Norbert Reithofer, chief executive, said BMW was developing a modular platform
for small cars. The front-drive architecture, set to be launched in 2014,
would enable the carmaker to expand its Mini range and bring small BMW
models to the market.

Mr Reithofer said: “The smaller segments of the premium market are set to grow
by 4-6 per cent each year until 2020. But there are only a few models on the
market, so we want to further push into that segment”.

The move underscores how premium carmakers are forced to catch up with rapidly
changing demand patterns in their industry.

Mini plant
BMW’s for a new small car plans are set to trigger a further expansion of
capacity of its Mini plant near Oxford and are likely to mark the first time
that the premium compact car would be built at a BMW plant outside the UK,
writes Daniel Schäfer in Munich.

Frank-Peter Arndt, BMW’s head of production, said Mini could expand capacity
at Cowley from 240,000 to 260,000 for the next generation of models from
2014 onwards

He said: “In theory, we could go up to 300,000 cars in Oxford. But this alone
would not be enough and so we are also thinking about producing the Mini at
a BMW plant”.

The Mini plant in Cowley employs about 3,500 people and is one of Britain’s
largest car factories. A further capacity increase would be good news for
UK’s hard-pressed car industry.

But the limited space in Cowley means that BMW would have to look to its
Leipzig plant in east Germany for production beyond 300,000 cars a year.

216,000 Minis
The carmaker sold about 216,000 Minis in the past year. It is about to launch
an array of different Mini models, such as a sports utility vehicle, a
roadster and a coupé in 2010 and 2011.

The small sports utility vehicle will be built from this year in Austria at
Magna Steyr, a contract carmaker.

Klaus Draeger, BMW’s head of development, said the planned small car platform
would give Mini the chance to grow and to develop new models more quickly
and cost-efficiently.

He said: “There is only very little overlap between BMW and Mini so both
brands could expand in the small car segment without cannibalising each
other”.

Customers in the developed countries have started to turn their back on large
gas-guzzling sedans.

Audi, on a quest to overtake BMW as the world’s largest premium carmaker by
sales, is expanding into the small car segment with its A1 model launched in
March.

Mr Reithofer said BMW would think about sports cars and a model below its
currently smallest 1 series compact car.

Such BMW front-drive cars would come close to a revolution for the German
carmaker, which had always been a fervent defender of rear-drive cars.

The premium carmaker’s foray into the small car segment has spurred fears that
its medium-term profitability could suffer. Small cars usually have lower
margins.

Analysts have also warned that premium carmakers such as BMW and Daimler lack
the scale to make profitable small cars.

But Mr Reithofer countered that the new platform would enable BMW to achieve
its profitability aims in the small car segment, and that it could increase
the scale further by sharing the platform with other carmakers.

He said: “We will have to ask the question: What can we do on our own to
create economies of scale?

“Once we have built our own modular platforms, we can approach others and ask
them to participate”.

Daimler
Rival Daimler is in talks with French carmaker Renault about shared small car
platforms, other joint projects and even a possible cross-shareholding.

BMW, which aims for a 8-10 per cent operating profit margin by 2012, recently
extended its co-operation with French volume carmaker PSA Peugeot Citroën on
1.6 litre engines.

Talks over a platform partnership were abandoned at an early stage in 2009,
but could be revived once the front-drive platform exists.

Klaus Draeger, head of development, said: “We will surely talk first to those
we already have a partnership with”.

Mr Draeger said the front-drive platform could reach a scale of 600,000 to
800,000 cars in the future, even without sharing it with another carmaker.

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