August proved to be a disappointing month for BMW as total new sales fell off by 19% year-over-year. Looking at the luxury brand performance table below shows that BMW was the only luxury brand that failed to report a gain last month. Total sales for the brand failed to break the 17k unit mark, which was over 7k units less than last month’s top selling luxury maker Lexus, and nearly 6k units less than second place German rival Mercedes-Benz. This is the first time that Lexus has been able to surpass both of its German competitors in terms of monthly sales since December ’10.
What exactly caused the August sales slump for the BMW? The answer is twofold… The first problem was the drastic decrease in average incentive spending from July to August, and second low dealer supply. Supply and lower incentives were most likely at fault for the drastic sales slide.
According to Autodata data, BMW average incentive spending between July and August decreased by over $1,300 per unit, falling from July’s yearly high of $4,179 to $2,818. So far year-to-date average incentive spending for the BMW has been $3,553, or $735 higher than what was observed in August.
Looking at the luxury brand segment as a whole, average incentive spending for BMW is now positioned well below the August luxury average of $3,569 per unit. To uncover the last time that BMW incentive spending was this low you would have to dig all the way back in July of ’06 when the average was $2,303 per unit.
For August Lexus average incentive spending actually increased by $50, which brought the brand’s month end average to only $2,437 per unit. This is an excellent example of tight incentive control as the brand still managed to sell over 24k units.
Mercedes-Benz on the other hand actually behaved much like BMW in terms average incentive spending, as they drastically decreased spending from July to August. Incentive declines for the brand averaged $1,624 per unit causing total incentive spending to total $2,805 per unit for the month, right in line with BMW and slightly higher than Lexus.
At the model level August proved to be a disappointing month for BMW’s historic sales volume leaders as both 5-Series and 3-Series sales were down by 57% and 29% on a yearly basis, respectively.
According to data collected by WardsAuto BMW’s average days’ supply totaled 34 days through the end of August, up from an extremely lean 15 days in July. In terms of supply, 34 days is low and well below the industry benchmark of 60 days. Low Inventory is most likely the culprit behind the large pullback in average incentive spending because without actual cars to sell what good are incentives?
Taking everything into consideration also poses the question if the recent slump has anything to do with BMW’s new model styling. Are designs like the new 5-Series and 3-Series just simply not as good as previous model years, or has the competition simply stepped their game up narrowing the gap between the Bavarian Powerhouse? Only time will tell, as the degree of separation in the luxury segment narrows with each passing day.
Be sure to check back as we revisit the luxury brand segment providing updates on new model performance and brand positioning.