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BMW facing excess inventory, thanks to sales initiative

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On: Tue, May 10, 2016 at 8:04AM | By: Carl Malek

BMW facing excess inventory, thanks to sales initiative

Last year, BMW undertook a bold initiative that was meant to make the Bavarian luxury car company king of the market (while upstaging Audi, and Mercedes Benz). While the final results of this campaign are mired in controversy, it appears that the campaign has also had the unexpected consequence of swamping BMW with excess inventory. 

A key aspect of this initiative was that BMW increased the number of cars that would be supplied to dealerships. The company was hoping that this larger inventory pool would help the dealerships reach more customers, which in turn would help raise sales. However, it appears that it has actually caused a chronic case of oversupply with many dealerships sitting on an overabundance of cars. As a result, many dealers have been slow to order new inventory, which has contributed to a 9.4 percent slide in sales for the first half of 2016, and caused BMW to fall behind Lexus and Mercedes-Benz.

A report from Automotive News states that the current generation 3-Series, 6-Series coupe and convertible, and the i3 EV have been especiallyimpacted by the slump in sales. To help remedy this unexpected crisis, BMW will put renewed focus on selling its expansive lineup of crossover vehicles—including the bread-and-butter X5, as well as the smaller X3—in an attempt to bring more families into the brand. "We are adjusting our product plans and reallocating more SUVS to the U.S.," CFO Friedrich Eichiner said. He wants to see at least 40 percent of all BMW sales in the U.S. to be crossovers. This is a clear sign that BMW is just now realizing the explosive levels of growth that the SUV and CUV segments have seen in recent years, mainly due to low fuel prices as well as an increasing appetite for more capability.

This renewed push for crossover sales will also receive some financial assistance: a recent $1 billion expansion that BMW undertook for its Spartanburg, South Carolina, plant. Alexander Bilgeri, VP of communications for BMW North America, announced that the renovated factory will churn out roughly 450,000 cars a year which would help add some much needed muscle to the push for crossover sales, especially if demand does indeed rise to meet BMW's projections.


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