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BMW Counting On Mini Paceman to Counter Fiat 500 Threat

March 24, 2013

BMW Mini Seen Fending Off Fiat Challenge With New Paceman: Cars

The Paceman will be the seventh model in what has become a key part of BMW’s lineup, giving the world’s largest maker of luxury cars a growing presence in compacts with a brand that customers are willing to pay a premium for. Mini’s importance. Source: BMW

A dozen years after inventing the nostalgia-hip segment of the car market, Bayerische Motoren Werke AG (BMW)’s Mini is finding itself increasingly squeezed by Fiat’s zippy little 500. Now, the Germans are pushing back with the Paceman, a two-door crossover coupe designed to keep the brand top of mind among young urban buyers.

The Paceman will be the seventh model in what has become a key part of BMW’s lineup, giving the world’s largest maker of luxury cars a growing presence in compacts with a brand that customers are willing to pay a premium for. Mini’s importance for BMW will rise as the manufacturer shares more parts between the two brands to lower costs and stay ahead of Audi (VOW3).

Based on the Countryman, a four-door compact sport-utility vehicle, the Paceman was redesigned with a lower roofline and horizontal back lights to give it a broader and sportier look but retain the lines of an SUV. The car, available in Europe since March 16 and in the U.S. soon, starts at $23,900 in the American market -- Mini’s most expensive offering.

“If we’d simply done a three-door version of the Countryman, we’d have risked cannibalization,” Kay Segler, head of the Mini brand, said while introducing the car at the Geneva Motor Show on March 5. “You don’t perceive the two cars as one from the back view. That costs a lot of money and takes a lot of brain power.”

The Paceman is the final model of the current Mini lineup, the brand’s second generation since BMW resurrected the quirky British classic in 2001. A revamped version of the basic hatchback, using the same underpinnings as a new BMW small van tentatively called the Active Tourer, will hit showrooms next year. By the end of the decade, Mini says it may offer as many as 10 variants, including a convertible, a wagon and a coupe.

Roman Holiday

“The potential of the brand is theoretically inexhaustible,” said Christoph Stuermer, an analyst with researcher IHS Automotive in Frankfurt.

BMW says it sold about 301,500 Minis last year, a 5.8 percent increase over 2011. IHS predicts growth will slow to 2.2 percent this year as deliveries of the aging base hatchback drop, from a peak of 189,000 in 2010 to 149,000 this year.

The Paceman, IHS predicts, will sell 20,000 -- not huge, but enough to keep the overall brand from shrinking as customers await the new generation. With the new models coming on line, IHS expects Mini sales to top 400,000 in 2017.

The Paceman is arriving as sales of Fiat’s 500 have picked up. The squat compact, based on the 1960s classic featured in movies such as La Dolce Vita and Roman Holiday, sold 237,000 last year as U.S. deliveries more than doubled.

Compact Cachet

IHS expects Fiat to boost sales of the 500 by 9.2 percent, to almost 260,000, in 2013 as the company follows Mini’s lead and builds the model into a sub-brand. Next year, the 500 will have three body styles -- the standard hatchback, a four-door wagon, and an SUV -- and other variants such as a convertible and an electric.

The strong sales of the 500 have helped Fiat shares rise 18 percent this year, while BMW has slipped 4 percent on concerns the German carmaker’s profit growth is slowing. Still, BMW’s position as the luxury car leader has given it a market value of 45 billion euros, versus Fiat’s 5.6 billion euros.

Mini also faces increased competition both from luxury rivals and mass-market automakers as more buyers trade down into smaller vehicles but still want to feel cool. By 2015, IHS expects this stylish compact segment to reach 1.6 million vehicles globally, more than doubling in five years.

Volkswagen AG (VOW3)’s Audi, the No. 2 luxury carmaker and threatening to overtake the BMW brand in sales this year, in 2010 introduced the A1 subcompact, which challenges Mini with a combination of performance and luxury in an urban package. IHS expects Audi to sell 97,000 A1s this year.

Zippier Mini

In January, General Motor Co.’s Opel pushed into the segment with the Adam, a city car offering colorful design options. IHS expects GM to sell 44,000 Adams this year. And next year Daimler AG (DAI)’s Smart brand plans to add a new four-seater developed in cooperation with Renault SA (RNO) (RNO).

The base Paceman comes with a 122 horsepower engine and can accelerate to 100 kilometers (62 miles) per hour in 10.4 seconds, with a top speed of 192 kilometers per hour (119 mph). That makes it zippier than the 500, which starts at $16,000. The base model has a 69 hp engine that can power the car to 100 kph in 12.9 seconds, with a top speed of 160 kph.

The John Cooper Works high-performance version, named after an engineer who developed a rally version of the Mini in the 1960s, features lowered sports suspension and 18-inch alloy wheels. A turbocharger boosts the engine to 218 horsepower and ensures a top speed of 224 kph. The John Cooper will start at 35,950 euros.

Austrian Factory

The Abarth 500, Fiat’s $22,000 performance variant, has a 160-horsepower turbocharged engine, five-speed manual transmission and 16-inch aluminum wheels, with a top speed of 205 kph.

With the century-old Mini factory in Oxford, England, running flat out, BMW is outsourcing production of the Paceman and Countryman. The cars are being made by Magna International at its factory in Graz, Austria, which has also built BMW’s X3 SUV, the Mercedes G-Class, and the Peugeot RCZ sportster. In 2014, BMW will also start producing Minis at a former Mitsubishi Motors Corp. (7211) facility in the Netherlands.

“We’re running at full capacity in Oxford and use the weekends to retool for the next generation,” said Mini brand chief Segler. “That’s sensational for a car that is at the end of its lifecycle.”

To contact the reporter on this story: Dorothee Tschampa in Frankfurt at dtschampa@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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