BMW Ireland

Source: Exec Digital UK

Date :7/26/2007 10:07:23 AM

BMW – on target in Ireland

Written by John O'Hanlon & Produced by Ben Weaver

BMW is an aspirational brand: having one tells the world you have arrived, so little wonder it is doing well in the booming economy of Ireland

Until 2003 BMW cars were distributed in Ireland by an importer, as most brands still are. Even the biggest selling OEMs, Toyota for example, sell at one remove through a local agent. But in 2003 BMW made the decision to set up its own national office in Dublin. It bought out its agent since 1967, Frank Keane, and set about structuring the organisation there in its own tried and tested way. The local business is responsible for 18 dealerships covering all BMW and MINI cars and BMW motorcycles in Ireland.

Sean Green was appointed Managing Director of BMW Group Ireland in January 2006. Though he’s only 35, he is an old BMW hand, having started in the UK 19 years ago as an apprentice. He held posts in aftersales, marketing and sales before taking the role of Product Lifecycle Manager for Europe in Munich, later returning to the UK as Regional Sales Manager for the Network within London. Prior to his present appointment he was responsible for UK and Ireland Sales Development, so was seen as the ideal person to head up the Ireland operation when the post fell vacant.

The newly set up subsidiary took over Frank Keane’s 15-strong dealership network and added to it, Green explains. “Frank Keane had done a great job for us over the years, but when we saw the size of the opportunity in the Irish market and where that was going we wanted to take control of the operation.” This was in line with company strategy, since as at about the same time subsidiaries were being set up in other smaller markets including Portugal, Greece and Denmark. Nevertheless BMW was ahead of most competitors in making this move and most vehicles sold in Ireland are still imported privately.

A committed network

Just 35 people (ten of whom are field-based) may seem a very small number to manage a €210 million operation, however all the logistics and back office systems for the operation are run by the UK office just over the water, leaving the Irish office with the key task of providing field support for the local network and the customers – and much of that has been automated as we shall see.

BMW found a network of dealers that were both committed and experienced: just as important, they were willing to invest. “That was probably the key thing,” says Green. “Between them they have invested about €40 million in facilities, equipment and new buildings. That has been a huge commitment on their part, which has really raised the bar for dealership facilities and standards in Ireland.”

When BMW took over in 2003 ordering of vehicles and parts was a very manual process. A fax would go from the dealer to the importer. The importer would then fax the order through to BMW AG in Munich. They would key that into the system and the car would be built. “It was a fairly antiquated system,” says Green. “One of the biggest changes was implementing an online ordering system that allows the dealerships to have a direct link to the factory. This means that the dealer can sit down with the customer, show them the feel and look of the car, and go into the options using video. That order goes online through to the factory and the manufacturing process in Germany, which checks with the suppliers to make sure that all the parts that have been ordered are available. And you can actually change the specification of car right up to the point where it gets locked in to production, which is normally about two weeks before it is finished.”

Buying luxuries

So that’s the climate for the dealers. For the customers it is no less complicated. The economy is strong, and on top of that, Sean Green detects a change in the Irish attitude to wealth. Ten or 20 years ago understating or even disguising one’s prosperity was the order of the day. But now a bit of the ‘if you’ve got it flaunt it’ mentality seems to be rubbing off on them. In any case luxury brands are doing well, and the car industry is reflecting that. “Our sales have gone up by about 14 percent this year,” he says, and the same thing is happening to the other upmarket brands. Audi and Mercedes Benz have seen similar growth year on year.

However there are restricting factors too. Innate conservatism dies hard, so when Irish people do decide to splash out on a BMW they still choose the more traditional models, and even then they face a draconian tax regime that may well affect their choice. “The biggest sellers for us will tend to be the 3-series and 5-series saloons. And of those models the ones with smaller engines that sell best because of the tax regime.” In Ireland the government takes 22, 25 or 30 percent of the retail price of the car, depending on engine capacity, as Vehicle Registration Tax (VRT) – that’s on top of VAT at 21 percent. Then you have to put the car on the road. Compared to the UK, Irish road tax is even more severe at around €700 for a two-litre model and over €1,300 for a 3-litre vehicle.

There’s pressure even on the affluent motorist to buy a lower-rated car. “That’s why you see smaller engine and cars in Ireland. Last year we introduced a model with a 1.6 litre engine because that has a tax advantage over a 1.8 or two litre engine. The retail price is the same, but for the customer it is €2,500 cheaper to buy.”

In the circumstances it is no surprise that Ireland has among the lowest number of cars per head of population in Europe. “The government doesn’t want to grow the industry until the infrastructure is ready, so you are hindered somewhat by the road infrastructure in Ireland. They are improving it very rapidly of course but it will be another five or ten years before it’s entirely ready and in particular Dublin’s M50 bypass, which is much worse than the M25 has horrendous traffic. You can see why the government wouldn’t want to encourage the national ‘car parck’ to grow further just at present!”

Towards zero emissions

Next year will be a challenge because the road tax system will change, he continues. “They’re looking to go towards an emissions based tax similar to the UK system. That would favour us as a manufacturer because we are very clean. We’ve introduced a certain number of initiatives recently under the umbrella title of BMW EfficientDynamics.We’ve just launched an auto start/stop system so that when you stop at the traffic lights, put the car into neutral and take your foot off the accelerator, the engine will stop. As soon as you depress the clutch it starts again. If the car is stationary for more than five seconds you are saving emissions.” And changing from hydraulic to electric power steering has made another small but significant improvement in efficiency.

These may seem like small measures but when you put them together you achieve something like 70 percent of a full hybrid solution, he claims. “We will have a car later this year, the MINI Cooper D, that will actually have lower emissions than a Honda Prius. Environmental pressure is one of the biggest challenges for us. Being seen as a luxury carmaker it is very hard for us to be seen as environmentally conscious but when you look at the 118 diesel and the 520 diesel we are on a par with some of the hybrids. It’s just that people think that hybrid is zero emission, which it’s not.

“Zero emissions is the goal for all of us and we’d love to get there,” he continues. Hydrogen technology can do that, and BMW produced the first mass production hydrogen car, the Hydrogen 7. The trouble is there are precious few hydrogen filling stations, and none at all in Ireland. All the same, he reckons that zero-emission hydrogen motoring will be common in 15 years’ time.

The sum of the parts

Another sea change for the customers since BMW took direct control of its network has been the availability of parts. This involved changing the mindset of the dealers, who used to think of the aftermarket as a necessary evil, says Green, until he and his colleagues started to convince them that it could be a major opportunity. One problem with selling cars in Ireland is that there is a plate change at the beginning of each year. 25 percent of new sales are made in January, and 50 percent in the first three months of the year. “When you come to the end of the year you hardly sell any cars at all. That’s a very difficult pattern to manage so we’ve tried to encourage them to look at different parts of the business to earn revenue from.”

That means the dealers make good profits in the first quarter but can struggle for the rest of the year. They didn’t seem to realise that if you give the customer a great after sales experience that would create a valuable relationship, and generate new sales as well. Now there is an online ordering system for parts, similar to that for new cars, through which parts can be flown over for next-day delivery. “From a customer’s point of view to have a car repaired within a day rather than having to wait the five days it may have taken in the past is a sea change,” says Green.

“It was a real education process and we’ve made a lot of progress there. Before we entered the market, the best year would have seen parts sales of about €5 million net. Last year we sold €19 million of parts, and in 2007 we expect to hit about €23 million. The opportunity has always been there, it’s just needed to be focused on the dealerships.” The parts business has been built up on the back of better service, he adds, and may well have come from things like tyres and brake parts that are safety critical but just weren’t being replaced as often as they should have been.

The learning curve

Clearly training has been critical. Since May 2006, BMW Ireland has been able to send its dealers over to the new £17 million BMW Group Academy UK based in Wokefield Park near Reading. It incorporates 32 bay workshops with 10 attached theoretical training rooms, 15 training rooms and BMW, MINI and motorcycles showrooms to simulate a working dealer environment, and is a benchmark not just for the automotive industry but for all customer-facing industries, says Sean Green. “A lot of our dealers fly over there for training. It is very convenient for them to fly to Heathrow. It has had a big effect in terms of pulling the network standard up. That the Irish dealers have grasped this opportunity is proved by the way they have improved. Sean Green hands it to them. “When we started in 2003 we had a very low technical competence level in Ireland compared to the UK. We’ve pulled that up very quickly so the pass rate for senior technicians was 93 percent against an average pass rate of about 50 percent in the UK!”