Two models introduced by BMW Malaysia will change their profit margins for the better.
Two weeks ago, I took the BMW 218i Gran Coupé out for a test drive and last week, BMW Malaysia previewed an upcoming 330Li model. A lot of people are asking why they would bring in a long-wheelbase model of the 3 Series, which is already selling like hotcakes. By synthesising my discoveries behind the wheel of the 218i with the way the 330Li M Sport is priced and equipped, here’s what I theorise: BMW Malaysia is about to fatten their per-product margin.
Assumption 1
Let’s assume a couple of things. First, that when equipment is constant, an equivalent 5 Series costs more to make than a 3 Series that costs more to produce than a 2 Series. In other words, 520i costs more to make than a 320i costs more to make than a 220i.
Assumption 2
Secondly, let’s also assume that a lower displacement/output engine is tougher to sell in the premium segment. Not only is it less appealing to have the cheapest, slowest 5 Series for the customer, it’s not quite as profitable for BMW. So, sales of these models are not quite as incentivised. In other words, fewer units of the 318i sell than the 320i, 330i or 330e. Fewer units of the 520i sell than a 530i or 530e.
With these two assumptions in mind, we can start to see the logic of BMW Malaysia’s moves. The first move is to eliminate the 1.5L 3-cylinder engine in the 318i from the product lineup. It was available for a short while in the previous generation. In the current generation, this variant is still available in other markets.
I’m not sure if the 318i sold very well in Malaysia, but anecdotally, I see more 320i and 330e models than 318i models. After eliminating it from the 3 Series family in Malaysia, they introduce the same 1.5L 3-cylinder ’18i’ variant into their cheaper, smaller cars like the X1 sDrive18i and 218i Gran Coupé.
If assumption 1 is correct, then the entry point into the BMW brand (now the 218i Gran Coupé) is now cheaper to produce, cheaper to sell. But because the 218i Gran Coupé is fashionable and well-equipped, it feels like a decent place to start one’s journey with the brand. Where they once sold you the 318i with smaller margins as a starting point to the brand, they now have a more inexpensive, but flashier model to draw people into the brand.
What about the 330Li’s upcoming introduction? Well, I suspect a similar thought process applies but it’s the 520i that’s being supplanted. Based on the 5 Series facelift preview in Malaysia, only the 530i and 530e will be introduced (for now). The 520i from the pre-facelift era was phased out. Again, if assumption 1 is true, then margins on a fully decked out 3 Series will be a lot fatter than margins on an entry-to-mid-spec 5 Series.
Thus, BMW Malaysia’s next year of sales is going to be more profitable per unit, regardless of how many units they’re going to sell. Will customers be happy? Well, from my taste of the 218i Gran Coupé, I can say that I don’t think customers will feel short-changed. It’s an even better entry into the BMW brand than the X1 sDrive20i. And last week, I got to sit in the rear seats of the 330Li and it fit me great despite my height and weight. So, it’s possible that future BMW customers will even enjoy this little shift that BMW Malaysia has done for itself.
