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By David McHugh, Associated Press, 06/24/2004

FRANKFURT, Germany — Germany’s BMW has raked in profits selling high-priced larger cars. Now it’s getting ready to venture into less familiar turf — the highly competitive compact segment — with its new 1 Series, which will sell for not much more than a similar-sized Volkswagen Golf.

The new BMW 1 Series is seen in an undated picture released June 2004 by the German carmaker BMW. (AP Photo/BMW)

The all-new BMW goes on sale in September 2004. Powered by a choice of four engines from launch, the car will be available as three different models - Base, SE and Sport. (AP Photo/BMW)

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The company, which was showing the car to journalists on Wednesday, says the new vehicle combines the functionality of the popular hatchback category with what it says will be the higher performance associated with the Bavarian automaker’s products.

“We see an increasing demand for a premium vehicle in this compact segment,” said company spokesman Eckhard Wannieck.

The car won’t go on sale in Europe until Sept. 18, but BMW is already marketing it heavily in Germany with television ads.

The pricing, while higher than competitors in the segment, dips fairly close to the Golf and the Audi A3. The entry-level 1 Series will sell for about $23,000, the company says.

The Golf with an equivalent engine runs around $22,600, and an A3 can cost around $22,800.

The car fulfills long-delayed BMW ambitions to make smaller cars, said auto analyst Christoph Stuermer at research firm Global Insight in Frankfurt. Those plans went awry when its acquisition of Britain’s Rover in 1994 turned out to be a flop and it disposed of its would-be mass-market arm.

“BMW is enlarging the product portfolio in the direction of greater affordability, which they had originally intended to do with the acquisition of the Rover group,” said Stuermer.

The company has a chance to spread its development costs by sharing much of the design and engineering with the next version of its mainstay 3 Series. Similar parts will allow the two vehicles to be built on the same production lines, Stuermer said.

BMW is counting on the brand’s “aspirational” or premium image and sportier performance to carve out a slice of the segment, which was pioneered by VW, but is now crowded with imitators that include the Opel Astra, Ford Focus and Alfa Romeo 147.

The car is coming to the United States, but no date has been set, the company said.

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