BMW retains China premium market confidence

There were unmistakeable similarities in the views of both BMW and Mercedes towards the Chinese BEV market in the respective firms’ Q2 results calls — an acknowledgement of cut-throat competition in the mass market segment but confidence that they could be winners in premium sales on account of their brands.

“We have to look at two different market segments: one below RMB350,000 ($48,500) and one above,” says BMW board chairman Oliver Zipse. “If you look below, yes, there in a lot of change going on. Zipse’s words echo those of Mercedes CEO Ola Kallenius, who made a similar point on a two-speed Chinese market at his firm’s Q2s, albeit he drew the line slightly lower at RMB300,000.

“In China, electric cars are seen, unlike in Europe, as something for the base segment. Cheaper cars have an electric drivetrain,” Zipse continues.

In contrast, in his view, the Chinese premium market looks more similar to Europe or the US, with ICEs and hybrids retaining market share better and, even among BEVs, brand strength trumping lower price tag. And that is where BMW wants to play — “the majority” of its cars are in the RMB350,000+ segment, says Zipse.

“There is a very solid brand based premium market in China on the BEV side as well as on the combustion engine side,” he continues. “And we will not slip down into the base segment.”

Its Mini subsidiary, which is more exposed to mass market competition, has a joint venture with domestic OWM Great Wall, where the two firms share a common platform. “A joint development with Chinese manufacturers is not a new idea. As a matter of fact, it is quite an old idea,” says Zipse.

And BMW itself concentrates on the premium market, where it has a “whole range of products there, which are fully electric”, and is “very well set up for the market conditions”. Zipse specifically identifies the iX3, the i3 long version, the soon-to-launched i5 long version, iX5, the i7 and the iX.

“We are absolutely convinced that we have strong products, we have growth automatically as a result because of these lovely competitive cars,” agrees the firm’s CFO Walter Mertl. “We are not frightened about anything [in China].”

“We are quite happy with China,” Zipse adds. “We are growing this year by 5pc in more or less all segments, BEV or not. We are quite happy on the BEV side,” the BMW chair assures the firm’s analyst community.

Not all are totally convinced. Jose Asumendi, head of European autos at bank JP Morgan is a believer. “ When I look at your monthly electric vehicle sales in China, you seem to be doing a very good job at capturing market share,” he says.

But Stephen Reitman, automotive equity analyst at bank Societe Generale, has concern that, while sales of BMW’s 7 series in China appear to be 5,000+ in he first half of the year, only 245 of them are the i7, Although he does note that “June was better” for sales of the BEV version.

Zipse is unworried. “Our strategy to conquer the BEV market is we start with the top and first. So we started with the i760 and the i770, which bears a price tag of almost RMB1.9mn,” he explains. Lower sales figures are therefore “not a surprise”.

He predicts that the lower-priced i750 “will be the top seller”. “The lower numbers are a consequence of our strategy [around] with which segment we start. You will see, over the year after the i7 50 is introduced, growing figures,” says Zipse.