BMW Reduces Base Price for E90.

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BMW Reduces Base Price on New 3-Series Model by 9% (Update3)

2005-01-31 08:03 (New York)

BMW Reduces Base Price on New 3-Series Model by 9% (Update3)

(Adds investor comment in the fourth paragraph.)

By Jeremy van Loon

Jan. 31 (Bloomberg) — Bayerische Motoren Werke AG, the world’s
second-largest maker of luxury cars, will cut the base price of the new
3-Series by 9 percent because of “difficult market conditions,” Chief
Executive Helmut Panke said.

“The pricing situation is not rosy,” said Panke during a
presentation of the car in Valencia, Spain, yesterday. The company
plans to sell more units of the new model than the existing version,
Panke said, declining to provide a figure.

The 3-Series is BMW’s most popular car and accounts for about 40
percent of the Munich-based company’s total vehicle sales. BMW, which
doubled the price of the car in 1984 when it introduced the second
generation, has always been able to implement price increases in the
past, said investors including Michael Schneider of Frankfurt-based
Deka Investment GmbH.

“The situation is bad for everyone,” said Thomas Koerfgen, who
oversees $4.5 billion as head of equity investments at SEB Invest GmbH
in Frankfurt. “This cut is only on the base model. We still don’t know
the cost of extra equipment, if that will be more expensive, and that
is where BMW makes a lot of its profit.”

The new 3-Series, which will be sold in Germany from March, will
cost 27,100 euros ($35,290) including tax for the 320i version, or
2,700 euros less than the base version of the current model. The new
car comes with a four-cylinder, 150 horse- power engine compared with a
six-cylinder, 170 horse-power motor in the current model. The new
engine is faster and more fuel efficient, BMW said.

Competitors

The car competes with DaimlerChrysler AG’s Mercedes-Benz C- Class
which starts at 28,536 euros for a 122 horse-power model and with
Volkswagen AG’s Audi A4, which costs 23,900 euros for the basic
version.

BMW has “been able to get reasonable prices for their products
because of their positive image,” said Schneider, a fund manager at
Deka Investment which oversees about $144 billion in assets and holds
BMW shares. “It’s an attractive segment and that means there’s a lot
of competition.”

Shares of BMW rose as much as 41 cents, or 1.3 percent, to

32.45 euros and were up 1.1 percent at 32.39 euros at 1:58 p.m. in
Frankfurt. The stock has fallen 2.5 percent this year compared with a
1.6 percent increase in the Bloomberg Europe Autos Index.

BMW on Jan. 26 said 2004 revenue rose 6.8 percent to a record
44.3 billion euros last year after the company introduced 10 new models
and won market share from Mercedes-Benz. Panke on Jan. 10 said the
company had record earnings in 2004. The outlook for this year is
“more complex,” he said then.

Weighs Less

Changes to the 3-Series include an engine that is 14 kilograms (31
pounds) lighter and uses 13 percent less fuel. The car comes in 12
colors and four different interiors. It accelerates from 0 to 100
kilometers (60 miles) an hour in 6.3 seconds, or 0.2 seconds faster
than the current model.

A station wagon version will be available this autumn and other
derivatives are planned for the coming years. This year, the company
will sell more 3-Series even as it increases production of the car.

BMW introduced the 3-Series three decades ago as a follow- up to
the “New Class” sedans such as the 2002 and after postwar failures

such as the Isetta, a microcar with a single door that opened at the
front.

The 3-Series was the first sedan that offered drivers a “sporty,
luxury limousine,” said Panke. The car remains a “benchmark” and is
the best-selling luxury car in the world, he said.

U.S. Sales

The 3-Series goes on sale in May in the U.S., the company’s
largest market. BMW has sold 2.9 million units of the current model
since it was introduced in 1998.

“The 3-series will always be an important car for BMW,”

Koerfgen said. “Certainly it’s always a risk to be so dependent on one model.”

Sales of the car declined 15 percent last year to 449,670 vehicles
in its final year of production. In the final year of a car’s life
cycle declines of as much as 20 percent are “typical,” said Adam
Jonas, an analyst at Morgan Stanley in London.

BMW plans to build the car in four plants, including three in
Germany and one in South Africa. There are no plans to build the car in
the U.S., said Wolfgang Epple, the director for the 3- Series, in an
interview.