BMW Biggest 1-Series Seen Catching Audi’s Compact A3: Cars

BMW Biggest 1-Series Seen Catching Audis Compact A3
A Bayerische Motoren Werke AG Sport Line model of the new BMW 1-Series automobile. Source: BMW AG via Bloomberg

Bayerische Motoren Werke AG is rolling out a bigger 1-Series compact car to reclaim the top spot from Audi for the first time since 2008 in the competition for younger customers purchasing entry-level luxury autos.

BMW’s smallest model will add more than 3 inches in length and about 1 inch in width, allowing for a roomier interior and more trunk space, the carmaker said. The vehicle’s starting price will be 23,850 euros ($33,480) in Germany, 900 euros more than its predecessor, and hit European showrooms in September.

“The 1-Series has considerable strategic value for BMW,” said Juergen Pieper, a Frankfurt-based Bankhaus Metzler analyst who recommends selling the shares. “It’s the gateway” for customers in their 30s, he said.

German luxury carmakers are revamping their smallest cars and adding compact models to entice buyers to sample their brands. The redesigned 1-Series will compete with Audi’s A3 and a rebuilt Mercedes-Benz B-Class coming to market this year.

The 1-Series will be the top global seller for luxury compact vehicles in 2011 with deliveries of 210,500, compared with 179,000 of the A3 and 114,000 of the B-Class, according to research firm IHS Automotive. Audi, which sold 208,000 A3s in 2010, has held the top spot in the past two years. BMW delivered 195,000 of the 1-Series last year.

“We’re delighted with the ability to bring new customers to the company with the development of the 1-Series,” sales chief Ian Robertson said at a presentation of the model in Berlin late yesterday. “This car has the youngest age profile within the BMW group. It’s a car that’s appealing to a much broader audience, a much younger audience.”

Fending Off Audi

Lifting 1-Series sales is part of a broader strategy at the Munich-based carmaker to sell more than 2 million cars by 2020 and fend off advances by Audi, which aims to pass BMW as the world’s largest maker of luxury vehicles by 2015. Ingolstadt, Germany-based Audi has outsold Mercedes this year, claiming the No. 2 position. BMW last week raised its 2011 sales outlook to more than 1.6 million autos.

Audi’s A3 compact, which starts at 20,950 euros, continues to benefit from “sturdy” demand and there’s no definitive date yet for an overhaul, spokesman Moritz Drechsel said. The Volkswagen AG unit’s original A3 was introduced in 1996 and the current second generation came to market in 2003.

Daimler AG will pep up Mercedes’ small-car lineup with the overhauled B-Class and three other new models. Mercedes is replacing the boxy A-Class with a sporty hatchback and is considering a small coupe and sport-utility vehicle. The Stuttgart, Germany-based automaker is building an 800 million-euro Hungarian factory and investing 600 million euros to upgrade a German plant to expand production of the models.

New to Brand

BMW has sold 1.22 million 1-Series since its 2004 introduction, with 400,000 of those deliveries in Germany, Robertson said. More than 70 percent of the vehicle’s owners are new to the BMW brand, he added. The car will be shown at the Frankfurt auto show in September, Robertson said.

Luxury-car makers are also boosting their compact offerings as regulators mandate vehicles with lower emissions. The new 1-Series, which relies on four-cylinder engines, burns up to 20 percent less fuel than the predecessor, said Dietmar Zimmerhackl, the 1-Series project leader. BMW would potentially face fines for violating CO2 emission limits without the benefit of its smallest model, Pieper said. The new 1-Series emits between 114 and 137 grams per kilometer.

The revamped 1-Series may be the last version with rear-wheel powertrains before BMW switches to front-wheel-drive technology as part of its efforts to expand compact vehicle offerings, said Tim Schuldt, a Frankfurt-based analyst at Equinet AG who recommends holding BMW stock.

“The 1-Series has an unmentionable bearing on BMW’s profit margin but it certainly is a boon to their efforts to complying with fleet emission standards,” Schuldt said.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE