The Rover Takeover: Mercedes Benz loses ground on its arch-rival: The Market: Bavarian company steals a march on Mercedes

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The Independent Online
FLASHING an pounds 800m cheque, BMW yesterday stole a march on its German arch rival, Mercedes Benz.

Not only has BMW effectively doubled its European market share, but it has acquired overnight through Rover, a presence in two areas which it judged are strategically vital for its development - small cars and off-road, utility vehicles.

'We had the choice of trying to grow step-by-step, expanding into these areas, or taking the fast track. Rover has brought us exactly what we knew we had to do,' Volker Doppelfeld, BMW's chief financial officer, said in Munich yesterday.

The harshness of the recession and increasingly tough competition, notably from Japanese producers, shocked BMW and Mercedes into a fundamental rethink of how they could strengthen their positions by broadening appeal. Both decided they needed to also concentrate on building smaller cars, below their respective up-market ranges, and on the rapidly growing four-wheel drive market.

But while Mercedes has opted to do this under its own steam, planning a new factory in the United States for off-road vehicles and opting to build a new city car in Germany, BMW has taken over the only international car producer that offered these models off-the-shelf.

'Just to develop and build a new model in BMW's existing range would have cost more than pounds 800m paid for taking over Rover,' Mr Doppelfeld said. In BMW's view there are far more synergies than potential conflicts, particularly at both ends of the Rover market that it is really interested in. Land-Rover and Range Rover offer it well established off-road vehicles with an excellent reputation that fit easily alongside BMW's image. At the lower end, it sees the chance to develop Rover's small cars notably the 100 and 200 series as the best way of tackling head-on the mass market, and the likes of Volkswagen, Fiat and General Motors. BMW has developed its own city car concept, the E1, but this is only seen as a potential niche product. It sees its greatest asset as its strong international distribution network.

In saying it has no intention of extending its current model range BMW has indicated that its marketing expansion will be through developing those Rover cars that complement its interests. Rover's Honda link-up is something BMW has judged it can live with, particularly as the Japanese co-operation is not in those car segments it is most interested in, small cars and off-road.

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