Speech of Hendrik von Kuenheim General Director BMW Motorrad BMW Motorrad Media Talk 2008 Munich, 16 April 2008 The Future of BMW Motorrad Ladies and Gentlemen, Dear Motorcycle Friends, I also bid you a very warm welcome here today. This is indeed the first time I am addressing you in my new function as the President of BMW Motorrad. Some of you already know me however from my former activities – my last position was the President of BMW Spain. I joined BMW about 20 years ago and over the years I have gained a great deal of experience in international car and motorcycle sales. Now I am happy to invest this experience in BMW Motorrad, helping to shape the future of BMW’s motorcycle business. At BMW as well as at Husqvarna Motorcycles, we are working all-out on a whole series of fascinating projects. We are in the middle of a broad-based model initiative. It is essential that this model initiative is turned into a success story over the next few years. It is our objective to expand the motorcycle business significantly and to achieve profitable growth. Ladies and Gentlemen, In my presentation today I will be focusing on two highlights in particular: First, I would like to give you some background information on our ambitious growth targets. Second, I will offer you the first status report on our Supersport project. Allow me to start with some essential aspects of our growth strategy. This year we again plan to deliver more motorcycles to our customers than in the previous year, continuing the many years of success BMW Motorrad is now able to report. Considering that motorcycle markets show a rather irregular and inconsistent development, this is and remains a very demanding target. We are of course focusing in particular on our core models in the Tourer, Sports Tourer, and Enduro markets. Indeed, these models remain indispensable within BMW’s future range of motorcycles. This applies particularly to our Boxers: The Boxer engine is just as much part of BMW as the white-and-blue logo. For this reason alone, this unique engine concept has a long and great future with BMW Motorrad. A future which, just like the past, will again offer numerous innovations. Ladies and Gentlemen, We are continuing our powerful initiative not only with our core models. BMW Motorrad has ambitious growth targets: As part of the strategic reorientation of the BMW Group, we have announced that customer deliveries by BMW Motorrad are to increase by approximately 50 per cent by the year 2012 to 150,000 units. To meet this objective, we are making BMW Motorrad even more sporting and dynamic. This means that we are specifically entering market segments where BMW Motorrad was not represented so far. We have already taken the initiative in this respect with the HP2 models and the F Series. Now we are taking on the competition to an increasing extent with brand-new, innovative and sporting products, moving ahead strongly also in international motorcycle racing. But why are we doing all this? Because we see a great potential in the Enduro segment, for example, for further growth. In the Tourer and Sports Tourer segments, on the other hand, we are reaching the limits to growth, since in this case we have largely exhausted our market potentials in the meantime. Precisely this is why we plan to address additional new customers we have not been able to win over so far. So this is why we are expanding our product portfolio to other market segments BMW Motorrad has not served in the past. Two examples are our entry into the Sports Enduro segment and our entry into the Supersport segment. Ladies and Gentlemen, To make our approach in this area even clearer and more specific, we are pursuing a two-brand strategy, which is precisely why we purchased Husqvarna Motorcycles last year. Together with Husqvarna Motorcycles, we are confident that we will reach our sales target of 150,000 machines a year. Husqvarna Motorcycles is the second-oldest motorcycle manufacturer still building motorcycles today and is one of the most famous names worldwide in the motorcycle business. Over the years, Husqvarna have won more than 70 World Championships in offroad and Supermoto racing. With Husqvarna’s very sporting machines, we are able to expand our product range even faster to new groups of purchasers throughout the entire offroad and Supermoto segments than we could with BMW alone. The highly competitive offroad segment is particularly large in the USA, Southern Europe and Australia. And holding a very good position in all of these markets, Husqvarna is already very strong, offering BMW Motorrad a perfect partner. We are very happy indeed with our new brand in the motorcycle segment, which is giving the entire Company extra momentum. So we have given ourselves ambitious growth targets right from the start, as of 2008: This year we plan to boost sales by approximately 30 per cent over the previous year, and we are already proceeding all-out to this objective. To reach this target we initiated and implemented a number of activities right from the start when taking over Husqvarna. Production output is developing according to plan. And after re-organising our parts business, we have solved our former problems in the supply of spares. At the same time we have launched special programmes and activities for the further improvement of product quality. We are also very happy with Husqvarna in motorsport, with the season so far developing very positively. We are active in both Enduro and Motocross events and in Supermoto racing. Indeed, the first results of the season in these various disciplines already exceed our expectations. And we are particularly happy that customer interest in Husqvarna has increased very significantly following the takeover by BMW, particularly in the amateur motorsport segment. Ladies and Gentlemen, We are moving ahead quickly and strongly not only with Husqvarna. Rather, our own model initiative at BMW Motorrad is also continuing at a fast pace and on a high level. In 2008, we offer our customers the substantially upgraded R 1200 GS and GS Adventure. On 8 March we started sales of the exclusive BMW HP2 Sport, and in the second half of the year the BMW G 450 X Sports Enduro will round off BMW’s model range in a brand-new segment. On 8 March the new BMW F 800 GS and BMW F 650 GS two-cylinders celebrated the start of sales. Initial response from the markets makes us very optimistic. In fact, global demand even exceeds our production capacities, with demand particularly from the Southern European markets in Spain, Italy and Greece exceeding our greatest hopes. Particularly the F 800 GS is the choice of many customers who have so far ridden another make. So much on the new models in 2008 you already know. But let me add that we will be presenting further surprises at the major motorcycle shows in Cologne and Milan, the Intermot and EICMA, which we cannot talk about yet today. So you see that we are well-prepared for the future. Despite all this good news, the fact remains that BMW Motorrad – like all European motorcycle manufacturers – currently faces special challenges. We see almost daily how conditions are becoming tougher, with the prices of raw materials and energy going up all the time and currency risks becoming greater. Let me explain briefly just how much the currency issue affects our competitive situation: In the last seven years alone, the dollar and the Japanese yen have lost about 80 per cent of their value versus the euro. That means that our main competitors are benefiting from even the slightest weakness of the dollar and the yen, from every drop in value even behind the decimal point. They are able to offer their products at lower prices in the world market and make significant profits all the same. Obviously, we must find answers to these challenges, since we cannot pass on these cost disadvantages directly to our customers in a one-to-one process. To remain competitive we are therefore continuing to enhance our efficiency in Development, Production and Sales, we are intensifying our international Purchasing activities, and we are creating a very attractive, innovative product portfolio. This, Ladies and Gentlemen, takes me on to the highlight I am sure you are all looking forward to. I stated before that we are actively looking for new options, for profitable growth and for the planned increase in volume. Precisely that is why we have decided, among other things, to take on the competition in the Supersports segment on both the road and the race track. We naturally realise that we are taking on a great challenge. Particularly the Japanese are some 20 years ahead of us in this class and have lots of experience. But even so, the spirit of this competition alone encourages us in our efforts. From the start we wish to be on par with our well-established competitors also in the Supersports segment. Our development team is highly motivated to achieve our goals. And I can tell you today that the status we have achieved so far is very promising. We are confident that we will be able to start the Superbike World Championship next year with a convincing all-round package, and that our series motorcycle will be just as convincing. In both terms of both its technology and price, our Supersports will be absolutely competitive. Dear Motorcycle friends, what motivates us to move into this segment in particular? First: The very fascination of this motorcycle with its racing DNA expands and upgrades the brand image of BMW Motorrad by offering an additional, sporting and emotional element winning over new customers for the brand. The Superbike World Championship is becoming increasingly popular among motorcycle riders, since here, unlike the MotoGP, they are able to watch and admire their motorcycles in a direct comparison with competitors. And they can enjoy this thrill all around the world! This year the Superbike World Championship is being held on four continents and in 13 countries. Second: For the first time we are demonstrating the innovative power of BMW Motorrad also in the segment of the most dynamic, top-performance onroad motorcycles, since our Supersports motorcycle is an all-BMW development from the ground up and will be built at our plant in Berlin. Third: We are expanding our product portfolio also with a view to worldwide growth. Today sales in the 1,000-cc class amount to some 100,000 units worldwide. The vast majority of these motorcycles goes to the USA and Europe. And the four large Japanese manufacturers account for about 85 per cent of the market. BMW Motorrad is looking at a long-term involvement in this segment. Clearly, that means we must speak the language of the segment and follow the usual market standards. And indeed – we are confident that we will set new benchmarks in this scene, winning over an appropriate market share. This, Ladies and Gentlemen, takes me on to the motorcycle as such. It is our objective to offer the customer a high-performance motorcycle with absolutely outstanding qualities and features on both the road and race track in terms of rideability, performance, and ergonomics. Since we are still in the middle of the development process, it would be too soon to mention any specific technical data. But you naturally know the usual level of performance our competitors have to offer. So with this in mind, I leave it to you today to speculate on what the specifications might be. Our Supersports is based on a highly proven fundamental concept. Before choosing this concept, we naturally analysed the market and the appropriate technologies with utmost care and precision. And we will use the technical parameters required to develop our own solutions. In the early project phase we checked out various engine concepts. And as you know, we then decided in favour of a four-cylinder, with the straight-four offering the best qualities to meet the power, performance, weight, and package requirements to be fulfilled. In typical BMW style, the engine will of course offer a number of special features, especially on the cylinder head. For package reasons we have decided against the BMW Duo-Lever on the suspension. Taking up more space, this kind of front-wheel geometry would have presented disadvantages with the very compact structure of BMW’s new Superbike. But you can be sure that the innovations we are introducing are absolutely convincing. One example is the special traction control you will find on the new machine. Again, however, we cannot give you any further information today. As you may expect of BMW Motorrad, the design of our BMW Supersports will be absolutely unique and very different. While it will of course reflect the usual design language in the segment, it will at the same time offer a strong and powerful message from the BMW brand. Now let me briefly give you the status of our entry into the Superbike World Championship: Today I can confirm that our preparations are proceeding according to plan in every respect: In compliance with the rules of the Series, the new motorcycle will be available to customers in 2009 and we will build 1,000 production models by the end of next year. We are implementing our racing activities in close cooperation with our partner Alpha-Racing, a specialist very experienced in motorsport. Located near Munich, Alpha-Racing have already started work in a special production hall specifically for this purpose. The process of building up the team is proceeding at full swing and we have already filled the key positions. The team is a combination of specialists from BMW and members of the Alpha-Technik racing crew, as well as further specialists from professional Superbike racing. Choosing the development and test riders for our racing machine, we are currently operating in a revolving system to gain as much experience as possible. The selection of test riders ranges from experienced riders still active today all the way to young “top guns”. In the upcoming weeks and months we will systematically start production of the racing machine in its individual power and performance stages, testing the new model as we go along. Ladies and Gentlemen, We naturally realise that the established teams have many years of experience. But we wish to take up this challenge in particular and have put together a highly motivated team precisely for this purpose, a team which will prove the performance of our new motorcycle in professional racing. Naturally, we will have to go through a certain process of learning – which is precisely why we have set ourselves realistic targets for the time being: In our first year in the Superbike World Championship we seek to bring home several places in the Top 10 and to consistently close the gap to the top teams. In year 2 we plan to catch up with the top teams and to win our first places on the podium. And our medium-term objective, obviously, is to win the World Championship! Ladies and Gentlemen, So much on this project, the current status of the project and our preparations for entering the World Superbike Championship next year. You have been speculating a lot on the designation of our new model. So let us put an end to this speculation today. BMW Motorrad’s first Supersports will be the “S 1000 RR”. In choosing the name and designation of BMW’s new Supersports, we are consistently following our nomenclature at BMW Motorrad. In this name, the “S” stands for Supersports, marking a new class of motorcycles from BMW. The “1000” designates the size of the engine, and the “RR” naturally stands for the model itself.