BMW Korea will raise prices starting as early as June, beginning with sedans, due to a heavier exchange-rate burden from the won's depreciation. The industry is discussing a roughly 1% hike, which would mean an extra cost of at least 600,000 won to more than 2 million won per model. Attention is on whether this will trigger a domino of hikes across the imported car market, starting with BMW Korea.
According to the imported car industry on the 7th, BMW Korea plans to raise the sales prices of vehicles contracted as early as June. The change will start with sedans, and a 1% increase is being discussed. BMW Korea said, "Sedan prices will go up first, but we are reviewing all models," adding, "Depending on inventory and other factors, the models to which it applies, the timing, and the increase rate will be finalized later."
If prices rise 1%, consumers would face an additional burden of around 1 million won. The 520, currently BMW Korea's best-selling car, starts at 74.3 million won, implying at least a 740,000 won increase. The most expensive model in the 5 Series is the i5 M60 xDrive at 138.1 million won, which would also climb by nearly 1.4 million won. The 3 Series would go up 600,000–850,000 won, and the 7 Series would rise 1.5–2.3 million won.
The price hike stems from a decision by BMW Group headquarters, with the strong dollar as a key factor. After BMW Group sets domestic vehicle prices, headquarters absorbs exchange-rate gains and losses until official prices are adjusted. BMW Korea imports sedans from Europe and sport utility vehicles (SUVs) from Europe and the United States, and all vehicle payments are settled in won.
In other words, when the won keeps weakening as it is now, headquarters' revenue inevitably falls. BMW Group's capacity to absorb exchange-rate pressure is steadily shrinking. On the 6th (local time), BMW Group said its first-quarter profit before tax fell 25% from a year earlier. As a result, price increases could take place not only in Korea but across global markets. In fact, due to exchange-rate pressure, BMW Group raised prices in India this year by up to 6% across all models.
Higher prices will inevitably dent sales. BMW Korea had initially mapped out an aggressive sales strategy to coincide with Mercedes-Benz's shift to direct sales this year and sharply increased vehicle inventories late last year. An imported car industry official said, "With Tesla's runaway lead this year, it is difficult for German premium brands like BMW to gain share," adding, "They have shifted to a strategy of maintaining stability." According to the Korea Automobile Importers & Distributors Association (KAIDA), Tesla's market share through April was 29.4%, sharply up from 7.6% a year earlier. BMW (22.4%) and Mercedes (17.8%) trailed.
Attention is on whether BMW's price hikes will prompt changes in pricing policies at other imported brands such as Mercedes and Audi. An imported car industry official said, "The recent exchange-rate burden has become so heavy that people are saying, 'the more we sell, the more we lose,'" adding, "Everyone has held out so far, but the time has come when price increases are unavoidable, and if the strong dollar persists, they will actively consider raising prices."