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The Globe and Mail

Incentives are 'an expensive way to sell'

Franz Jung, President and CEO, BMW Canada

The Globe and Mail

It's great watching the German giants slug it out on the car lots of Canada.

Discounts? Incentives? Cheap lease rates? No problem, step right up. Plus you get a three-pointed star or a blue-and-white roundel on the hood.

It used to be that cachet alone was enough to bring the Benz and Bimmer buyers flocking to the showrooms without unseemly price slashing.

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But the slowdown in the economy plus Mercedes-Benz just itching to sneak past BMW as Canada's best-selling German luxury brand has created a real brawl.

It looked like 2009 was shaping up to be the year that Mercedes finally outsold the Bavarians, but in April a new president and CEO of BMW Group Canada arrived and the gloves came off.

Franz Jung wasn't going to start his career in Canada by leading the company into second place.

He started matching Merc deal for deal and the sales took off.

As of the end of August, according to the all-knowing auto analyst Dennis DesRosiers, BMW has sold 142 more cars than Mercedes (16,081 versus 15,939) after Mercedes started the year with a big lead.

Franz Jung has worked all over the world for BMW since joining the company in 1996. He calls the current situation "an expensive way to sell."

Vaughan: It looks like you've turned the year around since arriving in April.

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Jung: June was our all-time best month, we sold more than 2,000 vehicles for the first time ever. July was the best July ever and August was the best August ever. And that's just BMW not including Mini.

It proves what discounting and incentives will do.

As long as we fight with the same weapons as the competition does, we have the strongest products.

In May, June, July and August, we have been the leader in the premium segment because we have the cash to support it.

We don't like it, but it's a buyer's market at the moment and if you don't have the same weapons you just cannot sell.

Expensive though, isn't it?

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Sure, it's an expensive way to sell.

We want BMW Canada to make a profit, but it won't be as much as it was forecast to be a couple of years ago.

These days, there's a huge cost, but you bring people here for the future as well.

For every consumer who goes to the competition if we are not competitive, it would take us three or four years to have a chance to bring him back.

We are very sales-focused at the moment, which is good.

So Mercedes won't get past you.

This year, we focus very much on Mercedes.

It's interesting what's going on, on their side, from a global perspective not only in absolute sales numbers but also in profitability.

It makes me a little bit sad that Daimler Mercedes has so much losses. We don't want this. We need strong competition and they need us.

Do you worry that the slow recovery and the flat economy will take premium customers out of the expensive end of the market for good?

Our customers want to be exclusive, they want to be individual, they want luxury.

We have 3-Series customers and we have M3-Series customers. Both cannot drive faster than 100 km/h legally, but there is a market for both.

Canada is the highest per capita M market in the world and that's in a country where you are not allowed to drive fast. That shows how people think. Canadians like fun products.

We see their values going away from big cars to smaller cars, but it does not mean going away from exclusivity.

The future then is small cars?

The 7-Series is still the flagship of the brand and, as long as there is demand for such cars and a business case, then we will have such cars.

But the next two or three generations will see a considerable improvement in terms of weight and engine efficiencies.

We will marry hybrid technology with gasoline or diesel technologies to dramatically reduce fuel usage with at least the same level of excitement in driving the car. That's the goal.

BMW has been pushing EfficientDynamics for a few years now and you have reduced average fuel consumption by a fair amount.

Our very core values of the brand is that we want to sell joy to our customers and we want to be the leader in the world with a perspective on EfficientDynamics.

If you look at Audi quattro, it took them 10 or 15 years. Now everybody knows Audi as quattro. We want to achieve that with EfficientDynamics.

It's about fuel efficiency in gasoline or diesel with low CO{-2} emissions. That's what the whole world is talking about in terms of global warming.

Our worldwide market share is still so little that we have potential to grow, long term. It depends on having the right product.

We think we are prepared with our EfficientDynamics technology. We are leading the premium segment in fuel efficiency and that helps us a lot.

I have seen the product that is coming and I believe BMW will be back very strong.

While you have to watch the German competition, what about the Koreans? Hyundai has already has the Genesis Sedan and Coupe to compete with you and soon it's coming with the even bigger and more expensive Equus, which will go up against the 7-Series.

Our competition is in the German car industry. I don't consider the Korean company as competition this year.

I might change my mind in the future.

Michael Vaughan is co-host with Jeremy Cato of Car/Business, which appears Fridays at 8 p.m. on Business News Network and Saturdays at 2 p.m. on CTV.

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