Sunday 3 August 2008

BMW cancels X7 SUV and cuts product availability (U.S)

It was either a make or brake decision for BMW, but the Bavarian car giant has decided to put the X7 project asleep. This was due to a -33% drop in sales in the first quarter of 2008 and high fuel prices.

Alarmingly, the company also said it will divert to more profitable regions as many as 40,000 vehicles that would have been shipped to the U.S. BMW's decision to axe the X7 reflects an overall skepticism that there will be much of a business case in the immediate future for extra-large SUVs and crossovers. Direct rival, Mercedes-Benz recently announced it is cutting back production of the seven-seat GL, ML and R-Class crossovers built in Alabama, and sales for most all premium-brand large SUVs and crossovers are slow. And if you plan to be in the market for an existing BMW or crossover this year, you may find it tougher to find what you want and also tougher to drive a deal. Cutting 40,000 shipments out of the U.S allotment would be more than 10 percent of the total 335,840 vehicles BMW sold in the U.S last year.

But the falling value of the dollar means BMW can shift those 3 Series and 5 Series cars to markets where there's more profit to be made. Overall auto sales in the U.S are expected to take a tumble this year to levels not seen since at least the early '90s, but BMW's call on the X7 most likely reflects the fact its "truck" business is dropping off much like everybody else's. Sales of BMW's "Sports Activity Vehicles" were down almost 15% in June and are down more than 10 percent for the year so far — so adding another, even larger model doesn't look like the smartest strategy.

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