BMW Group Pricing Policy

There are few factors that have more influence in the success of a business than the pricing strategy. Due to the increasing global competition and information flow it is of growing importance to keep control of the different factors that affect the pricing policy. The Pricing Manager must consider Costs, Customer and Competition. A worldwide price harmonization is necessary to prevent the loss of sales to alternative distribution Channels. VT (sales parts and accessories) is responsible for the global pricing for parts and accessories. The basis for the suggested retail price is the pricing relation in the German market. The subsidiaries should adapt these prices to the local market situation.

BMW Group Recommended Retail Price* (RRP) Influencing Factors on BMW Group Retail-Pricing Example: Part No. 1214 1 703 276 Sensor RRP: EUR 38,60 Price Positioning Primary Product Profitability of BMW Group and Importers Depreciation of older Vehicles BMW Group Recommended Retail Price* (RRP) Cost-of- Ownership Pricing SA (Accessories) Price Positioning of car manufacturing Competitors Insurance Rating Competitor’s Pricing of Parts and Accessories * All BMW Group Recommended Retail Prices are manually calculated

Discount Code Assignment Example: Part No. 1214 1703276 Sensor RRP: EUR 38,60 Discount Code: D = 25% Ex Factory = RRP – 25% = EUR 28,95 Captive Parts Slow Moving Items High Priced Items Cost of Ownership Low Discount Competitive Parts Fast Moving Items High Discount Criteria: Retail Price BMW Group Retail - Discount code (%) = Ex-Factory Ex Factory Discount Code

Examples for Discount Code Assignment 41 00 8 224 674 Body Skeleton Discount code A 11 42 1 727 300 Oil Filter Insert Discount code I 12 14 1 744 805 Rmd. Control Unit Discount code A 11 12 1 432 885 Rocker Cover Gasket Discount code K

Discount Code Structure Target: All parts assigned to one family code to have the same discount code! Example: Part No. 1214 1703276 Sensor RRP: EUR 38,60 Discount Code: D = 25% Ex Factory: EUR 28,95

Family Codes BMW Group classifies the total parts range of more than 100.000 items into approx. 1000 „family codes" to simplify the pricing for comparable parts in one family. A family code can have up to 10 digits. Example: 12 Engine Electrical Systems 1210 Ignition 121010 Distributor 121011 Distributor Cap 121012 Rotor Arm 121013 Pulse Generator 121020 Ignition Coil 121031 Spark Plugs Single 121032 Spark Plugs Set (4 pieces) 121033 Spark Plugs Set (6 pieces) 121040 DME Control Unit (Exchange) 121049 DME Control Unit 121051 Ignition Cable Sets/Wires 121052 Spark Plug Socket 121060 Transmitters 121099 Miscellaneous Items Example: Part No. 1214 1703276 Sensor RRP: EUR 38,60 Discount Code: D = 25% Ex Factory: EUR 28,95 Family Code: 121060

Data Transmission parts price information BMW Group transmits the parts coding file on a monthly basis Example: Part No. 1214 1703276 Sensor RRP: EUR 38,60 Discount Code: D = 25% Ex Factory: EUR 28,95 Family Code: 121060 This information must be stored by part number and updated monthly in the master file ! The essential data fields published for automatic pricing are: Part Number Description BMW Group Retail BMW Group Discount Family Code ... 12 13 1 404 309 12 13 1 703 825 12 13 1 730 766 12 13 1 734 468 12 13 1 402 440 12 14 1 703 276 ... Ignition coil Sensor ... 95,00 38,60 ... E D ... 121020 121060

Shadow File complete SA40 Master File active parts SA40 monthly UPDATE The master file must have the actual data per part number, not old and therefore no longer reliable data. 1 Shadow File complete SA40 (Teklam for IMPHL) 1 Master File active parts (Testam for IMPHDL) UPDATE Activate PN 30 000 130 000

Market Retail Price Calculation 1 Common Way of Retail Price Calculation in the Importer Markets 2 Calculation using Retail-Factors based on coding groups

Historical cost-based Retail Price Calculation Mark-Up-Factor covers Landed-Cost, Exchange Rate, Importers Gross Profit and Dealer Discount. Market - Retail Example: 20% Dealer Discount Dealer- Net BMW Group Retail Ex Factory Discount Code

Drawbacks of common Method in the Importer Markets This method presents in some cases higher prices than what the customer is willing to pay. In other cases the price is to low. It does not allow simple adaptation to market situation and therefore blocks competitiveness.

Recommendation Calculation using Retail-Factors based on coding groups

Calculation using Retail-Factors based on coding groups Prices are no longer calculated based on the Ex Factory but based on the VT-Retail. For each coding group a so called "Retail-Factor" will be applied. VT-Retail Retail Factor (RF) Factory Discount A B C D E F G H I K Market Retail = VT-Retail x RF Ex-factory = VT-Retail - Discount Market Discount LCF A B C D E F G H I K Landed Cost Price = Ex-factory x LCF Wholesale = Market Retail- Discount Gross Profit Calculation using Retail-Factors based on coding groups

Retail Factor Table For each family code a "Retail-Factor" needs to be set in the local systems. Using the table with all „Retail-Factors“ the individual market retail prices are calculated on a part number level. Example: Part No. 1214 1703276 Sensor RRP: EUR 38,60 Discount Code: D = 25% Ex Factory: EUR 28,95 Family Code: 121060 Retail Factor: 1.30 Market Retail Price = 38,60 x 1,30 = EUR 50,18 Example: Family Code Description Retail-Factor ... 121011 121012 121020 121060 .. Distributor Cap Rotor Arm ... Sparkplug Transmitters ... 1,25 1,35 1,10 1,30

Possible Dealer Discount Table The relation between Market Retail and Dealer Net Prices is defined by the market discount. Example: Part No. 1214 1703276 Sensor RRP: EUR 38,60 Discount Code: D = 25% Ex Factory: EUR 28,95 Family Code: 121060 Retail Factor: 1.30 Market Retail Price: EUR 50,18 Dealer Net = Market Retail Price – 26% = EUR 37,15 To classify each item to the market discount codes the BMW Group discount assignment should be adopted. The BMW Group discount structure will consist of 10 levels Possible Dealer Discount Table A B C D E F G H I K 14 18 22 26 30 34 38 42 46 50

Recommended Market Retail Price Calculation - Retail EUR 50,18 Retail factor EUR 13,05 = 26% Dealer discount RRP EUR 38,60 EUR 37,15 Dealer Net Partner EUR 9,65 = 25% d iscount Ex - Factory EUR 28,95 Example: Part No. 1214 1703276 Sensor RRP: EUR 38,60 Discount Code: D = 25% Ex Factory: EUR 28,95 Family Code: 121060 Retail Factor: 1.30 Market Retail Price: EUR 50,18 Dealer Net: EUR 37,15

Automatically calculated => The concept allows up to 95% automatic price calculation. Manual prices originate from individual situations. max. 5% => offers an overall view, a better control and flexibility to adapt to local and global conditions Manually priced min. 95% => contributes to the global price harmonization Automatically calculated => Higher customer satisfaction => Customer recovery Number of line items

Additional use of coding groups 1.- Simple pricing in a more sophisticated and detailed manner. 2.- Sales control and analysis per coding group 3.- Increased competitive ability due to a simpler adaptation to constant market changes 4.- Create management reports to support decision-making