BMW earnings hit by G30 5 Series ramp-up cost and leasing write downs

by Bimmerfest.com Member - pharding on March 9, 2017, 7:17 pm
”5er ramp up”

Two hot topics in this forum are at the center of BMW's 2016 earnings taking a hit, 2017 5 Series and Leasing.

Quote:
Startup costs for BMW's (BMWG.DE) new 5 Series model contributed to lower-than-expected 2016 operating earnings at the German luxury carmaker, which knocked its shares on Thursday.
Quote:
Evercore ISI analyst Arndt Ellinghorst, voiced surprise at the extent of negative adjustments that included estimated resale values for leased vehicles. Those contributed to 498 million euros of "eliminations" from fourth-quarter profit.
Read the full story from Yahoo Finance here!



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63 responses to BMW earnings hit by G30 5 Series ramp-up cost and leasing write downs

BobRae commented:
March 9, 2017, 7:56 pm

It shows BMW has been overstating residual values to lower monthly payments and sell more cars. That's what I love about leasing. Wait for a low interest rate and an optimistic residual and BMW eats part of the cost of "ownership" or "rental". I'm driving a car that is at lease end. Buyout is $34,800 after 39 months. I've been advertising it for less than that and haven't gotten any offers. Wholesale is several thousand less than the residual. Thank you, BMW
mr_clueless commented:
March 9, 2017, 8:26 pm

Welcome to financial engineering.

Economy 1.0 -- Get the best engineer
Economy 2.0 -- Get the best CFO
Economy 3.0 -- Get the best ...?
marius commented:
March 9, 2017, 8:33 pm

https://www.fool.com/investing/2017/...-spendi-2.aspx

Profitability falls on increased tech spending - I think this is more accurate assessment than blaming loss of profitability on practically another F10 LCI that resulted in G30 coming to life.
F32Fleet commented:
March 9, 2017, 9:04 pm

Still paid a nice dividend.

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FadyDizzle commented:
March 9, 2017, 9:16 pm

Honestly, I don't know how accurate this article is. I read through their financial statements earlier and although "leasing" may impact their earnings, their financing income was up considerably from last year (I think 15%). That means they probably made up whatever they lost from residuals on the money factor (interest rate charges).
BobRae commented:
March 9, 2017, 9:25 pm

Quote:
Originally Posted by FadyDizzle View Post
Honestly, I don't know how accurate this article is. I read through their financial statements earlier and although "leasing" may impact their earnings, their financing income was up considerably from last year (I think 15%). That means they probably made up whatever they lost from residuals on the money factor (interest rate charges).
It says earnings fell 2% despite a 2.2% increase in revenue. If the story is accurate, profit is down and residual loss write offs are a part of it.
FadyDizzle commented:
March 9, 2017, 9:30 pm

Quote:
Originally Posted by BobRae View Post
It says earnings fell 2% despite a 2.2% increase in revenue. If the story is accurate, profit is down and residual loss write offs are a part of it.
Not sure what they consider earnings. At the link below, if you scroll down to the financial statement excerpts, it shows earnings are up 8% (6.4m to 6.9m) and EPS is up 7.7% (9.7 to 10.4). I wonder if they are saying earnings are down when you convert to USD...the figures on this excerpt are in Euros and the Euro did weaken in 2016 vs. 2015.

http://f30.bimmerpost.com/forums/sho....php?t=1361987
Brietling commented:
March 9, 2017, 9:36 pm

I see LCI alot - what does that mean?

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FadyDizzle commented:
March 9, 2017, 9:37 pm

Quote:
Originally Posted by Brietling View Post
I see LCI alot - what does that mean?

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Life cycle initiation... It's a mid cycle refresh
mr_clueless commented:
March 9, 2017, 9:38 pm

Quote:
Originally Posted by Brietling View Post
I see LCI alot - what does that mean?

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http://lmgtfy.com/?q=bmw+lci
Brietling commented:
March 9, 2017, 9:43 pm

Thanks much...

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namelessman commented:
March 9, 2017, 9:45 pm

Quote:
Originally Posted by mr_clueless View Post
Welcome to financial engineering.

Economy 1.0 -- Get the best engineer
Economy 2.0 -- Get the best CFO
Economy 3.0 -- Get the best ...?
Economy 3.0 - Get the best .... musical chairs.
ImolaRedM commented:
March 9, 2017, 10:36 pm

Quote:
Originally Posted by namelessman View Post
Economy 3.0 - Get the best .... musical chairs.
The three envelopes?

A fellow had just been hired as the new CEO of a large high tech corporation. The CEO who was stepping down met with him privately and presented him with three numbered envelopes. "Open these if you run up against a problem you don't think you can solve," he said.
Well, things went along pretty smoothly, but six months later, sales took a downturn and he was really catching a lot of heat. About at his wit's end, he remembered the envelopes. He went to his drawer and took out the first envelope. The message read, "Blame your predecessor."

The new CEO called a press conference and tactfully laid the blame at the feet of the previous CEO. Satisfied with his comments, the press -- and Wall Street - responded positively, sales began to pick up and the problem was soon behind him.

About a year later, the company was again experiencing a slight dip in sales, combined with serious product problems. Having learned from his previous experience, the CEO quickly opened the second envelope. The message read, "Reorganize." This he did, and the company quickly rebounded.

After several consecutive profitable quarters, the company once again fell on difficult times. The CEO went to his office, closed the door and opened the third envelope.

The message said, "Prepare three envelopes."

namelessman commented:
March 9, 2017, 10:41 pm

Quote:
Originally Posted by ImolaRedM View Post
The three envelopes?
Dejavu?!?
nyca commented:
March 9, 2017, 10:47 pm

Unless you are willing to keep these cars 5+ years, don't buy them, lease them. Because you can never get that residual value on a trade-in after 3 years that they are using on these leases, everybody knows it.
pharding commented:
March 10, 2017, 4:55 am

Quote:
Originally Posted by Brietling View Post
I see LCI alot - what does that mean?

Sent from my SM-G935P using Bimmerfest mobile app


Life Cycle Impulse is the most common term which is derived from German semantics. They also use LCI as
an acronym. It is an injection of midlife improvements to boost sales and includes a facelift on the front and rear of the car to tweak things a bit.


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Brietling commented:
March 10, 2017, 6:51 am

Gotcha - Lexus seems to follow that same path..

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Gary J commented:
March 10, 2017, 7:28 am

Quote:
Originally Posted by namelessman View Post
Economy 3.0 - Get the best .... musical chairs.
Make that leasing musical chairs where you get them coming back on your predictable 3 year schedule.
pharding commented:
March 10, 2017, 7:45 am

BMW has a proponent of leasing forever and it has served them well. It has served the clients well provided that you were smart and searched through deceit, deception and lies by many BMW dealerships.


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marius commented:
March 10, 2017, 9:34 am

Wall Street Journal on the subject:

By Adrienne Roberts
Updated March 9, 2017 3:34 p.m. ET


The self-proclaimed ultimate driving machine has hit a pothole in the world’s most important luxury market.

BMW AG’s U.S. operation helped fuel the German auto maker’s rise, but it is now struggling to keep pace in the cutthroat American market. The company, whose BMW brand reported its first U.S. sales decline in seven years, needs a jump start so it can fund a spate of ambitious technology products.

The maker of luxury and high-performance vehicles said Thursday that earnings cooled slightly in 2016, with its closely watched pretax margins in automotive operations slipping to 8.9%, from 9.2% in 2015. The company blamed higher costs for new models, including electric vehicles, and technology for self-driving cars and other mobility services.

BMW had warned that its fourth-quarter results would be pressured by product introductions, write-downs on inventory and high research-and-development costs, but the decline in annual pretax earnings surprised analysts. It is a bitter pill for the brand, which lost the global luxury-sales crown to Daimler AG’s Mercedes-Benz last year for the first time since 2004.

The company’s U.S. division is struggling to carry its weight. While sales rose in Asia and Europe, and at all three BMW brands, including Mini and Rolls-Royce in 2016, U.S. sales fell 9.5% for the BMW brand and 11% for Mini. The BMW brand’s first U.S. decline since 2009 during the financial crisis represented the biggest drop-off among auto makers selling more than 100,000 vehicles.

BMW hit the skids in the U.S. even as the broader luxury sector is growing and the U.S. market touched a record. Executives have said the 2017 5-series sedan, which was launched in February, is likely to help BMW regain strength in the U.S. market

“I think it will help us in brand perception just as much as in simple sales,” BMW Americas head Ludwig Willisch said at the Detroit auto show earlier this year. The BMW brand’s sales logged a modest increase during the first two months of U.S. sales compared with the prior year.

Mr. Willisch had been running the U.S. business until a management shift last month.

The 5-Series, however, is a sedan competing in a market where buyers are shunning passenger cars and snapping up increasing numbers of heavier vehicles amid low gasoline prices. Mr. Willisch said BMW is investing to add capacity at its South Carolina plant to increase supplies of sport-utility vehicles.

BMW will need all the firepower it can get, particularly on the family-hauler front.

New SUVs from smaller luxury competitors, including Jaguar and Land Rover, have added pressure on BMW at the same time some of its hallmark vehicles—including the 5-Series—need to be refreshed. Jaguar Land Rover, owned by Tata Motors Ltd. of India, recently launched the F-Pace SUV, its first sport-utility; Volvo Car Corp., owned by Zhejiang Geely Holding Group, has won critical acclaim and new buyers with a redesigned XC90. “We’ll just have to be better,” Mr. Willisch said. “We have to have a compelling offer.”

Brian Allan, senior director of Galpin Motors, a Los Angeles dealership that sells brands such as Lincoln, Volvo and Jaguar, said it doubled its sales of Jaguar vehicles in 2016, with sales of the F-Pace SUV accounting for 30% of the increase. Sales of Volvo vehicles rose 50% at the dealership in 2016, driven almost exclusively by the XC90 SUV.

Mr. Allan suggested German luxury-vehicle makers need to rethink how they package their offerings. He said features that are optional on some of the German brands are standard on Mazda Motor Corp. and Honda Motor Co. vehicles.

“People are becoming very aware they’re paying for a name over content,” he said.

Jessica Caldwell, an analyst with Edmunds.com, said luxury SUV sales overtook sedans last year, but BMW didn't have the product lineup to match consumer demand.

“Some of the smaller luxury auto makers like Jaguar and Volvo have used new SUVs to become relevant players,” Ms. Caldwell said. “Those two brands are lower volume, but they’re getting more attention because they sell lower priced vehicles for people who still want prestige.”

BMW said overall earnings before interest and taxes fell 2.2% to €9.4 billion ($9.9 billion) in 2016, declining 1.8% to €7.7 billion in the core automotive division. Net profit rose 8% to €6.9 billion and revenue climbed 2.2% to €94.16 billion.

—William Boston contributed to this article.

Write to Adrienne Roberts at Adrienne.Roberts@wsj.com
BobRae commented:
March 10, 2017, 12:27 pm

Quote:
Originally Posted by FadyDizzle View Post
Not sure what they consider earnings. At the link below, if you scroll down to the financial statement excerpts, it shows earnings are up 8% (6.4m to 6.9m) and EPS is up 7.7% (9.7 to 10.4). I wonder if they are saying earnings are down when you convert to USD...the figures on this excerpt are in Euros and the Euro did weaken in 2016 vs. 2015.

http://f30.bimmerpost.com/forums/sho....php?t=1361987
Don't know, but I read earnings to mean profit. Part of it was related to "accounting changes" but there was a large euro drop on lease residual allowances. So, regardless, BMW (and probably others) use artificially high residuals to lower payments and drive sales. This is a financial statement line that gets pushed off into a non current year. Every so many years, BMW (and others) have to account for the losses on lease residuals.

I don't care how much money BMW makes or doesn't make. the point of my post was that when you are dealing on a car that has an artificially high residual and a good interest rate (mine was .9%), you are a huge winner over someone who buys the car and then walks in to trade it in 3 years. If I had purchased my car, not only would I have tied up $65,000 for 39 months, but when I went to trade the car in, I'd be getting less for the car than its stated residual on "deal day". So a big win for me.

I had the same deal on a 2004 Dodge Ram 2500 diesel pickup. Leased it for 36 months and at the end of the lease the buyout (residual) was $7,000 higher than what similar trucks were sitting on dealer lots for. Needless to say, I turned the truck in.

My wife had a leased 2011 Honda Odyssey. A month before the lease was up in early 2014, I put it online to sell it. In this case the residual was lower than its actual value. I found a buyer that paid $7,000 more than my buyout (it was super low mileage). I did the deal right at the dealership - they took the car in and then resold it to my buyer and applied the $7,000 "equity" to our new 2014 Odyssey. If I had purchased that van, driven it for 3 years and traded it on the new one, they'd have given me wholesale trade.

I love leasing.

The high residual game stopped in 2008 when the US economy crashed and many manufacturers got out of the leasing game. But, they are now back at it to drive sales.
F32Fleet commented:
March 11, 2017, 9:08 am

Quote:
Originally Posted by BobRae View Post
Don't know, but I read earnings to mean profit. Part of it was related to "accounting changes" but there was a large euro drop on lease residual allowances. So, regardless, BMW (and probably others) use artificially high residuals to lower payments and drive sales. This is a financial statement line that gets pushed off into a non current year. Every so many years, BMW (and others) have to account for the losses on lease residuals.

I don't care how much money BMW makes or doesn't make. the point of my post was that when you are dealing on a car that has an artificially high residual and a good interest rate (mine was .9%), you are a huge winner over someone who buys the car and then walks in to trade it in 3 years. If I had purchased my car, not only would I have tied up $65,000 for 39 months, but when I went to trade the car in, I'd be getting less for the car than its stated residual on "deal day". So a big win for me.

I had the same deal on a 2004 Dodge Ram 2500 diesel pickup. Leased it for 36 months and at the end of the lease the buyout (residual) was $7,000 higher than what similar trucks were sitting on dealer lots for. Needless to say, I turned the truck in.

My wife had a leased 2011 Honda Odyssey. A month before the lease was up in early 2014, I put it online to sell it. In this case the residual was lower than its actual value. I found a buyer that paid $7,000 more than my buyout (it was super low mileage). I did the deal right at the dealership - they took the car in and then resold it to my buyer and applied the $7,000 "equity" to our new 2014 Odyssey. If I had purchased that van, driven it for 3 years and traded it on the new one, they'd have given me wholesale trade.

I love leasing.

The high residual game stopped in 2008 when the US economy crashed and many manufacturers got out of the leasing game. But, they are now back at it to drive sales.
I played the leasing game initially, but driving the car became too enjoyable. 12k miles/year just wouldn't cut it anymore.

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mybn commented:
March 18, 2017, 4:49 pm

BMW can't catch a break it seems when it comes to news on its vehicles whether its market share or financial results or reliability. It is kind of funny to see part of the reason is scaling up for the new 5 which came out more like a refresh of the old 5.

Im not sure they are overstating residual values. I just think these cars are depreciating way faster than anyone predicted and the high cost of maintenance and reduced BMW benefits with their 2 tier certified programs, etc. etc. etc. do not help. At 60K miles, I am seeing older model Lexus fetch far more in the market than my 2012 5 series and I can't help but think its because those cars are just getting broken in, while mine every day I wonder if something will break and whether it will be 2K or 4K in costs. So,,, I want to sell a car no one wants, and that brings the price down in the market.
Kamdog commented:
March 18, 2017, 6:27 pm

Quote:
Originally Posted by mybn View Post
BMW can't catch a break it seems when it comes to news on its vehicles whether its market share or financial results or reliability. It is kind of funny to see part of the reason is scaling up for the new 5 which came out more like a refresh of the old 5.

Im not sure they are overstating residual values. I just think these cars are depreciating way faster than anyone predicted and the high cost of maintenance and reduced BMW benefits with their 2 tier certified programs, etc. etc. etc. do not help. At 60K miles, I am seeing older model Lexus fetch far more in the market than my 2012 5 series and I can't help but think its because those cars are just getting broken in, while mine every day I wonder if something will break and whether it will be 2K or 4K in costs. So,,, I want to sell a car no one wants, and that brings the price down in the market.
I really don't think it is an actual BMW problem. I have always bought my cars and ran them into the ground, unless there was a compelling reason to not do so. For example, I got rid of an Integra I loved, in order to get a car with airbags and antilock brakes, of which the Integra had none.

With the pace of technological advancement so high, why buy a BMW without all the current advancements and expect it to compete 3 or 4 years later with cars far cheaper with the advancements a couple years down the road? The OP's own, personal experience is instructive.

This is a very difficult time for those who buy, but not for those who lease.
tturedraider commented:
March 20, 2017, 12:51 am

Quote:
Originally Posted by Brietling View Post
I see LCI alot - what does that mean?

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Quote:
Originally Posted by FadyDizzle View Post
Life cycle initiation... It's a mid cycle refresh
Life Cycle Impulse
PsychDoc1 commented:
March 20, 2017, 5:47 am

Deleted
PsychDoc1 commented:
March 20, 2017, 5:49 am

Quote:
Originally Posted by tturedraider View Post
Life Cycle Impulse
It should be "Life Cycle Interval." At least that would make some sense. But who expects logic these days? [emoji2]

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BobRae commented:
March 20, 2017, 12:15 pm

Quote:
Originally Posted by mybn View Post

Im not sure they are overstating residual values. I just think these cars are depreciating way faster than anyone predicted ...
It doesn't matter why the residual is higher than the actual market value at the end of the lease, what matters is that BMW is eating that value difference, not the person leasing the car. A closed end lease is a win no matter how you look at it unless you keep a car for 6+ years.

If the residual is higher than the market value of the car you turn it in and walk away. if the market value is higher than the residual value, you find a buyer, exercise your lease end option and flip the car to the buyer and pocket the "equity".

Buying or leasing, you are using up a depreciating asset. So, its going to cost you money either way, the question is what is the best way to minimize that cost. In many cases, its leasing and this article shows how BMW has had to eat its lunch on leases - proving my point.

BMW is chasing market share and the customer who gets one at a bowl market interest rate is reaping the benefit.
mr_clueless commented:
March 20, 2017, 7:43 pm

This may have something to do with it:
https://mishtalk.com/2017/03/20/used...y-in-20-years/
namelessman commented:
March 20, 2017, 8:10 pm

Quote:
Originally Posted by mr_clueless View Post
This may have something to do with it:
https://mishtalk.com/2017/03/20/used...y-in-20-years/
Very interesting, maybe time to join lease bandwagon!
mr_clueless commented:
March 20, 2017, 8:19 pm

Quote:
Originally Posted by namelessman View Post
Very interesting, maybe time to join lease bandwagon!
Doesn't work for me because I drive too many miles. I'd need a 3-year lease with 70-75K miles!
Art234 commented:
March 20, 2017, 8:21 pm

I'm hoping this helps me with buying out my F10 since there is no G30 diesel as of yet....
namelessman commented:
March 20, 2017, 9:05 pm

Quote:
Originally Posted by Art234 View Post
I'm hoping this helps me with buying out my F10 since there is no G30 diesel as of yet....
The lack of G30 diesel seems to pop up the resale of F10 diesel, no?
namelessman commented:
March 20, 2017, 9:07 pm

Quote:
Originally Posted by mr_clueless View Post
Doesn't work for me because I drive too many miles. I'd need a 3-year lease with 70-75K miles!
If the goal is high mileage utility then resale value will not matter much beyond 100k, as most cars that move still fetch $4k to $8k, right?
mr_clueless commented:
March 20, 2017, 9:10 pm

Quote:
Originally Posted by namelessman View Post
If the goal is high mileage utility then resale value will not matter much beyond 100k, as most cars that move still fetch $4k to $8k, right?
Yes, I don't care much about resale value. I'm saving enough by not having to insure and pay tax on 2 cars.
Art234 commented:
March 20, 2017, 9:53 pm

Quote:
Originally Posted by namelessman View Post
The lack of G30 diesel seems to pop up the resale of F10 diesel, no?
Not sure there is enough demand to jack up the prices. I'll know more in a day or two.
I'm one of a few who appreciate the efficiency and attractiveness of the diesel.

I will remain a spectator here for at least another year or three....got a great deal on my F10 and will be buying it off the lease tomorrow. Without going into too much detail, buying the car with CPO for $6K below published residual in the lease.
Good luck to all the G30 owners.
need4speed commented:
March 21, 2017, 9:00 am

Quote:
Originally Posted by marius View Post
Wall Street Journal on the subject:

By Adrienne Roberts
Updated March 9, 2017 3:34 p.m. ET


The self-proclaimed ultimate driving machine has hit a pothole in the world’s most important luxury market.

BMW AG’s U.S. operation helped fuel the German auto maker’s rise, but it is now struggling to keep pace in the cutthroat American market. The company, whose BMW brand reported its first U.S. sales decline in seven years, needs a jump start so it can fund a spate of ambitious technology products.

The maker of luxury and high-performance vehicles said Thursday that earnings cooled slightly in 2016, with its closely watched pretax margins in automotive operations slipping to 8.9%, from 9.2% in 2015. The company blamed higher costs for new models, including electric vehicles, and technology for self-driving cars and other mobility services.

BMW had warned that its fourth-quarter results would be pressured by product introductions, write-downs on inventory and high research-and-development costs, but the decline in annual pretax earnings surprised analysts. It is a bitter pill for the brand, which lost the global luxury-sales crown to Daimler AG’s Mercedes-Benz last year for the first time since 2004.

The company’s U.S. division is struggling to carry its weight. While sales rose in Asia and Europe, and at all three BMW brands, including Mini and Rolls-Royce in 2016, U.S. sales fell 9.5% for the BMW brand and 11% for Mini. The BMW brand’s first U.S. decline since 2009 during the financial crisis represented the biggest drop-off among auto makers selling more than 100,000 vehicles.

BMW hit the skids in the U.S. even as the broader luxury sector is growing and the U.S. market touched a record. Executives have said the 2017 5-series sedan, which was launched in February, is likely to help BMW regain strength in the U.S. market

“I think it will help us in brand perception just as much as in simple sales,” BMW Americas head Ludwig Willisch said at the Detroit auto show earlier this year. The BMW brand’s sales logged a modest increase during the first two months of U.S. sales compared with the prior year.

Mr. Willisch had been running the U.S. business until a management shift last month.

The 5-Series, however, is a sedan competing in a market where buyers are shunning passenger cars and snapping up increasing numbers of heavier vehicles amid low gasoline prices. Mr. Willisch said BMW is investing to add capacity at its South Carolina plant to increase supplies of sport-utility vehicles.

BMW will need all the firepower it can get, particularly on the family-hauler front.

New SUVs from smaller luxury competitors, including Jaguar and Land Rover, have added pressure on BMW at the same time some of its hallmark vehicles—including the 5-Series—need to be refreshed. Jaguar Land Rover, owned by Tata Motors Ltd. of India, recently launched the F-Pace SUV, its first sport-utility; Volvo Car Corp., owned by Zhejiang Geely Holding Group, has won critical acclaim and new buyers with a redesigned XC90. “We’ll just have to be better,” Mr. Willisch said. “We have to have a compelling offer.”

Brian Allan, senior director of Galpin Motors, a Los Angeles dealership that sells brands such as Lincoln, Volvo and Jaguar, said it doubled its sales of Jaguar vehicles in 2016, with sales of the F-Pace SUV accounting for 30% of the increase. Sales of Volvo vehicles rose 50% at the dealership in 2016, driven almost exclusively by the XC90 SUV.

Mr. Allan suggested German luxury-vehicle makers need to rethink how they package their offerings. He said features that are optional on some of the German brands are standard on Mazda Motor Corp. and Honda Motor Co. vehicles.

“People are becoming very aware they’re paying for a name over content,” he said.

Jessica Caldwell, an analyst with Edmunds.com, said luxury SUV sales overtook sedans last year, but BMW didn't have the product lineup to match consumer demand.

“Some of the smaller luxury auto makers like Jaguar and Volvo have used new SUVs to become relevant players,” Ms. Caldwell said. “Those two brands are lower volume, but they’re getting more attention because they sell lower priced vehicles for people who still want prestige.”

BMW said overall earnings before interest and taxes fell 2.2% to €9.4 billion ($9.9 billion) in 2016, declining 1.8% to €7.7 billion in the core automotive division. Net profit rose 8% to €6.9 billion and revenue climbed 2.2% to €94.16 billion.

—William Boston contributed to this article.

Write to Adrienne Roberts at Adrienne.Roberts@wsj.com
It's been that way for many, many years. the difference is those "up content" cars have closed the driving enjoyment gap with BMW to such a degree that it looks like the poor deal it always has been from a content perspective.
BobRae commented:
March 21, 2017, 12:05 pm

Quote:
Originally Posted by need4speed View Post
It's been that way for many, many years. the difference is those "up content" cars have closed the driving enjoyment gap with BMW to such a degree that it looks like the poor deal it always has been from a content perspective.
There is a segment of the population that pay more to get less (content) but want the roundel on the hood. For many people, BMW is an aspirational brand, so they don't care what the car has inside as long as it says BMW on the outside.
namelessman commented:
March 21, 2017, 1:37 pm

Quote:
Originally Posted by need4speed View Post
It's been that way for many, many years. the difference is those "up content" cars have closed the driving enjoyment gap with BMW to such a degree that it looks like the poor deal it always has been from a content perspective.
My take is that some customers may not understand the added value of BMW and pick the wrong content.

E.g. my current F30 3 biggest value added attributes are chassis, engine, transmission. Those 3 pretty much are the bread and butter of BMW for a long while, so paying for those "contents" is what the brand is about.

The other add-ons enhance the brand but come at steep price premium, so it is natural those that pick the add-ons may become self conscious of "name" versus "content".
visualguy commented:
March 21, 2017, 3:02 pm

Quote:
Originally Posted by Kamdog View Post
I really don't think it is an actual BMW problem. I have always bought my cars and ran them into the ground, unless there was a compelling reason to not do so. For example, I got rid of an Integra I loved, in order to get a car with airbags and antilock brakes, of which the Integra had none.

With the pace of technological advancement so high, why buy a BMW without all the current advancements and expect it to compete 3 or 4 years later with cars far cheaper with the advancements a couple years down the road? The OP's own, personal experience is instructive.

This is a very difficult time for those who buy, but not for those who lease.
The problem is that leasing is MUCH more expensive than buying and keeping for a long time (such as 10 years). This assumes that you buy a car that's designed to last that long without requiring expensive repairs.

This is the case even with the somewhat subsidized leases offered by BMW.

Leasing BMWs is fine if money is not a concern, but this applies to few people... If you do the math for a long period, say 30 years (10 leases), and calculate the lease payments plus higher insurance plus higher registration, the numbers are pretty astronomical. The difference between that and buying 3 reliable cars and holding each for 10 years is serious money - well into the six figures, and then you have to add all the money you could have made by investing this money. This is serious financial impact, and kind of kills the BMW lease treadmill for me. It's ok to do it once or twice, but not as a long-term strategy unless money is not an issue.
namelessman commented:
March 21, 2017, 5:04 pm

Quote:
Originally Posted by visualguy View Post
The problem is that leasing is MUCH more expensive than buying and keeping for a long time (such as 10 years). This assumes that you buy a car that's designed to last that long without requiring expensive repairs.

This is the case even with the somewhat subsidized leases offered by BMW.

Leasing BMWs is fine if money is not a concern, but this applies to few people... If you do the math for a long period, say 30 years (10 leases), and calculate the lease payments plus higher insurance plus higher registration, the numbers are pretty astronomical. The difference between that and buying 3 reliable cars and holding each for 10 years is serious money - well into the six figures, and then you have to add all the money you could have made by investing this money. This is serious financial impact, and kind of kills the BMW lease treadmill for me. It's ok to do it once or twice, but not as a long-term strategy unless money is not an issue.
Yes leasing is indeed quite expensive compared to *****and-hold. E.g. on my old E39 sold at 12 years and 100k, just 4 back-to-back leases at prevailing lease terms would have costed 1.5x to 2x the total cost of ownership for that car. So skipping out 4 back-to-back leases saved enough money to pay for my current car. And the savings keep coming, e.g. by the end of 12 years in my current car, there will be 2 additional new cars waiting for me!
Gary J commented:
March 21, 2017, 5:17 pm

Still not the best argument for B&H though when at one point you are driving a 10 year old car while the other guy is driving the current model year. For me, having my title and being able to take it into a dealer and drive out something new after 1, 5, 7, whatever years beats all. Or even if I build and have to wait. While some will argue based on cost others will argue being on their own schedule, not someone else's.
namelessman commented:
March 21, 2017, 5:37 pm

Quote:
Originally Posted by Gary J View Post
Still not the best argument for B&H though when at one point you are driving a 10 year old car while the other guy is driving the current model year. For me, having my title and being able to take it into a dealer and drive out something new after 1, 5, 7, whatever years beats all. Or even if I build and have to wait. While some will argue based on cost others will argue being on their own schedule, not someone else's.
Yes the fixed term of lease is its biggest nemesis.

Within extended family the *****and-hold is preferred, and taking title into dealer usually is avoided, as cars are usually passed down to younglings, or sold to friends, or donated.

That saves the trade-in dance, and make the experience as simple as, say, buying a TV.
Gary J commented:
March 21, 2017, 5:46 pm

Quote:
Originally Posted by namelessman View Post
Yes the fixed term of lease is its biggest nemesis.

Within extended family the *****and-hold is preferred, and taking title into dealer usually is avoided, as cars are usually passed down to younglings, or sold to friends, or donated.

That saves the trade-in dance, and make the experience as simple as, say, buying a TV.
Wow missed the memo on that one. Really? Have some stats on that? lol

And what exactly is "saved"? I usually say I want whatever Autotrader says. Done.
visualguy commented:
March 21, 2017, 5:54 pm

Quote:
Originally Posted by namelessman View Post
Yes the fixed term of lease is its biggest nemesis.

Within extended family the *****and-hold is preferred, and taking title into dealer usually is avoided, as cars are usually passed down to younglings, or sold to friends, or donated.

That saves the trade-in dance, and make the experience as simple as, say, buying a TV.
The long-term cost is the biggest issue with leases. The fixed term is an issue, but nowhere near as significant in my view...

The thing is that current BMWs aren't a great choice for buying and holding for a long time. Too complex, too difficult to work on, expensive parts, engines which are designed for performance and not durability, etc. This is the case with other German manufacturers as well; I'm not singling out BMW.

If you don't hold for a long time, you're better off leasing unless the fixed term really bothers you.

So, the reality is that repeated leasing is very costly, but keeping a current BMW for 10+ years isn't likely to be practical. This is making me look hard for alternatives... The upcoming transition to electric is making things even trickier in terms of deciding what to do.
namelessman commented:
March 21, 2017, 5:58 pm

Quote:
Originally Posted by Gary J View Post
Wow missed the memo on that one. Really? Have some stats on that? lol

And what exactly is "saved"? I usually say I want whatever Autotrader says. Done.
Stats within our extended family is 90%, but that's our stats.

Autotrader is too easy, but still takes at least 30 minutes. Among friends KBB is quick handshake.
namelessman commented:
March 21, 2017, 6:06 pm

Quote:
Originally Posted by visualguy View Post
The long-term cost is the biggest issue with leases. The fixed term is an issue, but nowhere near as significant in my view...

The thing is that current BMWs aren't a great choice for buying and holding for a long time. Too complex, too difficult to work on, expensive parts, engines which are designed for performance and not durability, etc. This is the case with other German manufacturers as well; I'm not singling out BMW.

If you don't hold for a long time, you're better off leasing unless the fixed term really bothers you.

So, the reality is that repeated leasing is very costly, but keeping a current BMW for 10+ years isn't likely to be practical. This is making me look hard for alternatives... The upcoming transition to electric is making things even trickier in terms of deciding what to do.
Makes sense. The long term reliability of the current crop of complex engines is TBD, one sliver of hope is the PZEV 15-yr/150k warranty that covers many expensive items, howver PZEV won't cover timing chains, pistons, and such.

BMW in general gets costly above 10-yr/100k, so if PZEV at least forces BMW to use durable components to last 15-yr/150k, the chance of these engines making 10-yr/100k is further enhanced.

And among competitions, even with economy offerings, the complexity is approaching these German brands. And surprisingly, these economy brands nowadays have parts that cost more than BMW(e.g.). One sample point is windshield glass, F30 one(with rain sensor and no HUD) is actually cheaper than Accord and CR-V(even without rain sensor)!

And for now, electric cars are not that viable given the range, and for cars like Model S, the expiration of 8-yr battery warranty can lead to $14000 of battery replacement cost, which basically says these cars have zero resale value at that age.
Gary J commented:
March 21, 2017, 6:08 pm

Quote:
Originally Posted by namelessman View Post
Stats within our extended family is 90%, but that's our stats.

Autotrader is too easy, but still takes at least 30 minutes. Among friends KBB is quick handshake.
Autotrader, KBB whatever gets me in and out with a fair deal for all concerned. I've got stuff to do.
NickDi commented:
March 21, 2017, 8:29 pm

I do not find owning a car for 8 to 10 years much cheaper than leasing. The maintenance cost do add up a lot to the cost of the vehicle, even when doing some of the easy scheduled maintenance myself (oil, filters, even brakes). These cars are getting too complicated to be serviced by the owner - even changing a battery is a big deal with reprogramming the computer. Wait until you get transmission issues or have to fix the suspension. Also, paying the sales tax upfront, dealing with selling the car are all negatives.

MAYBE you can save lets say $100 a month if nothing major fails when owning but driving a 10 year old car without the latest electronics is not worth it. If you cannot afford the $100 or so extra cost, probably should not be driving a BMW and should get a Honda or Toyota which are excellent cars.

I owned 2 BMWs and now lease one and the next one will be a lease. My rule is "Always rent depreciating assets and buy appreciating assets". Own real estate, lease cars...
visualguy commented:
March 21, 2017, 8:52 pm

Quote:
Originally Posted by NickDi View Post
I do not find owning a car for 8 to 10 years much cheaper than leasing. The maintenance cost do add up a lot to the cost of the vehicle, even when doing some of the easy scheduled maintenance myself (oil, filters, even brakes). These cars are getting too complicated to be serviced by the owner - even changing a battery is a big deal with reprogramming the computer. Wait until you get transmission issues or have to fix the suspension. Also, paying the sales tax upfront, dealing with selling the car are all negatives.

MAYBE you can save lets say $100 a month if nothing major fails when owning but driving a 10 year old car without the latest electronics is not worth it. If you cannot afford the $100 or so extra cost, probably should not be driving a BMW and should get a Honda or Toyota which are excellent cars.

I owned 2 BMWs and now lease one and the next one will be a lease. My rule is "Always rent depreciating assets and buy appreciating assets". Own real estate, lease cars...
Right, that's why you need to own a car that holds up well for 10 years. Probably not going to happen with current-generation BMW, Audi, or Mercedes. It may have to be a Lexus or Toyota or Acura or Honda.

It probably makes more sense to lease a BMW than to buy it, but that doesn't mean that leasing cars makes sense in general. It doesn't, unless there are special circumstances like a tax deduction, or company-paid leases. With cars that hold up well over time, it's better to buy (from a financial perspective).

I was also in the "lease a BMW" camp until I did the math on what it would cost me to keep doing that over the next 30 years...
namelessman commented:
March 21, 2017, 9:27 pm

Quote:
Originally Posted by NickDi View Post
I do not find owning a car for 8 to 10 years much cheaper than leasing. The maintenance cost do add up a lot to the cost of the vehicle, even when doing some of the easy scheduled maintenance myself (oil, filters, even brakes). These cars are getting too complicated to be serviced by the owner - even changing a battery is a big deal with reprogramming the computer. Wait until you get transmission issues or have to fix the suspension. Also, paying the sales tax upfront, dealing with selling the car are all negatives.

MAYBE you can save lets say $100 a month if nothing major fails when owning but driving a 10 year old car without the latest electronics is not worth it. If you cannot afford the $100 or so extra cost, probably should not be driving a BMW and should get a Honda or Toyota which are excellent cars.

I owned 2 BMWs and now lease one and the next one will be a lease. My rule is "Always rent depreciating assets and buy appreciating assets". Own real estate, lease cars...
Depreciating assets(e..g office equipment, company car) usually apply to business and not necessarily private use. Cars for private use primarily are for utilities with no tax benefits, and in that context paying interest on such utility kind of sucks. So my approach usually is to pay cash for utilities, including cars.

The savings with *****and-hold are quite significant, esp. when interest rate inches back up. E.g. at prevailing lease terms and rates in 2000, 2003, 2006, 2009, four back-to-back leases of my old E39 costed almost 2x the cash price of that E39. It was so costly that the savings is more than enough to pay for my current F30, plus $6k extra for repair and maintenance.
NickDi commented:
March 21, 2017, 9:28 pm

Quote:
Originally Posted by visualguy View Post
Right, that's why you need to own a car that holds up well for 10 years. Probably not going to happen with current-generation BMW, Audi, or Mercedes. It may have to be a Lexus or Toyota or Acura or Honda.

It probably makes more sense to lease a BMW than to buy it, but that doesn't mean that leasing cars makes sense in general. It doesn't, unless there are special circumstances like a tax deduction, or company-paid leases. With cars that hold up well over time, it's better to buy (from a financial perspective).

I was also in the "lease a BMW" camp until I did the math on what it would cost me to keep doing that over the next 30 years...
Agreed on all points.
Wife had a Lexus SUV owned and we traded it in for an X5. Lexus retained value and was worth 2.5 times more than my 5 series at trade-in time but
- drove like a boat
- looked like a bubble
- had a cassette player (really!)
- broke more than the BMWs
- engine sounded like a sewing machine

I cannot go back to Lexus even if they pay me money to drive it. BMW or Audi or MB or nothing... I wish the Ghibli gets better though.
namelessman commented:
March 21, 2017, 9:51 pm

Quote:
Originally Posted by NickDi View Post
Agreed on all points.
Wife had a Lexus SUV owned and we traded it in for an X5. Lexus retained value and was worth 2.5 times more than my 5 series at trade-in time but
- drove like a boat
- looked like a bubble
- had a cassette player (really!)
- broke more than the BMWs
- engine sounded like a sewing machine

I cannot go back to Lexus even if they pay me money to drive it. BMW or Audi or MB or nothing... I wish the Ghibli gets better though.
The AR Guilia looks promising too, although dealer/indy service and reliability are total unknowns right now.

The "broke more than BMWs" comment is interesting esp. for Lexus. A coworker had horrible experience with Lexus, namely, the transmission went bad before warranty expiration, but Lexus refused to fix without repeated visits, and at the end only paid for parts, and coworker paid $7k labor. The coworker also has BMW, and his comment is that Lexus(even F sport) is not built for spirited driving.

It probably is fair to say that chassis + engine + transmission are the bread and butter of BMW(and seldom have issues). Those attributes somewhat justify BMW price premium over Honda/Toyota, and make BMW look cheap versus, say, Lexus(not sure about Acura/Infiniti).
NickDi commented:
March 21, 2017, 10:21 pm

Quote:
Originally Posted by namelessman View Post
The AR Guilia looks promising too, although dealer/indy service and reliability are total unknowns right now.

The "broke more than BMWs" comment is interesting esp. for Lexus. A coworker had horrible experience with Lexus, namely, the transmission went bad before warranty expiration, but Lexus refused to fix without repeated visits, and at the end only paid for parts, and coworker paid $7k labor. The coworker also has BMW, and his comment is that Lexus(even F sport) is not built for spirited driving.

That brings back the point of value proposition of BMW, namely, chassis + engine + transmission of BMW seldom breaks, and are the bread and butter of BMW. and hence the price premium over Honda/Toyota, plus relatively cheap compared to, say, Lexus(not sure about Acura/Infiniti).
AR Giulia is nice but compares/competes with 3 series, not 5 series. I test drove Giulia (not the V6 but the 4 cylinder version) and it is fun to drive but lacks some refinement.

My Lexus SUV was ok but a bunch of little things broke - like wheel bearings, brake calipers, battery prematurely failed, door rattles, headlight housing filling with water, belts squeal, differential had issues, .... That thing was in the shop twice more often than the BMW but twice cheaper to fix. The transmission felt always in the wrong gear - shifting points were terrible. It is a fine car to get from point A to point B and practical. Fun factor - none...
visualguy commented:
March 21, 2017, 11:48 pm

Quote:
Originally Posted by namelessman View Post
That brings back the point of value proposition of BMW, namely, chassis + engine + transmission of BMW seldom breaks, and are the bread and butter of BMW. and hence the price premium over Honda/Toyota, plus relatively cheap compared to, say, Lexus(not sure about Acura/Infiniti).
I disagree somewhat about BMW engines. The V8 engines have been a disaster for years, including the N63. Probably one of the worst engines on the market in terms of reliability/durability. The turbo I6 engines have been much better (once the high pressure fuel pump problems were finally fixed which took years). They do suffer eventually from carbon build-up.
visualguy commented:
March 21, 2017, 11:51 pm

Quote:
Originally Posted by NickDi View Post
My Lexus SUV was ok but a bunch of little things broke - like wheel bearings, brake calipers, battery prematurely failed, door rattles, headlight housing filling with water, belts squeal, differential had issues, .... That thing was in the shop twice more often than the BMW but twice cheaper to fix. The transmission felt always in the wrong gear - shifting points were terrible. It is a fine car to get from point A to point B and practical. Fun factor - none...
I don't know about their SUVs, but wouldn't look at SUVs for fun anyway... The Lexus IS and GS sedans handle great, and seem to be extremely reliable.
NickDi commented:
March 22, 2017, 12:27 am

Quote:
Originally Posted by visualguy View Post
I don't know about their SUVs, but wouldn't look at SUVs for fun anyway... The Lexus IS and GS sedans handle great, and seem to be extremely reliable.
I cannot comment on the GS compared to the 5 series. However, BMW X5 is awesome - it is light years ahead of the Lexus RX350 and X5 for sure can be fun driving. I am having fun driving the X5 to Costco on the weekends.
namelessman commented:
March 22, 2017, 1:15 am

Quote:
Originally Posted by visualguy View Post
I disagree somewhat about BMW engines. The V8 engines have been a disaster for years, including the N63. Probably one of the worst engines on the market in terms of reliability/durability. The turbo I6 engines have been much better (once the high pressure fuel pump problems were finally fixed which took years). They do suffer eventually from carbon build-up.
BMW V8 in general is a beast compared to I6, while the current I4 is quite sturdy according to foremen and indies. The carbon buildup does affect the DI I6 but not much on non-DI(old) I6, e.g. M54, seems to be OK. The DI I4 can be subject to the same carbon issue, but some posts speculated that the high(er) compression ratio of I4 will help to alleviate incomplete burn and carbon issue.
Gary J commented:
March 22, 2017, 7:22 am

Quote:
Originally Posted by visualguy View Post
Right, that's why you need to own a car that holds up well for 10 years. Probably not going to happen with current-generation BMW, Audi, or Mercedes.
"Average age of cars on U.S. roads -- 11.5 years -- breaks record." let alone the quality cars mentioned. Google it. Skipping the rest of post - no time for no facts nonsesne.
Brietling commented:
March 22, 2017, 8:35 am

Quote:
Originally Posted by Gary J View Post
"Average age of cars on U.S. roads -- 11.5 years -- breaks record." let alone the quality cars mentioned. Google it. Skipping the rest of post - no time for no facts nonsesne.
Cars in general are more reliable today. Also, cars sell and then re-sell, possibly several times. Therefore, the average age stays fairly high. Also, we use and abuse our BMWs, "possibly" one reason why they're not reliable long term..

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Gary J commented:
March 22, 2017, 8:46 am

Quote:
Originally Posted by Brietling View Post
Cars in general are more reliable today. Also, cars sell and then re-sell, possibly several times. Therefore, the average age stays fairly high. Also, we use and abuse our BMWs, "possibly" one reason why they're not reliable long term..

Sent from my SM-G935P using Bimmerfest mobile app
More completely made up FUD not worth your time.

closer to the truth - http://www.jdpower.com/ratings/study...y-Make/1881ENG
Brietling commented:
March 22, 2017, 9:00 am

Quote:
Originally Posted by Gary J View Post
More completely made up FUD not worth your time.

closer to the truth - http://www.jdpower.com/ratings/study...y-Make/1881ENG
This does not support your point. Why is BMW not as reliable as Lexus? That answer isn't found in the above article. We had a Lexus GS 300 for 9 years with no major issues. My wife drove it like an old lady though. How many people drive the "Ultimate Driving Machine" like an old lady..

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Gary J commented:
March 22, 2017, 9:04 am

Quote:
Originally Posted by Brietling View Post
This does not support your point. Why is BMW not as reliable as Lexus? That answer isn't found in the above article. We had a Lexus GS 300 for 9 years with no major issues. My wife drove it like an old lady though. How many people drive the "Ultimate Driving Machine" like an old lady..

Sent from my SM-G935P using Bimmerfest mobile app
One off anecdotes prove exactly nothing.

Look at BMWs position on the survey for the truth.