BMW has announced that it will be launching new vehicles with four-cylinder engines in the United States. The decision represents a sharp reversal from past policy. Twelve years ago, BMW stopped selling four-cylinder vehicles in the United States due to a lack of sufficient consumer demand. Why are they reversing their strategy now? CAFE: Corporate Average Fuel Economy standards. The United States has implemented a sharp increase in those standards, and to avoid large fines, automakers will need to sell many more fuel efficient vehicles.
What's the implication for BMW? Regardless of whether you endorse the new government regulations or not, the business question is whether an effort to comply with the standards will lead to poor investments. Will consumers buy four-cylinder BMWs? Beyond that, though, one has to wonder about the potential damage to the brand if they offer four-cylinder vehicles which lack the power and performance that customers are accustomed to experiencing with BMW cars. After all, this is the "ultimate driving machine" company. They have done a terrific job of articulating that brand positioning over the years and remaining completely consistent with it. BMW insists that the engine technology has advanced sufficiently over the past twelve years so that consumers will not be dissatisfied with power and performance for the new four cylinder engines. It will be interesting to watch consumer reaction.