September 8, 2010
BMW IN THE FLEET BUSINESS

With the introduction of an innovative fleet program, a new national fleet manager and support from the top, BMW has firmly thrown its hat in the fleet ring. CAF spoke with BMW Canada CEO Franz Jung about the decision.

CAF: After a couple of tough financial years worldwide, the automotive marketplace, particularly fleet, is growing again. What factors have encouraged BMW Canada to become more involved with fleet sales and service in Canada?

JUNG: In the markets where I come from previously, fleet was already an integrated part of the BMW sales channel and I was wondering why in Canada, in particular in the premium segment, fleet is still small and hasn’t received the attention I thought it should have.

One year ago, I raised the question and said that we should focus a little bit more on that area, but before starting up we should investigate what’s going on, what the market environment is, how others do the fleet business, typical questions.

I was then traveling across the country and asking questions on the dealer side and on the corporate side, and more and more I came to the conclusion that there is already a market, even in the premium segment, in the fleet business in Canada. Having said that, I also very much believe the market is growing in the premium segment in the mid and long term. That’s the background of what led us to go into the fleet business.

CAF: Would you identify some of the global markets in which BMW has been particularly successful in corporate sales, how do they compare to Canada and what are some of the lessons learned that you would like to apply.

JUNG: The business has been developed very much over the last 10 years in Germany and in Europe, including the United Kingdom. Why? Because it became a motivating factor to offer an employee the opportunity to drive a 3-Series, for example. That’s how we got started with Sony Europe, Nestle in Switzerland or other big brands.

We would say if you work with us we would offer the 3-Series as your company car. That was the first step. The second step was to pay attention to the budget the company had. It wasn’t about us saying that they had to drive a BMW, it was about them choosing from what we had to offer. That was one big area in Europe.

The other big area was lease/daily rental companies where on arriving at the airport you could say, “I want a 3-Series or an X5, with or without navigation, etc.” The best selling tool you can have in the automotive business is a test drive. People land at an airport somewhere and regardless of the car they currently drive, a Ford, Lexus or whatever, they say, “Okay, I would like a 1-Series or a 3-Series, I want to test this car.” So this helps, it’s a win-win.

CAF: BMW is known for its engine and vehicle technology. What are some examples that support corporate customers not only for cost efficient operations but to help reduce the company vehicle carbon tire track?

JUNG: We have implemented hybrid technology in some of our vehicles now. Hybrid has a great future but is still an expensive technology. From what we understand, hybrid engines should deliver and become part of the scene but we are far away from offering a cheap engine with hybrids. Other brands have the same issue with this.

I have spoken with other automotive manufacturing colleagues and they too say they are not able to offer hybrid technology for the same price they would offer a standard engine technology. Therefore, hybrid is coming but needs some time to be really effective for the mass market. I think this isn’t the end of it; hybrid plus electric engines will be, in the future, dominating the automotive industry long-term.

We have launched, just recently, a 1-Series full electric car as a test fleet and it is running very well. Two years ago, we launched a Mini electric fleet in California, 500 cars, which is also running very well. The acceleration is remarkable and it is a new way of driving. But, as I said, this is still far away for the mass market.

What we have now is our Efficient Dynamic technology. Most of our cars already incorporate this technology, and if you see comparisons between our cars and cars from the competition, in carbon exhaust and fuel consumption for example, we are leading in almost all segments. We talk about more than a litre per 100 kilometre advantage in small cars, which is a lot over a car’s lifetime. We also talk about approaching a carbon emission standard of only 100-grams (per km) which only two years ago was impossible to achieve from an engineering point of view.

It takes a long time to transfer this message to a retail customer but not long to transfer to corporate clients because they have an interest; they are thinking and wanting ‘green’ and we have ‘green.’ We have the best available in the industry. This helps us. I have been responsible for Nordic countries including Sweden, Denmark, Finland, and Norway, and we would have been out of business from one day to the next had we not had this technology.

This is a proven example: many years ago, Volkswagen had developed the VW Polo, which was the smallest car VW had produced, which only consumed three litres (per 100km). That is many years ago but they were so close to what we want today. They were charging 3,500 Deutsche Marks (a substantial premium) more for that technology because you need to get back the money you invested. However, nobody bought that car. You will see the same with hybrids. You can only do so much but at the end of the day you need a market and you need the investment back. Otherwise, it makes no sense.

CAF: You have been quoted as saying that to be successful today an automaker has to know how to “play the whole piano” Can you expand on that note as it pertains to BMW’s corporate sales program?

JUNG: I said this because I believe the “good old days” in car sales are over. It used to be that when you had a new car you presented it at the auto show, had a little media coverage then people came running to buy it. In those days, BMW customers started as BMW customers and remained BMW customers till their dying days. These times are over.

Today you have to focus; see the whole chain, from the development of the car right through to the very last day of that car. There are so many steps that you can opt for and that is what I meant by the piano analogy: you have to, as much as possible, follow up on all the steps over the whole life cycle of a car.

That of course goes to the development of the car, the marketing of the car, and the right dealer selling the car. It also goes with the used car business because every used car buyer will hopefully someday buy a new car. It also goes with offering good financing options and good after sales service. It goes with following up not only on the history of the car but the history of the customer which could be totally different from each other. Hopefully at the end of the day it goes to a repurchase of a BMW by that same customer.

If you miss one of these steps while “playing the piano,” then you miss business. It is not easy to do this because you must always have total concentration on everything you do, but this speaks to the BMW brand because we do all of this.

The things that we do are fully sustainable, fully dedicated and completely concentrated or we just don’t do them. This is what we will do here in Canada with fleet.

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