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Comments
I understand that Dewey really loves BMW cars and BMW as a company. He is not alone. There are many die-hard Bimmer fans out there. And it's understandable, given the extra dose of adrenaline that BMW drivers get compared to most others. But taking any BMW ciriticisms personally, well... maybe... but I haven't read any serious insults posted by Dewey, so I think we're all safe at this point, and I'm very glad about that. This forum is looking good to me so far, and I'm pleased to be exchanging ideas with you again.
Tag - yes that is the problem. They buy back cars at the end of the lease at rates that are higher than market and they are taking losses at that point that offsets the gains made in the first year sale.
Well, that's my take on it, and as you clearly explain there are dangers that can potentially result from that process.
The reason I went further to ask Dewey the average profit per vehicle was to take his answer and compare it to the average incentive expenditure per vehicle. At that point, I figured Dewey would then see the potential concerns that you and I mentioned.
Anyway, it was interesting to discuss it, and thanks for that link you provided me.
TagMan
Here's the key stats:
2005 cars sold = 1.322mln
2004 cars sold = 1.249mln
unit growth 5.8%
2005 revenue 44.656bln
2004 revenue 44.335bln
growth in Euros = 2.321bln
rev growth = 7.2%
2005 gross profit = 10.664bln (22.85% margin)
2004 gross profit = 10.295bln ((23.22% margin)
Gross profit growth in euros = 369mln (15.90% margin, note this incremental GP s.b higher than the overall gross margin % as those figures have already absorbed the big sunk costs of the production side of the business. The fact that they are not means BMW is feeling pricing pressure and can't raise prices to match cost increases. This is pure production and has nothing to do with leasing). It's why analysts are all over Intel when they show a GP decrease.
Avg rev per car in 2005 = 35,281 (46,656 divided by 1,322.427
Avg reve per car in 2004 = 35,482 (44,335 divided by 1,249,470)
Incremental rev growth per car = -3,469 (2,321 rev growth divided by 72,957 unit growth and then apply that to the 35,482 2004 revenue per car)
avg Gross Profit per car in 2005 = 8,064
avg Gross Profit per car in 2004 = 8,239
Incremental gros profit per car in 2005 = -3,181 (369mln divided by 72,957 and applied that to the 2004 GP per car
at the op income line profit per car on the 72,957 additional units sold is only 19mln divided by the incremental unit sales and this is only 260 per car whereas the overall operating profit per car in 2004 is 3,025 and in 2005 that profit per car is 2,868. It is here that the subsidized leasing rears it's head, killing off profits completely on new units sold and this is clearly where the analysts are focussed.
The real stick out figure though is in percent of rev financed by BMW. In 2005 that figure is 45.365bln vs an overall revenue figure of 46.656bln. So BMW is financing 97.2% of its sales. In 2004 the figure was lower with 38.432bln financed on 44.335bln or 86.7%. I really don't want to hear anyone question high leasing figures in lux cars. In my area dealers do abot 90-95% on MB and about 75-80% on Lexus. This is how big volumes of lux cars are moved no matter who is the seller. If the figures above don't prove it to you nothing will. It's also easy to see how the growth from 86.7% to 97.2% affected operating income as that financing growth had big subsidies.
Anyway when I say I'm done with this is I mean this isn't personal and should never be looked at that way. So if it becomes a fiasco I want no part of it. Numbers are numbers and unless you play Enron like games they are easy to decipher. BMW is hardly hiding anything as all of this is clear as daylight in their data. My hocus pocus comment was meant as spin in PR not a spin in numbers. I haven't looked at Toyota figures and for all I know they may be running this way too though I doubt it as an analyst would easily pick it up and stock prices would be pressured by analysts comments.
BTW - I closed my major business deal today. I had so much time for the board because I was waiting and waiting on the lawyers. In the next two weeks the operations fun starts.
I agree with you that numbers are numbers. Unfortunately, some numbers do lie, as I think you know. In this case, however, I don't see any twisting of data to extract an inflated or deflated mathematical result.
My big beef with data or statistics is when they are used to alter perceptions of business people or to confuse the average person. I do believe that you know what I'm talking about without having to go into any great lengthy discussions about it.
One of my biggest complaints about statistics being misused in the automobile business are those that relate to reliability. People do not really know the TRUE mathematical differences between the reliability of different cars. They have varied perceptions based upon ambiguous data that is often represented in percentage terms. Percentages are one of the worst forms of confusing data there is, and it ticks me off to see major reputations and multi millions at stake by representing vehicle reliability in misleading fashion. If you're one of the beneficiaries of this, it's great... but if you are not, it's a shame, because even though the information is technically true and factual, it leads to massive misperception, and the injured company can't call foul. Essentially, while the data is true, the perception is typically exaggerated.
Anyway, that's a seperate discussion.
Again, thank you for taking the time to lay out the formula and applying the real numbers so that we can see the results for what they actually are, not for what any of us would like them to be.
One thing, as I said earlier, I would like to emphasize is that I don't see a doom and gloom scenario for BMW, even though this data points to some overly agressive finance incentives that will come back to bite BMW at a later date.
I still expect that BMW will pull themselves into a healthier position over time, by doing what they do best, and better than many... building cars that excel in both design and performance.
BTW, congratulations on this business deal of yours. I can't help but wonder what the heck it is. I wish you continued good luck with it.
TagMan
I agree with your comment because the gross margin percent on the large volume of cars in the aggragated base business to date is a good one and gives them the manuverability to play games with incentives and lease residuals. They have enough scalability for it and it's no threat to them financially at all. It impinges on profit growth and that's why my comment was that it's a threat to that but the base is super solid. IMO the Quandts are planning an exit strategy based on the way the business is being run. I'm not saying that is what is happening, it's just my read as the existing program is gunning for unit growth and that improves scalability in the future which will help with a multiple on sale. In fact I wouldn't be surprised to see the Quandts try to take the whole thing back private and then sell not too long after that.
It's the scalability issue and huge future investments that would have me more concerned then the existing business model. No matter how you slice it BMW is still a boutique business with an emphasis on sport handling. That gives them a double edged boutique when you think about it. They are boutique volume and boutique genre and they are almost untouchable. People will hurt BMW marginally but no one is going to slay them. That's a valuable asset but it's still a boutique and when large expenditures become a requirement boutques get acquired or merge. If BMW was a clothes manufacturer they'd be a high end sport line likely to be bought by Nordstrom, Saks or Niemann Marcus etc as one of their most important exclusive lines.
Playing the game with residuals also gives BMW bragging rights on future retention values and in its own way that is a hidden marketing cost and actually if I was at BMW in a responsible financial position that's what I'd argue to an auditor. Most auditors would try to force writedowns on loss in lease retention values against revenue arguing that revenue in current year is overstated. The marketing argument would be a strong one since many people believe the future retention value story (even though it's not true based on actual results) and that is what marketing is all about. All of those future retention figures are set by residuals built into leases in this day and age. In the past they were based on what cars historically resold for. But not now. Now they are based on lease residuals and as such become more of a measurement of lease risk rather than future retention values. I think in the days when most German cars were bought rather than leased retention values got a big lift as there weres so many fewer on the market than there are now. But today the lease programs and reliability issues have put a big dent in German car retenion values. Porsche is still strong in retention because the car is still pretty rare so it still fits the old German model in most of its car models. BTW this is also why I don't buy into your diesel belief. It goes against the grain of the current business model. Diesels are all about LT ownership and fit the business model of the 70's and 80's. Todays model is all about ST leasing. So diesels bring in a big conflict. Hybrids will continually be improved and at some point electric will be dominant and gas or dieel will be its charging technology. Hybrids fit the lux business model perfectly as the batteries will get better and better and anyone with the means will want to constantly upgrade in the same way that we upgrade our PC's and TV's. Hybrids extend leasing as a means to get there and it becomes a technology model. I wish i could lease tV's for three years right now knowing the constant improvement that will come to that box. Anyway that's a story for a different day.
Thanks for the well wishes. I want to do one more deal later in the year. We were at a cross roads with our business. Either milk it and sell it in a few years or buy a few other businesses that can be synergized and allow us to play the multiple arbitrage game and growth game at the same time. My partners and I went the latter route and it was an easy story to sell - a profitable business buying other profitable business with a 5 year planned exit strategy is always an easy fiancial sell.
it's just my read as the existing program is gunning for unit growth and that improves scalability in the future which will help with a multiple on sale.
Yes, and one underlying reason that they are shooting for unit growth is to dance with Lexus regarding future "units sold" sales data.
a profitable business buying other profitable business with a 5 year planned exit strategy is always an easy fiancial sell.
Sounds like Mr. LJ may have constructed a 5-year final retirement strategy... one that brings enough green to the portfolio to live on comfortably for the rest of his life. Or is this just the first of what could be additional 5-year cycles?
TagMan
In addition, even a test drive will reveal unusual driving characteristics associated with the hybrids, while the diesels will be more similar to gas counterparts. I've driven the current hybrids, and the way the engine starts and stops is wierd, and one hybrid suv model actually makes a horrible grinding sound when coming to a complete stop... and it's completely normal for it to do so. Yikes.
IMO, these upcoming alternate engines and fuels will ultimately have to shake themselves in or out of the lease market, and residuals could be nothing more than a best guess in the beginning.
Price of fuel will be an unfortunate barometer for vehicle values... meaning that fluctuations in hybrid or diesel vehicle values could be expected.
Do you intend to re-locate after the deal is done?
TagMan
No - I'm staying here. I love the four seasons and the area I live in. I may opt for a second home in coastal NC or SC or in Boca/West Palm on the east of Florida or Long Boat Key/Saratoga on the west at some point though.
TM
Thank you very much. Aren't you in the southeast, NC or SC? Are you near Myrtle by any chance. I love Pawleys Island.
http://redwing.hutman.net/%7Emreed/index.htm
Here's Pat:
http://redwing.hutman.net/%7Emreed/warriorshtm/royals.htm
Only 2.8 percent of BMW customers paid cash for their cars worldwide? That would be ominous indeed. Sorry Lj that is not the case at all based on BMW’s financial statements and numbers dont lie.
That 45.4 Blln figure of sales financing additions you had provided is a current receivable that is used primarily to fund its sales to its dealers. These receivables are paid within a year and are operational and are not directly linked to 2 to 5 year term auto leases or financing deals to the consumer.
If you want BMW lessor details of how much is outstanding refer to Note 22 which consists of a balance of only 5.9 Blln .
And for sales financing details go to Note 24:
Receivables from sales financing, totalling euro
29,053 million (2004: euro 25,054 million), comprise
euro 22,301 million (2004: euro 18,782 million) for
loan financing for retail customers and dealers and
Contingent rents recognised as income, generally
relating to the distance driven, amounted to
euro 4 million (2004: euro 1 million). Write-downs on
finance leases amounting to euro 46 million (2004:
euro 83 million) were computed and recognised on
the basis of specific credit risks.
euro 6,752 million (2004: euro 6,272 million) for
finance leases. Finance leases are analysed as follows:
Receivables
As I said there is nothing ominous about BMW’s financing or lease activities.
The two main reasons are the strengthening Euro and higher material costs. That is repeated quite often in the annual report.
And financing/leasing is not one of the main reason for those margins.
And no Tagman I am not a BMW cheerleader with ponpons. This has nothing to do with being a BMW fan. This has everything to do with getting the facts right about BMW's financials.
2013 LX 570 2016 LS 460
Well, regarding the first sentence... I've never seen you in that way. Perhaps more of a Bimmer aficionado, with genuine reasons.
Second and third sentences... The facts are what they are, and you can make your own interpretation.
1. I've seen businessman read the same financial statement and draw different conclusions.
2. I've seen analysts make opposite stock recommendations for the exact same company.
3. I've seen business brokers analyze a company and come up with very different valuations.
All three of my examples tell me one thing... and that is that financial numbers are subject to interpretation.
Personally, I believe that BMW is a strong company that is currently very motivated in achieving volume sales through the use of aggressive financing methods. Those financing methods are of some concern, IMO.
I do not know if there is a "right or wrong" as you suggest, but I do know that I respect your opinion as one that comes from someone that is educated, makes every attempt to work with the truthful facts, admires/owns BMW, and has other solid opinions about the automobile business, past, present, and future. I don't see any pompoms.
I see a difference of opinion and interpretation between you and lj regarding certain portions of the financials of BMW. No big deal. While you and I agree much of the time, I've been in the position of arguing an opposite perspective with you in the past, and I remember you showed a willingness to grind away with no end in sight. I admire your perseverance, but I suggest that lj is sensible here to suggest that you and he simply see these numbers differently.
That said, I wanted to let you know that I am struggling with the idea of trying to convince my wife to let me trade in her '05 Vanden Plas Jaguar for that new upcoming BMW twin-turbo 335i convertible. Totally different category of car.
TagMan
TagMan
On another note, Tag, I think you hit the nail on the head with your comment about opposing financial interpretations. It’s funny how we have two financial professionals here and their points of view parallel the brand they own.
enough with that annual report. Currently BMWs are desirable and their realized resale values in the current preowned market remains high. The only reason BMW can offer lease deals with such high residuals is because their models tend to have high resale values. Otherwise if their resale values dropped substantially then BMW would have serious problems.
But that day has not arrived yet. Brand new and preowned BMWs remain desirable and as long as that situation continues then BMW will remain a financially healthy company.
You are correct in pointing out the relatively high incentives on BMW vs. the competition. That can definitely be problematical.
So why dont we focus on the two BMWs with the highest incentives:
1) The BMW X5--high incentives exist for all SUVs and trucks. This is an industry wide problem not a BMW problem. If you want proof then here it is:
Toyota says some of its dealers are offering hefty discounts on the basic work truck version of Toyota's newly redesigned Tundra truck. The discount is a one-month, nationwide program that began this month and is described by Toyota as "another tool," to spur sales, in addition to relatively low APR and lease deals Toyota has already offered since the outset.
As you can see even spanking new redesigned trucks like the Toyota Tundra or SUVs like the BMW X5 are faced with the same problems.
2) The BMW 7 Series. This car is in the ending part of its product cycle and I am sure every BMW executive will give out a big sigh of relief when the new model arrives. The 7 series has been a flop since the first year it was introduced so high incentives are inevitable.
Also the older MB S Class recently was also sold with hefty incentives. Now the new MB S Class is sold with no major incentives. So there is hope for the new upcoming 7 series.
Last but not least the CEO of BMW assured everyone that high incentives will decrease next year as new and exciting BMW models are introduced.
Also you beat me on our TM vs. DCX stock bet. But still the returns of the DCX was not shabby after all
thanks for the well balanced post. Unfortuatley the Annual Report of BMW or any auto maker will not give all the details to verify what we are arguing about.
For example the BMW Annual Report provides a Lessor balance of only 5 Blln Euros. I think we all know that BMW issues far more leases than that? That Lease figure ofcourse is far too low since a lot of BMW leases are Off_Balance Sheet items. Many car leases are securitized and sold as an asset backed bond/security to institutions or individuals like you or myself (hypothetically ofcourse since I dont own any fixed income investments)
In otherwords trying to predict boom or gloom based on these Annual Report leasing figures is not at all a productive exercise. But what is certain is that as long as BMW sales continue growing and their margins dont drop substantially then there is really nothing to worry about.
Also Tagman I look forward to reading you post with regards to your BMW335i cabrio test drive. Please keep us posted.
Ofcourse that is due to mere coincidence
Sorry for the link but I could not find an English translated article.
Financial Times Deutshland
You're welcome, of course.
I look forward to reading you post with regards to your BMW335i cabrio test drive. Please keep us posted.
I wonder if there will even be any available to test drive or if they will sell like hotcakes. My guess is that every one will be sold immediately when they are introduced here in this California Spring/Summer.
So, if I'm lucky, I'll get to drive one. I think the trick will be to put my name in as a potential buyer, and I'll likely get a phone call from the dealershiop when they arrive, and if I can show up within a few hours, I'll get to drive it.
If it happens, I'll keep you posted.
TagMan
hmm, isn't that the precise problem that financial analysts were pointing out? Car companies can offer whatever residual they like so long as they are underwriting the lease through their own captive finance company; real life resale value is hardly relevant when it's moving money from one pocket to another within the same company. The fact taht real life resale value is way below the residuals on BMW's can be easily derived from the high per centage of turn-in's at lease end. If the residual were truely reflective of preowned market resale, there should be much less than even 50% turn-in's, because (1) turn-in incurrs at least $400 "turn-in charge"; (2) knowing the vehicle history should make the particular car more valuable to the first driver/owner than someone buying the car at auction (assuming there is no particular known reason to get rid of the car, e.g. unreliability). Yet, lease end turn-in rate is extremely high for BMW's. The residual is obviously wrong in order to have such a statistic bias.
Toyota says some of its dealers are offering hefty discounts on the basic work truck version of Toyota's newly redesigned Tundra truck.
Notice, it's dealer discounting, not manufacturer incentive like on the X5. Also notice, it's the basic work truck version, a market segment that has traditionally been dominated by F-150 and Silverado, the traditional "buy America" market segment, and now Tundra is trying to break into.
And what you are stating about leases is applicable not only to BMW but to every single automaker in the industry.
And yes the new Tundra is a BIG TOYOTA DISAPPOINTMENT. It would be very hard for any Toyota executive at this stage to say they're delighted.
The Lexus RX 400h I drove recently got 24 mpg overall in a week of mostly highway driving. Not bad for a two-ton vehicle. But I recently drove a 2007 Mercedes-Benz E320 Bluetec turbodiesel under similar conditions, at mostly higher speeds, and got 34 mpg. Yes, the Benz is lighter, by about 500 pounds ( a 13 percent difference), but the diesel's fuel economy was 40 percent better than the hybrid's.
Diesel-electric hybrids? Likely in the future. Note, too, that diesels are amenable to alternative fuels. Biodiesel, produced from used cooking oil, is available today. No surprise that a diesel engine can run on cooking oil - the petroleum product known as diesel fuel was not available when Dr. Rudolf Diesel developed his compression-ignition engine. Among the fuels he used before the development of a petroleum-based fuel was peanut oil.
link title
The cars will be due out in late 2008 or early 2009. Lighter and more powerful than the current nickel metal hydride packs, the new batteries will help make for more fuel-efficient hybrids. And it's not just the batteries that will be better.
The rest of Toyota's next-generation hybrid systems will also be a big step up from what's on the road today. "We are now aiming at reducing, by half, both size and cost of the third-generation hybrid system," says Watanabe.
That should go some way to bringing the price of hybrids closer to regular gasoline cars. Longer term, Watanabe reiterates that he believes hybrid sales could reach 1 million a year by the early part of next decade.
To ramp up sales, Toyota will increase the number of hybrids on the market. Reports in Japan suggest the company plans
link title
Mr. Richards is backed by Kuwait's Investment Dar Co., a holding company, among others. Mr. Richards is chairman of Prodrive Ltd., an auto-racing firm, but Prodrive isn't participating in the purchase, these people added. A spokesman for Prodrive, Ben Sayer, declined to comment Friday on whether the U.K. company was in talks to purchase Aston Martin from Ford.
Wall Street Journal
I'm sure I'm wrong here. I need more help from people like yourselves to help me understand.
Who buys these sleds once they go above 100K miles, when there is ABSOLUTELY no warranty and everyone expects to pay $2K for a broken seat and/or $8K for turbo trouble?
Many line up to do so for Asian vehicles. Some even do with American (I'm there now), but I need to hear more about those who do so with European, and more to the point, why? What happens to BMW & Audi vehicles in the US after 100K miles?
Who, or what, absorbs all this loss?
Or, if there is no loss, please help me understand. Use short sentences & short words. I'm getting older.
Thank you.
A car company can still make money with inflated residuals. In fact most car companies with inflated residuals do make money. BMW and other German marques have high enough margins to absorb those inflated residuals. Just like Japanese luxury marques do.
A pyramid scheme? A house of cards? That does sound awfully ominous indeed. You own a Lincoln do you? I guess your very own personal experiences with low resale values makes you fear for the financial cosequences of all European automakers. But there is certainly no need to worry since BMW, Porsche and other German auto marques have pretty good resale values relative to other Japanese and US marques.
Many line up to do so for Asian vehicles. Some even do with American (I'm there now), but I need to hear more about those who do so with European, and more to the point, why? What happens to BMW & Audi vehicles in the US after 100K miles?
I own a MB with over a 100K miles. Everywhere I go here in Toronto I see several old BMWs, MBs and Audis. And most these high mileage German car owners are frugal by nature and are not willing to spend much money to begin with.
The evidence on the streets contradicts your expressed view on old German cars. Your notion of German cars seems to be more consistent with unreliable Italian sports cars British MGs or French Renaults. If that was the case then yes we all would not see many old German cars on the roads today. In fact we would not even be seeing any new German cars today in North America if they were so horrific to own in the first place (they would share the same fate as Renaults).
Here's the secret of why there are so many old high mileage German cars on our roads today. And as you have requested I will make this answer short and sweet:
Independent auto shops preferably ones that specialize on one single German marque.
Based on my experience it is really cheap to own a German car as long as you dont get it serviced by a dealership.
I hope my answer was helpful enough?
It is not uncommon for used car departments or used car facilities to buy and sell "package" deals that include numerous cars. These package deals allow the value of some cars to offset the value of others. A trade-in that was taken in for $1000 cheaper than its value can offset a car that is $1000 upside down, for example. A wholesaler may be willing to take a high mileage car off the dealership's hands if they also sell him a car that he wants.
With regards to the finance companies that ultimately own the financed vehicles, they eat the loss in value and weigh it against their gains made from the financing. Typically they come out ahead, but the aggressive actions of BMW recently are part of the concern that they will lose too much money... but if they can keep financing more and more cars at healthy terms, eventually they can come out of the negative situation and turn it positive, all the while having moved more units... which is the name of the game.
It's a big picture. Every car isn't a profitable sale, but in the end there should be a profit when all is taken into consideration. Some deals are home runs, and others are skinny, and still others are losers, but the selling company gets to show another unit sold.
At the dealership level, often a dealer will sell a car with little or no profit, if they can get the profitable financing, or if they know that the customer will buy other aftermarket items, such as added protection packages and extended service agreements. This is known as making money on the "back half" of the deal. The "front half" was the profit, if any, attributed to the vehicle sales price... usually handled by the salesman. The "back half" is typically handled in what is called the "F & I" (finance and insurance) department, where the "F & I" person attempts to sell more products or services, and typically registers the car for you and does the other necessary paperwork, such as the purchase or finance contracts.
I know I've given you more information than you asked for, but I hope it is helpful or interesting to you.
TagMan
I heard on some press release that all upcoming Toyota and Lexus hybrids will involve space to fit a different sized battery. I dont know if that statement is specifically applicable to the LS600HL but it would make sense if the new LS600 would be designed to fit a new type of lithium ion battery.
I am contemplating on replacing my Subie with the Camry hybrid, but haven't got time to go test drive one yet. My lease is not up until end of Oct so I still have time...
"We are now aiming at reducing, by half, both size and cost of the third-generation hybrid system," says Watanabe
I read that too. That's why I've decided to hold on to the GS longer to see how this would affect the luxury segment.
One more thing. The analysts raising an eyebrow over BMW's tactics seems to make sense. I've seen an awful lot of used cars on the dealer lots these days. I guess everything is fine if they are moving them, but they do appear to be overloaded.
I can see how a CPO program & financing can cover item 1), but I guess it's a testament to longevity & reliability of the breed for the people who can least afford those "breathtakingly expensive" (not my words) repairs to be willing to take them on and run bare.
My theory is that the majority of people who buy (can't lease at these mileages) cars with over 100K on them would prefer a newer one, but can't work out the budget. Some, of course, are looking for a project car.
Kudos to those thrifty folks in TO who you see out on the streets driving the older cars. Here in Phoenix. . .not so much, which is odd, given the climate.
Well, I just checked BWM.CA and Lexus.ca for used car inventories and I found this (just for comparison purpose):
In Ontario, all dealers, MY 2003-2006:
BMW 3 & 5 series: 270 cars
Lexus IS, ES & GS: 22 cars
so I guess you are right that there seems to be more used BMWs out there waiting to be sold again. Furthermore, according to the website, BMW has special lease rate for their CPO vehicles.
Designman - it's really about growth and future scalability with analysts. The analysts aren't worried about BMW from an existance standpoint or a profitable company standpoint in the near term. Their concern is the company is making less margin on incremental sales than it does on its base business and that's a growth problem and a stock portfolio problem. Hence the cutbacks in stock outlook by these guys. In any business that is growing you make more money on your last dollar (incremental profit on incremental revenue) than yod do on your midpoint dollar. In BMW that is not the case right now and that is really what the analysts are saying and they are pointing to aggressive leasing as the reason. If you were the owner of BMW and made a ton of money every year you may not care as much about that. Entrepenneurial folks and corp folks obsessed with stock price futures run businesses very differently.
But where corporate people and entrepennueurs think similarly is the real long-term and the analyst concern of BMW needing better scalability (economies of scale, call it whatever you want) for future large investments is something I'd worry about if I owned BMW (here I mean 100% ownership not stock ownership). On the other hand if I was driving greater sales at a lower margin and that is something by design then I couldn't care less about what an analyst thought. But again - that's me as an entrepenneur. If I was making only an incremental 10-15 cents on that dollar instead of 30 cents it may not matter to me as I'm still growing. But if I'm publicly traded the analyst will run to a company that is growing faster and dump me in a heartbeat.
I'm not surprised that you are seeing a lot of cars on dealer lots as that was due to a very large shipment in February.
"who absorbs the residuals and costs"
Easy answer - whoever financed them. Either the person who bought the car, the bank that bought it and leased it or the manufacturer who leased it directly. The higher the residual the more the risk to the financing party if the car is a lease. Many cars that are auctioned off are resold outside of the US. South America was always known as a big destination sale point of 3 year old off lease cars. The best of the best are cherry picked by US dealers and are sold as certified cars.
I find that troubling, if true. I would like to think that if shop owners do not have access to the information, then at least car owners should have certain rights that go along with owning any car... and one of them being able to acquire the technocal information pertaining to their car.
Gosh, it just seems strange to own something and not have the right to know completely about it. I just have to wonder what the story is on this. Ideally, I would expect that independent shop owners also have a way to get the information that they deserve and need.
You have raised a good question, IMO, that deserves a real answer.
TagMan
So... based upon that thinking (about growing), I would consider that from a longer term perspective, and by not feeling pressure from current or short-term minded investors, BMW may be doing themselves and their investors a favor in the long run.
TagMan
TagMan