Luxury titans: A case of too much variety?
German brands add vehicles to pad profits
In their quest to boost sales and achieve double-digit profit margins, Germany's premium carmakers are divvying segments into ever- thinner slices. In the process, they are stretching their brands figuratively -- and their cars literally -- in ways previously unimaginable.
"We take into consideration what the investment is that we have to make, what's our gross sales potential, what's the net sales potential after cannibalization effects and what's the margin we make on the car," explained Ola Kaellenius, Mercedes board member for sales and marketing. "Then we run that through the machine, and if we get a net present value that meets our targets, we go for it."
In the coming five years, Audi says it will add seven new vehicles, including at least two SUVs, increasing its range to 60 models. Mercedes plans to add 10 models in new segments by 2020.
Carmakers often recombine the DNA of other vehicles as they try to create the next breakthrough concept that drivers didn't know they wanted. "Coupe-ifying" sedans and SUVs is the latest trend, including the new Mercedes GLE Coupe that costs nearly $17,000 more than its M-class sibling.
"In an increasingly crowded marketplace it's important to give their customers a sense of differentiation, so you are not driving the same BMW as your neighbor," said Anil Valsan, global lead analyst for EY's automotive team. Valsan adds that popular niche cars are typically packed with sought-after features, enabling automakers to charge higher prices and offer lower incentives.
(AutoNews.com)
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