BMW has launched a major counterattack

Author | Wang Xiaojun

Editor | Zhou Zhiyu

In this round of transformation in the Chinese market, domestic brands have taken center stage. Traditional brands, on the other hand, are fading and their anxiety is hard to conceal.

BMW, once synonymous with the luxury car market, has also encountered a crisis in this round of turmoil, with prices of various models continuously dropping. Headlines frequently feature buying a 3 Series for 170,000 and a 5 Series for 260,000. In the fierce market competition, BMW's brand value is gradually being eroded in the escalating price war.

Against this backdrop, BMW has selected a manager with a rich financial background, Birgit Böhm-Wannenwetsch, to succeed the technically-oriented Dr. Franz Decker. This is BMW's effort to balance selling cars, costs, and investments.

With Birgit Böhm-Wannenwetsch's arrival, BMW will next "tighten its belt" in the Chinese market, optimize operational capabilities, and prepare for the launch of new generation models in China. Currently, from a series of collaborations, the concentration of new generation models in China is already quite high.

The characteristic of this round of personnel changes at BMW also reflects a trend among many joint venture car companies in recent years when choosing leaders for the Chinese market, focusing on accounting and strengthening operations.

Thirty years have passed in the blink of an eye, and the environment faced by brands like BMW in the Chinese market has undergone tremendous changes. Only by changing attitudes and entering the "counterattack" phase with greater determination can they "survive" in the fierce elimination rounds of the Chinese market.

New CEO, here to turn the tide?

Recently, Brilliance BMW announced that Birgit Böhm-Wannenwetsch, an executive from BMW Group's financial system, will succeed Dr. Franz Decker as the new president and CEO of Brilliance BMW.

From Birgit Böhm-Wannenwetsch's career perspective, although she has been deeply involved in the automotive industry, her strongest expertise lies in financial management.

Before joining BMW, she began her career in the automotive industry in 1992 with a bachelor's degree in economics from the University of Münster in Germany, joining General Motors Europe.

After graduating with a master's degree in management from Stanford University in 2000, she held several core director positions at well-known automotive brands such as Opel, General Motors, and Saab. Her experience spans major automotive markets worldwide, including Europe and North America.

Before taking on the role of president and CEO of Brilliance BMW, she joined BMW Group in 2018 as Senior Vice President of Finance and Group Treasurer, responsible for leading BMW Group's financial services department in the Americas and overseeing the largest financial services business of BMW Group globally.

During this period, she not only led the optimization of the group's global capital management system but also provided strong support for BMW's steady development in a complex global financial environment. Additionally, her role as treasurer has given her a deeper understanding of the costs, benefits, and risks of all projects.

Now, the arrival of an experienced executive in finance in the Chinese market also signifies a strategic shift for BMW in China For many years, BMW has maintained a growth momentum in the Chinese market. Here, managers only need to focus on producing more cars and do not need to worry much about sales.

Dai Hexuan, who previously served as the president and CEO of Brilliance BMW, is an experienced manager in production. He joined Brilliance BMW in 2016, holding several core senior management positions, and became the president and CEO of the company in April 2022.

During his tenure, he led significant projects such as the construction of the Shenyang Lida plant and the implementation of the sixth-generation power battery project, transforming the Brilliance BMW Shenyang production base into a facility with an annual production capacity of 830,000 vehicles. It is worth mentioning that this capacity accounts for nearly 30% of BMW's global capacity, making it BMW's largest single production base worldwide.

However, in recent years, with the shift in the energy landscape, consumer attitudes have also changed. In 2022, BMW's sales in China were 792,000 units, marking the first decline. Last year, BMW's sales in China were 714,500 units, barely maintaining its position as the luxury car sales champion.

After the decline in sales, profits were inevitably affected. According to the 2024 annual report, BMW Group's total revenue reached €142.4 billion, a year-on-year decrease of 8.4%; the group's pre-tax profit was €11 billion, a year-on-year decrease of 35.8%.

In fact, as early as mid-2024, BMW attempted to exit the price war. At that time, BMW China stated that in the second half of 2024, BMW would focus on business quality in the Chinese market and support dealers in a steady manner.

However, this strategy does not seem to have worked, and sales have become even more challenging than before. Consumer loyalty to BMW is no longer comparable to the past.

Song Qi (pseudonym) chose to resign from his sales position at BMW under the pressure of declining sales and increasing assessment pressure. He told Wall Street Insight, "In fact, BMW sold better before the price cuts. After the price cuts began, consumers became more hesitant, fearing they would pay too much."

This year, BMW's price cuts at the terminal continue, and the price comparisons among dealers have not stopped. In desperation, some dealers have chosen to withdraw from the network, and salespeople have also chosen to leave. Many of Song Qi's former colleagues have turned to new energy vehicles, finding that their salaries are not lower than those at BMW, but the work intensity has decreased.

Moreover, Song Qi noted, "The main consumer group for cars is transitioning to a younger demographic, who are initially exposed to new energy and smart technology, which happens to not be BMW's strong suit." He clearly remembers a post-2000s customer who looked at several BMW models with him but ultimately chose Tesla.

Currently, BMW urgently needs to turn things around in the Chinese market, and appointing a CEO with a financial background is one of BMW's current strategies. After Bao Siqi's appointment, he needs to ensure BMW maintains stability in China and prepares for the launch of new generation models.

The End of a 30-Year Golden Era

If we count from 1994 when BMW established a representative office in China, BMW has a history of 30 years in China.

However, the story of its formal entry into China dates back to 2003. In the spring of 2003, at the Great Hall of the People in Beijing, BMW Group and Shenyang Brilliance Auto officially signed a joint venture agreement, marking the birth of Brilliance BMW. The following year, BMW invested 4 billion yuan to begin construction in the Dadong District of Shenyang, which was also BMW's first factory in China and the beginning of localized production At that time, investing in manufacturing plants in China was a decision that required caution. After all, according to data from the China Association of Automobile Manufacturers, in 2003, the overall sales volume of the passenger car market in China was only 2.04 million units, with the share of luxury cars being even smaller.

However, it cannot be ignored that China had just joined the World Trade Organization, marking the beginning of an era of explosive growth. Although the overall market size was not very large, the growth rate was significant. For example, in 2003, the year-on-year growth rate of passenger car sales in China reached 80%.

BMW's investment was also based on this. Just five years after its establishment, the Shenyang Dadong plant rolled off its 100,000th BMW vehicle. At that time, mainland China had also become BMW's fourth largest single market globally.

This growth continued for a long time thereafter. By 2010, passenger car sales in the Chinese market had reached 13.7578 million units, more than six times that of 2003.

Seeing the rapid growth trend, BMW chose to continue investing in China. In 2009, BMW began construction of the second phase of its plant in Shenyang, gradually increasing its production capacity to 300,000 units, and also built its first engine plant outside of Europe in Shenyang.

Subsequently, the BMW Shenyang production base underwent a series of expansions, until the official opening of the Shenyang Lida plant in 2022, bringing BMW's production capacity in China directly to 830,000 units.

From the repeated capacity expansions, it can be seen that for a long time, China was not only an important consumer country for BMW cars but also a significant production base for BMW.

During that period, the already large automotive consumption market and the demand for consumption upgrades allowed luxury brands like BMW to thrive in an upward era.

However, the wind began to change earlier. When people reviewed the data from 2019, they found that in 2018, the Chinese car market ended 28 consecutive years of rapid growth and experienced a decline for the first time. That year, the production and sales volume of the Chinese passenger car market were 23.529 million and 23.71 million units, respectively, down 5.2% and 4.1% compared to the same period the previous year.

This indicated that the turning point in the Chinese automotive market had begun to appear, entering a phase of stock market competition. In a competition where the pie was no longer growing, who could win the favor of consumers would depend on real capabilities. Meanwhile, the signs of a shift in the racing landscape had already begun to emerge, with the first wave of new car-making forces having started their ventures five years ago.

BMW, having long held a dominant position in the luxury car market, experienced its turning point a bit later. In 2022, BMW faced its first sales decline since entering the Chinese market. At the same time, the atmosphere in the Chinese market was unprecedentedly enthusiastic about seeking new growth from energy transitions, with many new forces eyeing the BBA market, while the responses from BBA seemed insufficient.

In the past two years, many articles about BMW have had titles like "BMW only sold XXX million," and this number has been decreasing periodically.

Salespeople also directly felt the pressure of poor sales.

Song Qi introduced that starting from 2022, the dealership he worked for adjusted its core assessment indicators. Previously, the main focus was on transaction volume, but later it also began to consider order volume. If this indicator was insufficient, even if the transaction volume exceeded expectations, they would still incur penalties. The original off-duty time was six o'clock, but after work, everyone began to hold meetings and make calls until eight or nine o'clock. Only after reporting to the manager could they leave work At this stage, for BMW China, responding to the price war, addressing new demands in the Chinese market, and coping with the long-standing slow development alongside the rapid iteration of the Chinese market has become relatively urgent.

All of this still needs to return to the essence of business, calculating the balance between selling cars and investment to achieve maximum benefits. Therefore, it is not difficult to understand the arrival of a CEO with a financial background at this time.

BMW's New Card: Chinese Technology

Another key point of BMW's recent personnel changes is that after finishing his term in China, Dai Hexuan will return to Germany to take on the role of Chief Information Officer and Senior Vice President of Information Technology at BMW Group.

This means that executives who have emerged from China are recognized by BMW Group for their technical capabilities, which may also become an important direction for BMW's future technological transformation.

Looking back at the history of joint ventures in China's automotive industry, it was a period of exchanging market access for technology. Today, with the energy transition, this trend has shifted.

From a broader perspective, in recent years, reverse joint ventures have become a hot topic in the automotive industry during the new energy era. A typical example is the partnership between Volkswagen Group and XPeng in the electronic and electrical architecture, with both parties deepening their cooperation step by step; Stellantis Group has teamed up with Leapmotor to establish a joint venture, becoming a typical representative of collaboration in going global.

BMW's series of actions also reveals the rise of China's R&D capabilities.

For a long time, the main work of Chinese R&D personnel was to adapt and tune the models developed by the German headquarters; however, BMW has now begun to emphasize the empowerment of global operations through Chinese R&D capabilities.

Reflecting on the changes in the Chinese market, BMW Chairman Zipse has frequently visited China this year. Around the Shanghai Auto Show, he even visited China three times in thirty days to discuss various technological changes. As a manager with a technical background, he has also keenly captured the impact of these technologies on BMW and allowed these technologies to feed back into BMW's global market.

During Dai Hexuan's tenure as CEO of Brilliance BMW, the stamping workshop at the Shenyang production base has optimized production efficiency using a self-developed AI intelligent quality inspection system, while the AI visual inspection system in the painting workshop has achieved an accuracy rate approaching 100%. The AI quality inspection system and digital twin technology developed here are being replicated in BMW's global factories, while the intelligent driving algorithms developed by the Chinese team are also being reverse-exported to international markets.

In the new generation of models, the concentration of Chinese R&D is even higher. In the core components of new vehicles, there are large cylindrical batteries supplied by CATL and EVE Energy, as well as the sixth-generation electric drive system developed by the Chinese R&D team.

At the BMW Group's new generation technology strategy communication meeting in March, BMW Group Board Member Murter also directly expressed the empowerment of BMW Group by Chinese R&D capabilities.

Murter stated that BMW has over 3,000 software engineers in China, who not only develop for the Chinese market but also empower the global market. BMW has integrated China's cutting-edge innovations, especially in artificial intelligence, into the group's global innovation system.

However, this trend has just begun to emerge, and the subsequent collisions and outcomes will need to be assessed after the new generation of models is unveiled

The New Consensus Among Giants: Survive by Operations

Looking back at the personnel changes in joint venture car companies over the past two years, it is not difficult to find that appointing executives with financial and operational backgrounds to manage the Chinese market is not just a choice made by BMW.

At the end of last year, Nissan announced that its current Chief Financial Officer (CFO) Stephen Ma would take over as Chairman of the Nissan China Management Committee. He will report directly to Chief Executive Officer (CEO) Makoto Uchida.

In 2023, Ford promoted its then General Manager and Chief Operating Officer of Ford China, Wu Shengbo, to President and CEO of Ford China. The results were quick to show, as Ford China significantly improved its performance in 2024, achieving its first annual profit in seven years, while export business also saw substantial growth, with nearly 170,000 vehicles exported, a year-on-year increase of over 60%.

Volkswagen had already appointed Berndt as President and CEO of Volkswagen Group (China) in 2022, who has extensive procurement experience and served as Chief Operating Officer of Volkswagen Passenger Cars for four years, to oversee its operations in China.

It can be said that BMW's logic in changing leadership for the Chinese market shares similar backgrounds and considerations with these car companies.

As the Chinese market has moved past the stage of not worrying about sales and making large investments in production capacity, the former glory of joint venture car companies is fading. They need stronger operational capabilities, a more detailed assessment of the market's commercial essence, and to be accountable for their financial reports.

An executive from a joint venture brand told Wall Street Insight that some international companies represented by joint ventures have already left this land, which does not mean these companies cannot survive, but rather is a choice made by the companies themselves. Those that remain need to return to the essence of business, balancing price and sales.

In recent years, joint venture brands first claimed "never winning online, never losing in sales," but then their sales also became less robust, with many brands experiencing double-digit year-on-year sales declines, putting them in a particularly passive position.

After hitting rock bottom, a rebound began. Since last year, many joint venture brands have announced the start of their 2.0 era, with new collaborations, new technologies, and new models emerging one after another, no longer displaying arrogance.

As changes have begun, perhaps there is no need to be overly pessimistic about the future of joint venture car companies in China.

Fu Bingfeng, Executive Vice President and Secretary-General of the China Association of Automobile Manufacturers, also stated that joint ventures in China have experienced significant challenges, but leading companies can still maintain good development.

In his view, although the market share of joint venture brands has dropped to 31.5%, the overall volume in the Chinese market is still close to ten million units per year. Leading joint venture companies such as General Motors, Volkswagen, Mercedes-Benz, and BMW have very clear strategies in China and are fully leveraging China's competitive advantage of "speed," transitioning towards "Chinese innovation feeding back to the world."

In the future, the Chinese market will still be a stage for global brands to grow together, but joint venture car companies must learn to run a marathon with Chinese speed. Whether this counterattack can succeed depends on whether they can truly engrain "Chinese demand" into their genes, rather than just paying lip service.

The transformation is fierce, but the days of meticulous budgeting have already begun. After all, this is indeed a game of who can survive the longest, and continuous funding is also the most important part of strength