Price Bomb: BMW-Mini Undercuts All-Wheel Drive Plug-In Competition By $26,000

| About: Bayerische Motoren (BMWYY)

Summary

Until now, the least expensive all-wheel drive plug-in SUVs on sale in the U.S. market have been three models from Volvo, BMW and Mercedes.

Those three models carry base prices tightly grouped between $64,195 and $68,795.

Now comes the Mini Countryman plug-in, which is also all-wheel drive and starts at only $37,650. That’s essentially at least $26,000 below the competition.

This all-new generation of Mini Countryman has vastly larger interior space than its predecessor. Its roomy interior will surprise you.

Next up on the AWD plug-in competitive front (Fall 2017) will be the Volvo XC60 T8, which at $53,895 cuts the Mini’s pricing advantage to $16,000.

With a market cap of approximately $53 billion, BMW (OTCPK:BMWYY) has the fourth-highest market cap of any automaker. For FY 2016, BMW posted pretax profits of 10 billion Euros, or 10% of revenue: here. That’s among the very highest rates of profitability in the automotive industry.

You might be surprised how BMW intends to expand its horizons in order to increase sales from this level. BMW Group unit sales grew 5.3% in 2016 to 2.37 million cars, and has continued to grow in 2017, as it’s up 5.7% through May.

This article will show how BMW is now launching the least expensive all-wheel drive plug-in car in the U.S. market via its Mini brand. Is this market positioning a first for BMW?

The BMW Group owns three major automotive brands: BMW, Mini and Rolls Royce. As different as these three brands are, they have one thing in common: They are all premium brands, at or near the top of the pricing curve in their respective segments.

Take Mini for example. Mini offers a set of relatively small cars with three and four cylinder engines. On paper, this looks like a “basic compact car” that would normally sell for well under $20,000 from almost every mass-market brand: Chevrolet (GM), Ford (F), Toyota (TM), Nissan, Honda, Kia, Hyundai or Volkswagen, just to mention the most obvious ones.

Yet, unlike those other compact cars, you can go to the Mini web site and configure options like no other car in this compact segment. Even for the very least expensive Mini Cooper - the smallest one, with the three cylinder engine, which starts at $22,650 - I found it hard to add anything less than $10,000 in most tempting options. And you could go a lot higher from there.

In other words, Mini cars start at $22,650 but you could also go for a larger Mini Countryman and add a few desirable options, which I did and got to $45,900. The point I am making here is that Mini might be a small car, but it’s a premium car. It’s not a coincidence that it’s the Rolls Royce of compact cars. A Rolls Royce isn’t a much larger car than a Lincoln Continental, but the price may be 5x-10x as high depending on the exact model comparison.

This brings us to the area where the BMW Group, through its Mini brand, will now break new ground: All-wheel drive plug-in electric car.

Specifically, before the Mini plug-in hybrid all-wheel drive car went on sale in the U.S. market around the middle of 2017, you had to pay these prices to obtain an all-wheel drive plug-in SUV:

Volvo XC90 T8: $68,795

BMW X5 40e: $64,195

Mercedes GLE 550e: $67,295

Coming as early as this Fall: Volvo XC60 T8: $53,895

Basically, until the Volvo XC60 T8 arrives in U.S. dealerships later this year, the only all-wheel drive plug-in hybrid cars in the U.S. market - and I am not counting relative exotics, selling for base prices above $72,000 - are clustered tightly between approximately $64,000 and $69,000 in terms of their base prices.

Within months from now, the Volvo XC60 T8 will drop this bar down to $53,895. The XC60 is essentially a Volvo XC90 that’s just a little smaller, primarily lacking the third row of seats, so the car fits only five people instead of seven - just like the Mercedes and BMW X5 40e.

With this as a backdrop - competitors selling for $64,000 and up today, and soon $54,000 and up - BMW now starts to offer the Mini Countryman plug-in, which starts at $37,650. That means it’s undercutting the competition by at least $26,000 today and soon “only” $16,000.

That’s a huge price advantage, especially given that the Mini Countryman isn’t so “mini” anymore. You can fit five tall adults in there, and a respectable amount of luggage. This isn’t the Mini - or Countryman - of yore. It’s an all-new and much larger Mini Countryman that in many ways competes in terms of interior space where it would be considered by many to have a level of utility not materially different compared to a Volvo XC60.

For those who say this would be highly surprising, I urge you to check them out side by side. The interior space differences between the Mini Countryman and other crossover-SUVs are not what they used to be even a few months ago.

You can see just how much larger the Mini Countryman has become in this all-new version in this video: here. Especially, the portion of the video starting at the 7 minute mark until 9:40.

Of course, as with all Minis, you can easily add a lot of options to this plug-in version. I had no problem pricing the plug-in one to the $46,000 level (before plug-in battery tax credits and other incentives). Then again, you can do just the same - or more - with competitors from Volvo, Mercedes and the BMW X5. Click a few boxes and you have added easily $8,000 on them too. So that cancels out.

It would seem that BMW has a winner here, with the Mini Countryman plug-in. At $37,650, it undercuts the only all-wheel drive plug-in competition available in the U.S. market today by $26,000.

One would think that this segment would be a sweet spot in the minds of many tech-and-green interested consumers: All-wheel drive crossover-SUV, with plug-in hybrid capabilities. You’ll be able to drive around town in all-electric mode, and then have regular gasoline range for longer trips, including up to the mountains where all-wheel drive comes in handy in the snow.

If you have 12 miles from home to work and charge both at home and at work, you could be driving 100% on electricity. Many people live within 12 miles from their job.

Bottom line: A new market positioning for BMW-Mini.

BMW and its various brands usually find themselves at or near the top of their segment pricing. This is one unique situation where BMW’s Mini brand is now selling a car $26,000 below the nearest competition, and $16,000 below what the competition has coming in a few months from now.

If that’s not an interesting move from BMW and its Mini brand, I don’t know what counts.

Disclosure: I am/we are long GM.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: At the time of submitting this article for publication, the author was long GM, F and GOOGL. However, positions can change at any time. The author regularly attends press conferences, new vehicle launches and equivalent, hosted by most major automakers.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

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