgrades (probably the highest cost) and some slap on visuals and exhaust which pays for itself with high take on the M-performance version. Everything else is recycled parts such as brakes, seats, wheels and mirrors (again shared among many M models)

Every expensive option such as DCT and carbon fiber roofs more than pay for their R&D with insane margins to boot.

In conclusion, unlike a bespoke sports car such as the Audi R8 (which itself was half based on the Gallardo) series derived performance versions are not loss leaders, they are in fact cash cows with the added benefit of marketing and brand image building that helps sell the volume vehicles.

+1

The only cars that BMW probably regrets building from a financial standpoint are the Z cars, and that's why they partnered with Toyota for this one.

[hellrotm]

Originally Posted by chris719

+1

The only cars that BMW probably regrets building from a financial standpoint are the Z cars, and that's why they partnered with Toyota for this one.

Most recently the i-program, I believe initial investment was 2 bill. Sure some of the drivetrain tech will trickle down over years. But they admitted defeat recently, saying there will be no second gen i3 or i8. Instead they will abandon carbon composite body/chassis and build upcoming all-electric cars on existing car/suv platforms.

[Davil]

They need to make an M-Xbee-C

https://jalopnik.com/bmw-loses-title...-in-1828492428