Luxury auto brands adopt new strategies as the old run out of gas
LOS ANGELES: Success in the US used to come easily for German automaker BMW AG, whose sporty sedans in three sizes would be snapped up by affluent consumers.
The premium auto business has now become more complicated, as illustrated by the BMW models displayed at this week’s Los Angeles auto show, amid a backdrop of heavy spending by luxury auto brands on new models and technology as they make awkward leaps from a predictable past to an uncertain future.
On one side of BMW’s display stood a prototpye of a large X7 sport utility vehicle, a vehicle that was unthinkable in its lineup a few years ago when the top of the line was still defined as a large sedan.
On the other side, BMW displayed the iVision, a prototype of an electric sedan that will rival Silicon Valley electric luxury car maker Tesla Inc’s Model S when the production version, or nonprototype version, launches in 2021.
“This is the future,” said Bernhard Kuhnt, the new head of BMW’s North American operations, referring to the iVision and electric vehicles in general.
More immediately, Kuhnt said, the X7 represents BMW’s determination to offer more sport utility vehicles, which now account for more than half of luxury vehicle sales in the US, to reverse a four per cent slide in sales this year through October.
“In October, we sold 60 per cent sedans in a market that is 55 per cent SUVs,” he said.
But next year, as BMW’s US dealers get more newly redesigned X3 SUVs, and a new X2 sport utility, the SUVto-sedan ratio will start to flip, and sales should grow, he said.
BMW’s rivals are at different points in their own jumps from the strategies that fueled growth during the past two decades. The type of vehicle that defines the top of the line for German luxury brands shows how the business is changing.
“The classic definition of the standard bearer as a three-box sedan, that is migrating in three directions,” said Scott Keogh, head of US operations for Volkswagen AG’s Audi brand.
One direction, he said, is “electrification as the new prestige,” a trend driven by Tesla.
Rivals at other established luxury brands agreed during interviews at the LA show that some form of electric power – fully electric or plug-in hybrids – is now necessary in order to compete.
“The US is a market where customers are asking for electric” vehicles, Hakan Samuelsson, chief executive of Volvo Cars, said in an interview on the sidelines of the LA auto show Wednesday. “That’s a premium value - to be carbon free.” —