What you need to know:

• BMW Australia marketing boss Alex McLean accepts Tesla has totally disrupted the car market. But thinks a new challenge for its brand differentiation is looming when electric vehicles are ubiquitous.
• That tipping point is fast approaching – and other carmakers are already lifting bits of Tesla’s playbook.
• Tesla has four models globally, two in Australia. BMW has 30-plus. “Do we need to be that complex?” questioned McLean.
• Plus, it’s pushing harder into direct sales and an ecom mindset.
• Media-wise BMW is now allocating much more budget to performance media as buyers on average take just 1.1 visits to a dealer before they buy, versus seven a decade ago.
• Meanwhile, he says Australia’s tax incentives make electric vehicles far more attractive as company cars.
• Which means automotive players must now learn how to become B2B marketing machines.

Tesla has totally disrupted the car market without ever advertising once. But its number one brand attribute is electric vehicles – and every auto brand is powering in that direction. In a few years time, that may leave the “ultimate disruptor” disrupted, reckons BMW Australia marketing boss Alex McLean.

Meanwhile, he says Australia’s fringe benefits tax rules – with sweet incentives for leased cars – mean automotive marketers are increasingly becoming B2B operations.

Elon effect

Two forces have arguably shaped the automotive industry more than any other in recent years: Covid and Tesla. The pandemic shuttered showrooms and forced carmakers to get online, fast. Tesla showed the rest of the pack how a singular focus, stripped down product portfolio and DTC model could change the game.

McLean is nothing but admiration. Tesla is “the perfect example of a disruptor” to the automotive industry, he told Adweek, and BMW is not afraid to lift a page or two of its playbook.

“They came in with an incredibly simple product portfolio. They have four cars, globally, two in Australia, and they are easily the market leader in electric vehicles,” said McLean. “They've also reduced their price points four times in the last six months, so while they are a competitor, they are [selling at a] much more affordable price point, so we can learn a lot from them.”

That may manifest itself in a smaller, tighter product portfolio. Perhaps not as few models as Tesla, but McLean suggests the days of trying to be all things to all buyers may be numbered.

“When it comes to simplification of the product portfolio, BMW 25 years ago had five products and now has 30-odd products. Do we need to be that complex?”

Plus, BMW like all carmakers post-Tesla and post-pandemic is pushing harder towards ecom and online sales – though will take sales however people want to buy. “We will be in both camps,” per McLean.

Running out of road?

But McLean is backing decades worth of investment in brand positioning to close the gap on Tesla, and ultimately overtake it.

“There are 60-odd car brands in Australia which means you have to focus on brand attributes. Ours is performance, we are known as the driver’s car. Mercedes' attribute is luxury. But if you look at Tesla … their number one attribute is electric cars. As the category matures and becomes ubiquitous, they will need to differentiate themselves further. They have an element of innovation and they are definitely focusing on the performance of some of their products, but this will be an interesting phase that we move into,” said McLean. “It’s going to come back to those attributes at the heart of the brand. So the next five years will be fascinating … What can those new entrants add … in terms of their brand offering?”

But for now, he acknowledged, Tesla is bossing it: The Tesla Model Y SUV is Australia’s third top selling car year-to-date, the Model S sedan the fourth. The firm sold more than 25,000 cars in the first half of 2023, putting it on track to easily enter Australia's top ten auto brands, and not far off the top five.

BMW’s own data suggests circa half (47 per cent) of its prospects and customers are considering an EV for their next car – with rising petrol prices fuelling demand. The problem is, Tesla’s lead means it is automatically in consideration when people think about buying a new car.

McLean said that narrowing of focus doesn’t change the customer journey but means other brands must ensure they don’t give people any reason to “fall out” of a sale and shop elsewhere.

Given industry-wide data shows car buyers are now on average visiting dealerships 1.1 times before buying a car versus seven times ten years ago, any digital gaps are increasingly costly.

“Tesla is category leader and we are all playing catch-up,” per McLean. “But the buying behaviour [for EVs] is not dramatically different. The journey is still short – about 4-5 weeks from the moment of ‘I need a new car’ to signing the contract. So you have two or three brands on the list at that moment … For us, there has been quite a change in the last few months, from [focusing efforts on] giving people a reason to purchase [to] don’t give them a reason to fall out of a purchase,” he said. “And that’s the same whether EVs, combustion engine vehicles or hybrids.”

CX the next sales frontier

When EVs do become ubiquitous – BMW Group is targeting half of all its sales to be fully electric within seven years – it could be that the computers on wheels make customer experience the key sales driver. At least that’s the view of BMW’s top brass.

“We had our global head of customer support – previously known as after sales – here in Australia recently. His big focus was that customer experience will sell the next car,” said McLean. BMW calls it “proactive customer care”, whereby the car’s onboard computers tell dealers of any issues and the dealers contact the car owner with a diagnoses and a list of slots to bring the car in for a fix. “So how the tech in the car can enable better customer experience is definitely what we are focused on,” said McLean.

Performance push

For the meantime, BMW Australia is pumping a greater share of marketing budget into performance channels.

“We're moving closer to an ecommerce model or strategy as opposed to being purely focused on brand,” McLean told Mi3. “It’s not that we want to down-weight brand, it’s more that 20 years ago automotive marketers were very much focused purely on the brand piece, because they didn't have any visualisation on anything after that. So as much as we need to focus there, we need to make sure the wheels are spinning day-to-day in our performance marketing.”

As such, he said performance marketing “now takes almost 50 per cent” of its media budget as it focuses on short-term retail performance.

A decade ago, brand would have been “80 per cent” of spend, but at that point people were taking seven visits to a dealership per sale versus one, so needed constant brand reminders, and back then BMW was only “dabbling with mobile sites”, per McLean.

“Today, if I am walking into a sales meeting, I’m not talking about big brand metrics, they want to know what is happening [across the funnel]. So that is why we need that [increased performance] spend – to maintain today’s performance while not down-weighting investment in brand.”

On that front, has BMW Group in Australia made any decision on who will be handling its media spend? McLean won’t be drawn on rumours the pitch for the carmaker’s business is all but done.

“It’s close,” is all he would say. “I’m keen to get that finalised.”

B2B flip

Either way, an increasing chunk of BMWs marketing and media performance will likely be more B2B than B2C due to electric vehicle tax breaks favouring company car drivers.

While Australia’s EV incentives and taxes are confused – Victoria applies a per kilometre tax of 2.8c per kilometre, with NSW and WA set to follow, despite currently offering other tax incentives to buy an electric car – there are generous tax breaks for electric company car owners. That is forcing carmakers to rethink their marketing strategies, according to McLean.

“Australia is one of the only – if not the only – market in the world where we have states that tax you for driving an electric vehicle: State governments take funding from [duty on] petrol, they want to make sure there is a revenue source from EVs as well, which is not great,” said McLean.

“But there are incentives as well … and the biggest one over last 12 months would be the Federal Government incentive: If you buy an EV below the luxury car tax threshold, then you would be exempt from fringe benefits tax. It’s quite complex and I’m not a tax adviser, but there are significant incentives at play [there].”

The luxury car tax threshold is currently $89,000. “And in the EV market, 80 per cent of it is below that threshold,” said McLean. “So if your car is on a novated lease [basically, if it’s a leased company car], or you are a small business, you can benefit there. And novated leasing is about 10 per cent of the entire market.”

Hence carmakers increasingly focusing on sales to businesses.

“It’s fascinating,” he told Mi3. “We have to turn into almost a B2B-style marketing department.”

But whether business or consumer markets, the pivot from fossil fuels to electric vehicles is now fully underway.

“There is no more sense of early adopters,” said McLean. “The EV world is very much here.”