BMW Fights Mercedes With New Fuel-Efficient 3-Series Sedan: Cars

Feb. 10 (Bloomberg) — While Bayerische Motoren Werke AG
won the race for the U.S. luxury car market last year, the
world’s largest premium automaker is keeping a sharp eye on its
rear-view mirror.

Facing increased competition from Daimler AG’s Mercedes-
Benz, General Motors Co.’s Cadillac and Volkswagen AG’s Audi,
BMW is determined to hold on to its hard-won top position with
the arrival of the new entry-level 3-Series sedan in U.S.
showrooms tomorrow.

The stakes are high. The success of the 3-Series, first
introduced in 1975, has been a key to BMW’s ability to outsell
Mercedes last year and capture the U.S. luxury crown from Toyota
Motor Corp.’s Lexus. That may change as a slew of competing
entry-level luxury sedans increases the pressure on the new 3-
Series, which features more power yet greater gas mileage than
earlier versions.

“Ever since we came out with the 3-Series we were very
successful, so we’ve been hunted for a long time,” said Ludwig
Willisch, chief executive officer of BMW North America. “We are
used to that.”

The new 3-Series is making its debut as Mercedes is moving
to surpass BMW. Mercedes was the top-selling U.S. luxury brand
last month, its sales surging 24 percent to 20,306 while BMW
rose 3.1 percent to 16,405. Lexus, which held the luxury title
for 11 years until 2011, is targeting U.S. sales to surge more
than 25 percent this year to 250,000.

Mercedes started selling an updated C-Class sedan in
September that ended the year up 11 percent, edging out the 3-
Series sedan by about 500 sales. Audi plans an updated A4 to
arrive in U.S. showrooms around midyear. GM’s Cadillac will
introduce its first compact luxury car in about 25 years when
the ATS arrives in the third quarter.

$290 Billion

Still, BMW executives are confident they can outpace their
rivals. Willisch said he expects sales of the new 3-Series to
grow more than 10 percent and play a role in keeping BMW’s sales
ahead of the luxury pack. The 3-Series was last redesigned in
2005.

The 3-Series has generated $290 billion in revenue and $17
billion in earnings before interest and taxes since 1995, Max
Warburton, a London-based analyst at Sanford C. Bernstein, has
estimated.

“It is one of the most profitable vehicles ever, thanks to
big volumes and good prices,” Warburton said in a Nov. 15
report.

More Horsepower

The new 3-Series gets 36 miles per gallon on the highway
and 28 mpg in combined highway-city driving with its eight-speed
automatic transmission and stop-start technology that cuts the
4-cylinder engine at stoplights, compared with 28 and 22 for the
outgoing 6-cylinder version. The entry-level 328i will have 10
more horsepower than its predecessor, the company said.

“It’s a perfect succession” to the previous version, code
named the e90, said Satch Carlson, editor of Roundel, an
enthusiast magazine for members of the BMW Car Club of America.
“If you liked the styling of e90, this is not going to scare
you away,” he said.If you didn’t like it, this is probably
going to be more to your liking because it’s more refined.

The new 3-Series’s styling may face challenges against the
Audi A4, Rebecca Lindland, an industry analyst with IHS
Automotive, said in an interview.

“I don’t know if it has the charisma of the Audi A4,” she
said.

Audi, which sold 27,517 A4 sedans last year, plans a
refreshed version that includes changes to the front grille,
including new headlights.

The 2012 3-Series sedan starts at $35,795, $300 more than
its predecessor, excluding an $895 destination and handling fee.
BMW expects the four-cylinder version will make up more than 50
percent of its 3-Series sales, Willisch said.

More Attention

A car of that size and that performance would be
something 10 years ago that was unthinkable,” he said. “It has
240 horses under the hood, so it is, as far as performance is
concerned, better in every aspect in comparison to the former
six-cylinder engine and it is much, much more efficient.”

The 3-Series will get some additional attention in
September when the automaker brings out an all-wheel-drive
version, which made up about half of the model’s sales last year.
A hybrid version is also planned for the around the same time as
the all-wheel drive version, with a 300-horsepower, six-cylinder
engine. The hybrid will probably make up less than 10 percent of
sales, Willisch said.

While skeptical that luxury customers are price-sensitive
to gasoline costs, Carlson, the Roundel editor, said BMW
customers care about image.

They like to be known by the neighbors as conscientious,
caring people who want to save the planet,” he said. “Plus,
they’re in the luxury field with competitors who are coming out
with hybrids for the same reason.”