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Wall Street Journal - Not Good Numbers for BMW - Motorcycles Mentioned

Does it matter? We're talking motorcycles here. And we all know what takes priority when it comes to motorcycles. :D

If I were to actually start a discussion of pensions (I am not) it would be political and become political and would soon be terminated by the moderators - as it should be. Hit me up at a rally campfire or at the national and I will wax eloquent about pensions.
 
Fewer Driver's Licenses

One other factor playing a role in the auto/MC industry I suspect is the trend of eligible-age drivers, especially teenagers delaying or postponing getting their drivers licenses.

Recent articles I’ve read state that the percentage of licensed drivers (USA) in the age group of 16-44 has been decreasing steadily since 1983. In 1983, for example, 46.2% of 16 year-olds held a drivers license while in 2014 only 24.5% of 16 year-olds held a license.

It’s reasonable to assume that most of these people will eventually get a license but by then it might be a matter of absolute necessity rather than the sheer enthusiasm of getting a license ASAP as it was in my teenage years.

And if you don’t have a license you probably aren’t shopping cars or MC’s.
 
Does it matter? We're talking motorcycles here. And we all know what takes priority when it comes to motorcycles. :D

I'm in agreement with Motodan on these current results for BMW and Harley......the demographics of the market are changing. And, I think, that change will be pretty rapid. In addition, in my experience, those changes are impacting the folks entering the typical MOA member age and income brackets.

MartyHill's observation about his purchases just went in the same direction. BTW - I hope to be still riding and buying at 79.
 
The WSJ is a business financial paper. Often there are several degrees of separation between what sound financial investment opportunities look like and what is going on at BMW AG from an enthusiast’s perspective.

For a bit more information and interpretation spend some time in the BMW Quarterly Report
https://www.press.bmwgroup.com/glob...N/bmw-group-quarterly-report-to-31-march-2016
This bit of creative non fiction business writing may give you a sense of some of the difficulties in assessing the investment value of a company v its product lines and what it takes to bring them to market.

The automotive segments of BMW provide a number of challenges. The industry as a whole is working its way through ICE to Hybrid to ____ engines.

One way to sell new technology in this industry is to lease. BMW has growth in its leasing sector. While this helps keep and in some markets increase sales it alters the investor risk analysis.

Sales are a mixed bag country to country. As you try to figure that out keep in mind BMW is a niche manufacture in the bottom of the upper quarter of the industry. Looking at the sales in the US for both automobile and motorcycle segments three factors jump out.

WARNING - What follows is a non political business discussion of the US that mentions political things.

There are many who suggest that in a presidential election year with no incumbent running expenditures on capital items/durable goods may be tepid or slow down considerably during the run up to the election. Post election, the argument continues, things will return to normal (whatever that is and means is another debate altogether) and in fact you may see a year end spike due to pent up demand and the need/desire to book expenses in the then current year.

If this makes sense to you at all - We are in such an election cycle. A motorcycle is a major durable good expense.I will leave it up to you to decide how much impact this has on any industry sales figures you read.

WARNING - What follows mentions weather. It should not be misconstrued as an global warming argument or an opportunity to debate that topic.

Moving back and forth between macro industry analysis and micro local dealer/buyer analysis is tricky business. Weather, oddly enough is a major factor. I will use my micro Fly-Over-Land climate to make the case.

We had the 5th warmest winter in reported weather history. Talking with local dealers of various brands this resulted in challenges for the products they sell to survive the white season. In turn those challenges are impacting how they are rolling out their business plan for the coming season with smaller cash reserves than they would like.

On the rider side we have had a cool wet spring. This has not precipitously slowed down the riding but has germinated the desire to ride to a dealer and look at new bikes. It is only in the past week I have started really eyeing the MC dealers I drive past every day.

PRODUCT
Let’s start in the US and work out from there as we look at BMW product.

We are in year three of a product line roll out. Years 1 and 2 saw an upgrade in several of the models that sell well in the US and introductions of models that should sell well. They did. The challenge for BMW NA is to continue to sell these models in a tepid market while going up against record sales in the previous two years.

This year is much more about the expansion of product lines into the sub 500cc market. This has never been a big segment for BMW in the US. Financially, BMW AG, BMW NA and dealers, are beginning to realize on their P&Ls and Balance sheets the expense for the roll out of a new product line in a new market segment.

GLOBAL
Move your view out from the US and your head begins to spin.

South America - This region has been a nice growth market for all the BMW segments. The Motorrad segment expanded with a knock down assembly program in Brazil to meet the demand on that continent. Economic times are challenging, particularly in Brazil which had been a MC sales leader.

India - India has been a new sales market for many of the manufactures. BMW’s sub 500cc plan has strong roots in the sub-continent market and relationships with Indian manufacturers. A combination of economics and weather are slowing down the realization of that plan's potential in this market.

Asia - The quarterly reports comments about Japan are reflected similar challenges in other Asian markets.

Europe -
The sub 500cc product line should have its strongest impact for BMW financials in Spain, Italy and Greece. Italian sales have been strong in the big bike class. Will that carry over to the sub 500cc class? Spain and Greece represented countries that moved the 650cc product line. Economically they are disasters. What does that mean for the sub 500cc plan? DE, FR, and the UK seem to be suffering from European variations of many of the tepid sales issues the US is.

LONG STORY ending

For all the reasons above and the shift from auto/motorcycle manufacturing companies to Transportation Companies this industry provides all sorts of challenges for investors. My sense is if you are looking for quarterly dividends BMW’s will be weak in the near term. As a long term hold as part of a portfolio...I leave that up to you.

For the enthusiast - WOW! New products. New variants of old products. Sales of these are moving desirable gearhead toys into the used market. The challenge is does your personal business status allow you to take advantage of them.

Mandatory disclaimer:
All this analysisand a fiver will get you a large coffee, a really nice roll/donut/cruller and leave room to tip the barista and have change when you leave the Official Fly-Over-Land coffee shop.
My vote for the best post in a forum ever. Well done.

Sent from my Nexus 6 using Tapatalk
 
More people may be riding/driving older vehicles for various reasons. In our house we see no need to buy new. Currently have '74, '84, '88, '04 and an '08. Stuff just lasts longer if maintained. Or, as you get older you ride/drive less and don't wear'em out. Manufacturers are scrambling to keep sales going, ergo new product features, turbo diesel comes to mind. Consumers are certainly pinching the pennies these days. Hope the spare parts don't go away.
 
With the exception of a few guys with pensions, none of my 50~60 yo friends are buying bikes. They're all saving every penny for as long as they can work.
Kinda sad. I started riding at 59 so am in a different situation than your friends. I'm sure they will have more $'s at the end if that matters.
At 80 I just want to ride and enjoy!
 
Kinda sad. I started riding at 59 so am in a different situation than your friends. I'm sure they will have more $'s at the end if that matters.
At 80 I just want to ride and enjoy!

It's really sad, if you ask me.......

Life is too short to worry about investment returns every minute.
 
Here is a BMW PressClub release explaining one of the “New Strategy Projects” mentioned in the 2016 Q1 report.

04.05.2016 Press Release
BMW is opening up its own assembly plant in Manus Brazil for eight models for that market. This ends its relationship with Brazilian motorcycle manufacturer Dafra. BMW had contracted with them to assemble G and F models since 2009.

The plant opening represents around 170 workers according to the press release. This would be a good portion of the new workforce the listed in the Q1 report. At least that is my assumption. If they use a similar model to the start of their relationship with Darfa these new BMW employees will be sent to the BMW Berlin plant for approximately six months of training and job shadowing before the Manus plant opens this fall.

The move also means capital expenses for BMW. In addition to the physical plant and equipment there will be other costs to set up all the various supply chains and relationships need to operate the plant which Dafra provided in the previous agreement.

In something of an ironic twist from an investor standpoint a Brazilian knockdown assembly plant impacts BMW investment outlook. Both these major headings add risk raising questions about BMW as an investment.

BMW’s 2009 development of the Dafra relationship came out of an opportunity and desire to increase sales in South America and redistribute a variety of BMW manufacturing resources from Brazil to the Asian market while working with the Brazilian government to maintain job levels in Brazil. Investors appeared to see this as a favorable win win. For the Motorrad Segment it allowed expansion in a BRIC country which were still growth markets for the Segment while places like NA were contracting.

In 2016 the situation may be perceived as being turned on its head, by a would be investor. The BRIC countries, particularly Brazil are in trouble. In that setting BMW is making a capital investment in building a plant and support systems along with adding staff to the corporate payroll. The prime driver of this move is the G310; a new and unproven market for a market segment BMW has little or no experience in.

As an enthusiast why should I care?

The short answer is...I don’t know.

The answer for myself is to turn UJM history on its head with a big dash of hope.

The Japanese manufacturers used their dominance in the sub 250cc world market to subsidize development of cool products I liked. VFRs, GSXs, sport touring models and more. Honda Cub sales subsidized Big Red efforts at the race tracks I liked to frequent.

Historically BMW financed similar efforts, if at all, with sales of big bikes. The new sub 500cc strategy expands the Mothership’s profit potential in the long run. The hope is they spend some of that profit developing gearhead toys and equipment I want.
 
Hit me up at a rally campfire or at the national and I will wax eloquent about pensions.

I'm 65 and still need to do 12 a day for the foreseeable future. What's a freakin' pension?
 
Just rode up the 1 and had a cup of coffee. Yes, it's raining in norcal but who cares. The pacific looks amazing today.:)
 
Reminds me of a bumper sticker I saw while heading west in Ontario Province two years ago:

GoodbyeTension.jpg
 
More people may be riding/driving older vehicles for various reasons. In our house we see no need to buy new. Currently have '74, '84, '88, '04 and an '08. Stuff just lasts longer if maintained. Or, as you get older you ride/drive less and don't wear'em out. Manufacturers are scrambling to keep sales going, ergo new product features, turbo diesel comes to mind. Consumers are certainly pinching the pennies these days. Hope the spare parts don't go away.

Surprising that this hasn't been a larger part of this conversation. With a yearly manufacturing output of X? number of vehicles, many of which are returned to the open market yearly, this no doubt affects BMW's sales and "investor" potential in myriad ways, as folks look at used V new bikes available on the consumer market. I personally have bought new cars but never a new motorcycle- and can't even see a reason to purchase new from a dealership. That being said, my preference and focus in motorcycling is vintage and older bikes anyway... tho I do own a "modern" (2002) K1200. Bought it used, and my next "newest" bike is a 1989 model.

So how many consumers buy used over new? Who can even begin to quantify that? But it's gotta have its impact.
 
Surprising that this hasn't been a larger part of this conversation. ...snipped...

So how many consumers buy used over new? Who can even begin to quantify that? But it's gotta have its impact.

For various reasons, the question of how many consumers buy used over new is most interesting. At the same time, it is the most difficult to quantify and understand.

IIRC in an BMW PressClub release touting their Classic Parts Department, had a throw away line saying it is estimated that over 70% or so of their motorcycle were still registered. The implication being their OEM parts and the new Classic department should be your motorrad life support of choice. With just over 3 million produced, according to BMW annual report numbers, since 1923 that would seem to be a lot used bikes in the market. But what that means is anyone's guess.

I hold two titles for UJM motorcycles that now are just frames after cannibalizing for projects and selling parts. How many BMW titles in the above number are in the same state?

What is the customer to unit ratio for used ownership? From BMW's and an investor the ratio of is one to one in simplest terms. Each buyer represents a new customer no matter what other motorcycles they may or may not have in the garage. Take a look at the forum sig lines and you notice a lot of people listing multiple motorcycles.

For BMW and the investor the question would seem to be what is the saturation point of any product? The ability of BMW to add and grow new markets such as South America, and India more recently, makes saturation point calculations more an art rather than a science. Then a series of questions follow from that.

The MOA standpoint the used market has always been an undervalued membership target. The new Motorrad buyer is simple to target and is low hanging fruit. But how does the associations product match up to their needs? The used buyer and the association product may be a better match; however, it is an elusive quarry.
 
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