BMW triumphs over X5 total recall (page 1 of 2)

It was hardly the way that BMW's Middle East operations would have liked to start off the new year. As a brand renowned for its emphasis on "engineering perfection," BMW definitely lost face when it was forced to announce in February that 164,000 units of its immensely popular X5 sport utility vehicle (SUV) were being recalled worldwide because of a possible faulty brake hose.

But soon enough the German penchant for restoring order took over, and BMW's regional office, along with their many dealerships, worked overtime in tracking down the affected vehicles and rectifying the fault. In the Middle East, about 4,000 X5 units were affected by the recall decision.

The company will certainly overcome the incident, but its timing could come to haunt the carmaker for a long time to come. BMW is set to face one of the toughest years since it entered the Middle East market in the mid-1990s. Key regional markets such as Saudi Arabia and Kuwait are recording fairly sharp declines in automobile sales across the board, according to market sources, and the future looks uncertain at best.

In a year-to-year comparison, first quarter sales in these two markets, which together account for half of the overall Gulf automobile sales of 500,000-600,000 units annually, are down by at least five percent. Purchase figures in the UAE market, which accounts for 85,000 new car sales a year, are not that different either.

Even within the ranks of the ultra-luxury car segment, which makes up between 10,000-15,000 units annually, demand is mostly flat. This is the first time since opening its Dubai office in 1994 that BMW is facing a contracting market.

So far, it had seen a spell of unbroken year-on-year growth in these markets, capped by its breaking the 10,000-unit mark for the first time in 2002. This includes 2,940 units of the pricey 7 Series, which is the highest BMW has recorded to date in the Middle East. The company has also invested in some of the most
eye-catching showrooms, advanced service facilities and glossy ad campaigns in the region.

With the current year promising to be an exacting one, the company clearly needs new thinking. "For 2003, we would consider a repeat of our 2002 numbers as being an extremely good achievement, given the environment we are operating in," says Robert Bailey-McEwan, regional managing director for the BMW Group, at the announcement of the 2002 results. "We could have done a lot better in 2002 if there were more models of the X5 and the Mini coming in to satisfy demand."

The contracting market comes at a bad time for BMW. The company is set to introduce a number of new models around the world and a slack market is hardly the ideal platform for them. BMW recently spectacularly launched its new 7 Series in Miami and Dubai simultaneously. The company is also preparing for the arrival of that most coveted of status symbols: Rolls-Royce.

The first Rolls-Royce units after its ownership passed on to the BMW Group from January 1, 2003, will be reaching their Middle East owners by April. Deliveries will be made only on firm orders placed in advance, and carry a price tag of $300,000.
But the mark will still face major challenges in the super-luxury market - Britain's Bentley, with which Rolls-Royce shared parentage until recently, is launching a major offensive in the region by bringing in new models.

Then there is, of course, the Maybach from the DaimlerChrysler stable.