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When Franz Jung arrived from Sweden in April to take the reins of BMW Canada Inc., he received a quick lesson in why it's crucial to distinguish between the Canadian and U.S. markets.

Mr. Jung ordered a meal in a restaurant and the waiter brought him a big portion.

“I said to him, ‘This is the Americas, everything is big,'” Mr. Jung recalled. “He said to me, ‘Hey, watch out, you're not in America.'” The veteran of several international postings for BMW AG already knew enough about the North American vehicle markets to be aware that Canadians tend to buy smaller, more fuel-efficient vehicles than Americans and that entry-level vehicles are a vital weapon in an auto maker's arsenal here, even in the luxury market.

“We have products here that don't exist in America,” he said, pointing, for example, to the 323i, an entry-level version of BMW's best-selling line in Canada, the 3-series. “[The Americans] would not even think about it.”

He was also aware that by the time he arrived, an aggressive assault on the market by rival Mercedes-Benz Canada Inc. had propelled that company into sales leadership among luxury brands in Canada, ahead of BMW Canada, whose 18 consecutive years of sales increases had kept it in top spot.

Regaining first place is one of four strategic objectives Mr. Jung has set for BMW Canada, he said in his first interview since becoming president and chief executive officer.

“The competition got very, very aggressive – with reasonable products, but with extremely aggressive pricing,” he said. “That's why they gained volume and we have to come back.”

The comeback began in May when BMW outsold Mercedes-Benz. And it came in a luxury market that is awash in incentives.

There is little precise data on the total amount of money being offered to buyers, said industry analyst Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc. But anecdotal evidence and advertisements suggest “we are probably looking at the most generous incentives in the history of the luxury sector,” Mr. DesRosiers said.

The deals range from interest-free loans for the Jaguar XF, to $3,000 rebates for people paying cash to buy an Acura TL, to finance rates of 2.9 per cent on Audi A3 and A4 cars.

Virtually every luxury brand has some kind of incentive program in place.

In the face of competitors offering lease and loan rates of 0.9 per cent and 3.9 per cent, BMW cannot hold its rates at 6.9 per cent, Mr. Jung acknowledged.

“That would be a little bit too arrogant and too optimistic,” he said. So BMW has joined the parade, but won't sell vehicles at a loss, he vowed.

BMW Canada is one of a handful of luxury makers outperforming the overall market, which fell by 20 per cent in the first five months of the year from the same period in 2008.

The market appears to be coalescing around true luxury players, noted Mr. DesRosiers, who distinguishes the core luxury companies from those in the premium market, which is a step short of true luxury.

Along with sales leadership, Mr. Jung wants BMW Canada to dominate each segment in which it participates.

It has 11 new or redesigned vehicles arriving in the market by 2011, including the new X1 small crossover utility vehicle and a crossover for the company's Mini brand.

The third objective is to make the company leaner and more efficient – part of a worldwide mandate at parent BMW AG.

That effort began last year with a reduction of 20 per cent of BMW Canada's 165-person head office staff through a buyout program.

But actions need to be taken beyond simply reducing the size of the work force, he asserted.

“Do we need marketing for after sales and marketing for product?” he asked.

Improving customer service and satisfaction is the fourth strategic objective.

“Consumers are more demanding in terms of what happens with their car,” he said.

Fixing problems the first time the customer brings the vehicle back to a dealership is crucial, he noted.

“If consumers come back with a problem and you fix it the first time right, it's not only that they're okay, they are even happy. They accept that something can happen to the product, but if they have to come the second and third time because of the same problem, it's a really big problem.”