BMW AG’s battle with Mercedes-Benz heated up in the first quarter of 2016, as BMW’s profit slipped 2.5 percent. The average price of BMW’s vehicles declined 5.9 percent to about $39,100 in the quarter as demand for cheaper cars like the X1 hatchback outpaced growth for the revamped 7-Series sedan.
BMW is struggling with mounting competition from established rivals such as Mercedes and newcomers like Tesla Motors Inc. as growth slows because of an aging lineup. Amid plans for a self-driving, electric car to eventually supplant the 7-Series sedan as its flagship model, the company is increasing spending on new technology to regain an edge as Mercedes increased deliveries twice as fast as BMW in the first quarter.
Prices are under pressure particularly for sedans in the U.S., Chief Financial Officer Friedrich Eichiner said recently. BMW is boosting production of sport utility vehicles, including the X5 at its plant in Spartanburg, South Carolina, to match shifts in customer demand.