Why won’t BMW sell its full 1-Series lineup to Canadians?

It is tough to find fault with BMW these days, so I am more determined than ever to whine about what’s wrong with the new 1-Series.

If, after all, BMW can manage to earn a profit of more than $4-billion for the second quarter and if owners say they love what BMW makes – the BMW brand finished third in the 2011 J.D. Power and Associates APEAL (Automotive Performance, Execution and Layout) study, which is a so-called “things gone right” bit of research – then why can’t BMW solve the problem of how to make the entire 1-Series lineup viable and sellable in Canada?
I’ve just driven the remake of the little Bimmer line launched in 2004 and there is nothing wrong at all with the car in and of itself. What is wrong with the 1 is that the most appealing versions are not for sale in Canada. Those would be the entry or starter models so popular in Europe where the brand was first launched – say, the gasoline 118i and the diesel 120d.

Not for Canada, at least not yet. The 1 poses a problem for BMW in Canada and on many fronts. First, the four-door hatchback would need to be priced starting in the mid-$20,000s in Canada to make sense. There, it would potentially compete with BMW’s Mini Cooper line, which plays in that price range.

So instead, we get racy coupe versions of the 1 that start in the low $30,000s, including the terrifyingly fast 1-Series M Coupe with its 335-horsepower, twin-turbocharged, all-aluminum, 3.0-litre, inline-six-cylinder engine: $53,600.

Yet somehow BMW manages to make the 1-Series and the Mini work profitably in Europe, where I have just been to the global press launch of the 2012 version. The entry-level BMW accounts for around 30 per cent of BMW sales in some European markets; for 70 per cent of buyers it is their first BMW. No doubt the story would be the same for a more affordable BMW in Canada, too.

But not to be. Not for now, at least. My advice would be for BMW Canada to get moving and add the less expensive 1 cars to its showrooms. Yet on first blush BMW does not necessarily need or even want my counsel.

As Arndt Ellinghorst, a London-based Credit Suisse analyst, tells Bloomberg: “They have the strongest product lineup and best execution in the market,” noting that demand for the revamped 5-Series and X3 SUV is leading the buzz around BMW, Mini, and Rolls-Royce models in general.

Today, BMW is the world’s top premium auto maker in terms of sales and profitability. Period. BMW expects global sales to rise to more than 1.6 million vehicles, besting Volkswagen’s Audi premium brand and Daimler’s Mercedes-Benz.

As Bloomberg notes, BMW generated the highest profit margin of the three: a return the equivalent of 14.4 per cent of sales, up from 9.6 per cent a year earlier. That beat margins of 11.8 per cent at Audi and 10.7 per cent at Mercedes-Benz. Deliveries of the 5-Series have jumped 80 per cent and the X3 has more than doubled this year.

“We are producing at the limit,” CEO Norbert Reithofer told analysts and reporters.

Added Sanford C. Bernstein’s Max Warburton, “For an analyst who’s covered BMW for 11 years it's amazing to see this level of earnings. At no point in the past would it have been imaginable that this company could make margins of this level.”

BMW is doing all this without putting a $20,000-something 1 out there on Canadian roads. It’s hard for me to imagine, however, that a long lineup of Canuck gearheads would ignore what I’ve been driving in Germany: a red 118i with a 1.6-litre, turbocharged, four-cylinder (168 horsepower/184 lb-ft of torque).