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BMW intent on staying number one in the Middle East

In some ways, Johannes Seibert looks like he has a pretty easy job on his hands. The German national took over as managing director for BMW’s Middle East operations in February this year, at a time when the car manufacturer is taking an increasingly dominant role in what is already one of the world’s fastest-growing auto markets. BMW has posted record-breaking sales in consecutive years, and is building up to another headline-busting performance in 2014.
But any suggestion that Seibert and his colleagues are resting on their laurels is quickly dispelled.
“My brief to the team has been ‘let’s not become complacent’,” he says. “We are number one and we want to stay number one, but the message cannot be about defending the number one position — it’s about expanding it, which is a different skill.”
Building on BMW’s recent sales results looks like a tall order, given the firm’s recent history in the Middle East. Last year, the manufacturer sold a sliver under 25,000 BMW and MINI cars across 12 regional markets, a 15 percent gain on what was already a record year in 2012. Even that result pales into comparison with the first ten months of 2014, where 25,199 cars have been sold, a 22 percent increase on the same period a year before. BMW’s global growth figure during that period saw a 6.5 percent rise year-on-year, to 1.53 million vehicles.

If you dig down into those results, there are some even more startling statistics. In the premium segment (i.e. just BMWs), the firm has reported 21 percent growth in the first three quarters, compared to a 17 percent average rise in the segment over the same period, according to the Middle East Automotive Council (MEAC).
So what’s the story behind those figures? Seibert says that there are three main pillars that have led to BMW’s success in the region: brand desirability, a product mix that is designed especially for the target market and the right mix of retail and after-sales services. Those three points have been amplified by nine new launches in the first nine months of the year, including the i8 plug-in hybrid sports car.
“We have a different model mix to other regions,” Seibert says. “Worldwide, the 7 Series [BMW’s flagship sedan] makes up 7 percent of the model mix, while here it is 13 percent, the highest share worldwide. The X models [BMW’s crossover and SUV vehicles] have also been very successful; in the year to date over 40 percent of the sales volume is for X models — a figure that’s growing now that we have the new X4 in place.”
The UAE has been a particular success story for BMW, with just over half of regional sales coming from the country. AGMC, which has the rights to distribute BMWs and MINIs in Dubai and the Northern Emirates, has invested more than $100m in 22 sales and service locations. In the first ten months, AGMC posted a 12 percent rise in sales. Even more impressively, BMW has seen 70 percent growth in Abu Dhabi, which hosts the world’s biggest new BMW showroom, the cost of which came to $120m. And no wonder, given the size of the market; a total over 360,000 new vehicles were sold in the UAE overall last year, a rise of 16.3 percent on 2012.
Seibert says that the UAE and the rest of the Gulf share some characteristics that make them different markets to those in the West.

“Gulf customers are typically younger, and there is a higher share of cash payers here,” he says. “We have many customers in the GCC who own more than one vehicle, so it’s not atypical that an owner of a 7 Series will also own an X or M [higher trim] models.”
That assessment ties in with research that shows that the Gulf countries have one of the highest ratios of cars per household in the world. Over the next five years, the market for cars and vans in the Middle East is set to grow by about 50 percent, according to consultancy Oliver Wyman.
“We also see in all the countries here a high demand for full-spec cars, and individualisation is also important,” adds Seibert. “We have regularly launched special editions; especially in the higher market segment, it’s an important point to have your own individual car.”
The second-biggest market for BMW in the region is Saudi Arabia, where sales rose by 6 percent in the first ten months to reach 3,678 cars. Given that the Arab world’s biggest economy has a larger population than the rest of the Gulf combined, BMW is steadily working on building out a retail infrastructure that will bring the country in line with its GCC peers. In some parts of the kingdom, that process is well under way; Jeddah, for example, plays host to BMW’s biggest servicing centre worldwide.

Most other Gulf markets are growing strongly. Sales for Oman are up by 51 percent in the first 10 months, and the importer there is building a second sales and after-sales facility in Muscat. In Bahrain, sales have risen by 37 percent, and Jordan is seeing growth of 20 percent. In part, those results offset a weaker performance in some markets that have been hit by economic or geopolitical concerns. In Syria, for example, BMW’s partner has not been able to import or sell any vehicles for some time now, and Iraq is also seeing a slowdown in sales.
“In terms of the business view, BMW has become a truly global player and has learnt — and has had to learn — to deal with volatility and with crisis,” Seibert says. “During the last few years we have learnt to adjust flexibility and to adjust volumes to political and economic circumstances.
“When one market has a crisis of a particular kind, usually there are other markets that can take extra volumes. Month by month, and sometimes week by week, we adjust volumes and sometimes shift them — and that’s what we’re doing in this region.”
Back in the Gulf, it seems obvious that the stellar growth figures can’t last forever. Seibert says he is more interested in ensuring that growth stays sustainable over the long term.
“The very rapid growth is not the strategy,” he says. “The strategy for us is continuous sustainable growth, which obviously means profitable growth that goes alongside quality. Customer satisfaction is as important to us as market share and volume growth.

“We measure that month by month and market by market. I’ve looked back over the last five years and found that customer satisfaction has continually increased both in sales and aftersales. This is also what we are looking for in the future — not just to defend but expand the number one position.”
It’s not just the profits that are sustainable at BMW either. For some time now, the manufacturer has been attempting to be more environmentally aware — whether through Efficient Dynamics, its fuel-saving technology or through the wind turbines that help power its plant in Leipzig. Seibert points out that BMW has been top of its segment in the Dow Jones Sustainability Index for the last eight years.
It’s an approach that is encapsulated in the launch of the i8, a luxury plug-in electric hybrid sports car with a body made from carbon-reinforced composite. BMW says that even the supply chain to manufacture the car is carbon-neutral. It seems like a bit of a risky move to launch this kind of car into a segment that is usually defined by roaring exhausts and gas-guzzling speedsters, but you get the feeling that if BMW can nail this launch then others will follow suit.
So far, it seems the i8 has been a success. The vehicle sold out in the UK only two weeks after deliveries started, and Gulf buyers planning to purchase one for themselves are likely to have to wait until either mid or late 2015.

“It is a good sign when a new product, and this is beyond automotive, comes to market and demand cannot completely and immediately be fulfilled,” says Seibert. “When the wait list becomes too long, we see that customers become impatient and we want to avoid that. At the moment, we are increasing the i8 production level to satisfy the demand even faster.”
Of course, the i8 isn’t the first sustainable car that BMW has produced. That title goes to the i3, a fully electric vehicle that began deliveries in November last year. The i3 hasn’t made it to the Middle East yet, largely due to the lack of charging infrastructure in the region, but Seibert doesn’t rule it out, saying that any decision would be based on whether local governments take up plans to build charging points.
The managing director is also keeping his cards close to his chest when it comes to future models. But one that will be making its way to the Middle East in the future will be the X7, BMW’s newest SUV, which was announced by global chief executive Norbert Reithofer in March this year. The company is spending $1bn expanding its Spartanburg plant in North Carolina to allow for the increased production, making it BMW’s biggest plant worldwide. Given that X models already contribute 41 percent of the group’s sales in the region, an X7 looks like being a surefire hit.
That’s for the future, and Seibert is concentrating very much on the present.
“Coming here, it was a good brief because I was able to build on the success of my predecessors,” he smiles. “We’re well on track for the year — we just need to break the record again.”

By Ed Attwood
Friday, 21 November 2014 1:36 PM
Arabian Business