Category Archives: Cars

Recovery gets real at the Geneva motor show

genevaWith the glitter of last week’s Geneva show’s press day reveals having been swept away and the dry ice cleared, now’s a good time to reflect on the what it meant for the business.

The Geneva show always provides an annual shot in the arm for the motor industry. It’s at the start of spring, in a bubble of snow-capped mountains and clean air, with the God Particle leaving nearby. Switzerland has no OEMs so it’s neutral – no Frankfurt or Paris-style shows of national strength. And it allows the niche producers to sit among the big players in the main halls, so exotica and design are as prominent as commoditised volume cars. It’s a good place to be, even in a post-recession landscape.

But, ironically in a market showing the first signs of sustainable recovery, this year the event came with an unusually large dose of reality. It’s as though the industry doesn’t want to push its luck, to be distracted from a hard focus on that recovery. Which is hardly surprising: in spite of five consecutive months of growth in Europe, sales are still a very long way off pre-recession levels – three million units in fact. Almost all of the OEMs are losing money in Europe, and incoming PSA CEO Carlos Tavares was quoted in Geneva saying that making money hasn’t been part of its culture, and neither was it at his previous employer, Renault.

So it was appropriate that many of the key press day launches were focused on the more fertile market opportunities. But that paradoxically comes with some challenges – for both bottom lines and brands.

Renault_TwingoThe rash of new city cars from Toyota, Peugeot, Citroen and Renault will deliver volumes. They’re cars for our time – cheap, urban cars with an injection of fashion, fun and flair. But small cars and small price tags also offer small margins, especially when they have the quality demanded by downsizers and the Apple generation. The development cost-sharing for the Toyota Aygo, Peugeot 108 and Citroen C1 will have helped, as will the Renault’s Twingo’s joint development with Daimler’s next-generation Smart. But these are not the cars those companies really want to be shifting. They’re cars for the marketers, not the FDs, better for long-term customer acquisition and upselling than short-term profits.

BMW_2_Series_Active_Tourer_at_the_2014_Geneva_Motor_Show_BMW_52185BMW’s 2-Series Active Tourer has properly given its brand and marketing people something to think about. It’s two things a BMW has never been before: front-wheel drive and a family MPV – in effect, an aspirational Kia Carens. Mercedes-Benz has trodden the MPV path already with the A-Class, and has reverted from a clever, one-box design to a conventional hatchback. The B-Class has retained the one-box shape, but Mercedes makes vans; BMW makes the Ultimate Driving Machine.

However, BMW’s strategy is conservative compared with what led to the Geneva debut of the Porsche Macan compact SUV. Barely a decade ago, ‘Porsche’ and an ‘SUV’ didn’t belong in the same garage, let alone the same sentence. Now, thanks to the Cayenne, they’re synonymous, and over half of Porches are front-engined and four-wheel drive. The SUV may have saved Porsche but the company made the SUV a global phenomenon.

I’m not sure BMW will be hoping that it does the same for the front-wheel drive people carrier. It’s brand people may have to be as clever as its engineers over the coming years.

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Jaguar – the power to change the world?

jaguar-teaser-hed-2014_0Jaguar is going for it. And, you have to say, doing great things with how it’s communicating the brand. British, edgy, daring, contemporary, it’s making the most of the freedom it has compared with the premium-brand grandees Audi, BMW and Mercedes. It’s Paul Smith to Hugo Boss, Arts and Crafts to Bauhaus, Virgin to Lufthansa, The Who to the Scorpions. It’s punk premium.

The German carmakers can’t reinvent themselves like Jaguar’s doing. They’ve got solid-core brands and big market shares to protect, and are now mainstream players. They sell in every segment of the market, including to fleet managers and folk who would have been driving Fords and Peugeots until a few years ago, whereas no matter how successful Jaguar becomes it’s going to remain a relatively small-volume player. But unlike the other small premium brands, Lexus and Infiniti, it has heritage, so it can communicate like a niche brand, in a confident and exclusive way. It simply doesn’t need to appeal to everyone.

So it’s pushing the boundaries, and the high-profile Good to be Bad campaign works well, at least for the USA. The ad has been well cast with alternatives to the mainstream: Tom Hiddleston isn’t yet stereotyped, and Mark Strong, essentially a supporting actor, makes for a believable villain. Yes, since playing the terrifying Don Logan, in Sexy Beast, Ben Kingsley exudes barely contained psychosis – someone Ray Winstone wouldn’t want to meet in a dark alley. And yet he’s suitably ambiguous, a richly spiced mix of Gandhi, RSC and Iron Man. This is a sharp selection of bad boys for the new brand.

But the use of actors and celebrities, no matter how carefully chosen, is a well-worn route and a rather prescriptive brand tool. We don’t really think that the good-to-be-baddies drive Jaguars.

Jaguar is cooler than this. Earlier this month, somewhat more quietly, it launched the ‘100 Most Connected’ list with GQ, first F-Type customer Jose Mourinho and the very now Editorial Intelligence organisation, which connects the UK’s most influential people and curates relaxed meeting-of-minds get-togethers. The next one is at Aldeburgh, the Victorian Suffolk coastal town. True, it now serves as a seaside London suburb, but it’s very deliberately not Davos.

In engaging with this community Jaguar is aligning itself with state-of-the-art thinking: we’re now in a networked world, where who you know means what you know. Where top-down power is beginning to be unseated by a free flow of information. Where companies are beginning to value knowledge and thinking as much as revenues and profit. Where CSR is beginning to be questioned by a genuine desire to improve the quality of people’s lives. Where we need companies, brands and politicians to believe in what they’re doing.

So here we have Alain de Botton and David Beckham, Peter Fincham and Lionel Barber, Idris Elba and Andrew Neil holding hands in the Most Connected list, gazing out at the sea and feeling the sand between their toes. With Jaguar in amongst it. The message is that the company is progressive enough to embrace the new, post-recession world – one in which failure of the financial system, the need for sustainability and the growth of digital interaction have created a real shift in the way people think and communicate. Jaguar is absorbing influences from the varied spheres which a company providing something as vital as mobility should do.

In an essentially conservative, old-fashioned motor industry driven by the imperative to sell and month-end figures, Jaguar is probably the only brand which can do this. It has an extraordinary opportunity – to demonstrate an understanding that, in future, brands will be shaped not so much by traditional marketing messages as by changes in corporate thinking and behaviour. By actions rather than words. By engaging with people. By doing good.

Utopian vision? It’s happened before. As Henry Ford, the man who mass-mobilised the world, said: “To do more for the world than the world does for you – that is success.”

Note: Go to http://www.citizenrenaissance.com for more about progressive communications from the UK’s leading exponent Robert Philips, ex-Edelman EMEA President & CEO and founder of http://www.jerichochambers.com

Ford drives a future with fewer cars

Shanghai overpassAlmost hidden behind the parade of new cars signalling a rejuvenated motor industry at the Detroit motor show, Ford has made some interesting minor headlines with CEO Alan Mulally talking about the bigger issue of future personal mobility. The remarkable fact here is that other carmakers aren’t also speaking out on the subject.

The motor industry is changing faster than ever before. But it’s a bigger picture than that. Cars are just one form of personal mobility. Private and public transport are merging. The whole transport landscape is becoming integrated, inseparable from energy considerations and the environment. Major cities are already at car capacity and struggling to develop mobility solutions which will work. Which are sustainable.

Part of this involves excluding cars from city centres, yet that is precisely why the car companies should be leading discussion and planning for future urban mobility. They need to not only offer temporary or complementary solutions but to be at the core of the new transport model, whether in providing micro-footprint mobility devices, public transport vehicles, components or infrastructure.

Easier for a Tesla than a Toyota for sure. But before long, car companies will not be able to exist in their current form. Mulally cut to the point, saying that simply building more and more cars is “not going to work”. The industry is currently focused almost solely on the existing model: customer buys car, uses it in all situations, swaps it for another. It gives the customer huge choice – of different brands and variants which don’t fit the world we’re about to be living in. It doesn’t reflect the culture now required.

Already, buying habits are changing. Consumers are eschewing larger cars. Younger people are putting off buying vehicles. Existing cities are adding pedestrian areas, bike lanes and trees. Megacities are evolving to a new, connected blueprint. Quality of life is as much a driver as consumerism.

Car companies traditionally don’t lead. They follow legislative requirement and market imperative. But when they do so they excel – look at the extraordinary reduction in CO2 emissions and increases in engine efficiency and performance over the past few years. They could do so in the wider, emerging mobility landscape too.

Credit to Mulally for being so direct. And why shouldn’t Ford be the car company to lead opinion? More than any other it has the mobility credentials. It’s an everyman brand, started by a man who gave motoring to the masses with the Model T, and in recent years it’s invested huge amounts in to environmental R&D.

Credit to Mulally also for admitting to not yet knowing precisely what role Ford will play in future mobility. But he’s giving it the thought it needs. And with that approach Ford could be a vital part of the big mobility plan. A mobility brand.

 

Ford says upper-medium segment still important – it is if you’re German

ford-vignale-concept-new-photos-released-photo-gallery-medium_13Ford was quoted a few days ago saying that the upper-medium market segment, in which its Mondeo competes, is alive and quite well. Yes, it still accounts for a significant number of vehicles. But

The shift away from traditional large-ish cars took a permanent and dramatic turn in 2008. Two things happened. The sight of ashen-faced bankers carrying cardboard boxes out of the Lehman Brothers building made people realise that the world was indeed in economic meltdown. Things would change, including our buying habits. At the same time, Nissan had replaced its medium-sized Almera and upper-medium Primera with a single car and consumers were beginning to notice it. The Qashqai had the footprint of the Almera but the interior space of the Primera. It offered the appeal of an urban crossover without the pretenand its owners were buying into a new trend, not an image of company car drudgery.

From a financial point of view people questioned whether they needed a large car. From a lifestyle point of view they questioned what they wanted a car to do. Nissan had invented the popular crossover.

Since 2008 the UK has seen a major shift away from the upper-medium segment to smaller, more efficient and more versatile cars – minis and superminis as well as crossovers, SUVs and MPVs. So, despite that fact that the company car sector – the biggest taker for upper-medium cars – still accounts for over 50% of the market, the segment has dropped by over 45% and is barely a third the size of the lower-medium segment. At the same time minis and superminis, multi-purpose and dual-purpose vehicles have grown, the latter overtaking upper-medium volumes. The only upper-medium car to make it into 2013’s top ten sellers was the BMW 3 Series (at no 7, one place behind the Qashqai).

Which raises the really important issue for Ford. The company was also quoted saying that customers use a manufacturer’s ability to produce an upper-medium model as a measure of brand quality. I don’t think so.

Ford is stuck with the Mondeo. Unlike Nissan with the Primera it has a valuable share of the fleet market. Ford also has a loyal private customer base for whom ‘Ford’ is British. Dagenham. Honest. And of course the company shed its premium brands, Jaguar, Land Rover and Volvo for a One Ford strategy a few years ago. And now, with the relentless invasion of the mainstream segments by the German premium brands, coupled with the new popularity of the value brands, Ford and the the others in the middle ground are being squeezed. Hard. They have to fight back.

So Ford has announced the Vignale sub-brand to be introduced on high-spec versions of the smart next-generation Mondeo, offering dedicated, premium service. Renault is doing something similar under the Initiale banner. GM has dropped Chevrolet to concentrate on targeting Opel/Vauxhall at the German premium makes. The problem is that it’s easy for Audi, BMW and Mercedes to grow their customer base by extending their range to include smaller, cheaper, more family-friendly models. It’s a different thing altogether for a solidly mainstream brand to try to develop an upscale customer base.

The idea that medium-to-large everyday cars offer a quality marker for a brand is only right if you’re talking about Audi, BMW and Mercedes. They can even sell old-school three-box saloons by the bucketload in the form of the A4 and A6, 3 and 5 Series, and C and E Class. And if consumers want to go off-piste they’ve got Volvo for safety and Scandi design, Lexus for hybrid technology and build quality, VW for those who prefer What Car? to Superbrands. No matter how good a Mondeo is objectively – and it is good – the blue oval is a glass ceiling.

For Ford, providing a better experience and better product will almost certainly serve primarily as a differentiator from other mainstream brands rather than enabling them to compete with premium brands. Especially in the upper-medium segment which is largely responsible for way we aspire to the German badges.

 

Chevrolet – that’ll be the Daewoo…that I die

chevrolet-logo-grillThis week’s resignation of Chevrolet’s global marketing boss, following the resignation of the brand’s European head, is an interesting step. As one of the team who launched Daewoo in the UK, I was sad to see Chevrolet pulled from the region recently by its parent General Motors, which incorporated Daewoo into the Chevrolet brand after acquiring the Korean company in 2001.

After all, Daewoo had had a great start in the UK, Europe’s second most important market. The product was several model cycles past its use-by date but a no-dealer, customer-first strategy provided real brand values and record market share for a new entrant – immediately placing it ahead of Hyundai, Mazda and Volvo – and inspired success in Europe.

The rationale for dropping Chevrolet in Europe? It was losing too much money. It was seen as having too much overlap with the Opel and Vauxhall sister brands. Volumes were too low. True, but these were largely the results; the cause was a failure to develop the right product and build a brand for Europe.

While Daewoo had become synonymous with quality customer service, Chevrolet was known more for being American. The big, brash, chrome-lined Americana image didn’t fit with compact, Korean-made value products, and the fact that these sat in the same line-up as Corvettes and Camaros with old-world V8s presented a chasm for consumers to cross.

Some have suggested that a value brand simply wasn’t right for the company, which has wanted to take the the Opel and Vauxhall products upmarket to fight the tidal wave of new models from the German premium brands. But VW Group has done just fine with Skoda book-ending a brand portfolio with Bugatti, Bentley and Lamborghini. The truth is that GM didn’t develop distinctive product and failed to present a coherent brand.

It’s ironic that Daewoo, which had come to Europe as an independent in the mid-1990s, taken on the establishment and leap-frogged its Asian value counterparts has – under the ownership of an automotive giant with three-quarters of a century’s experience of operating in Europe and with an established brand name – sold just one vehicle for every five clocked up by Hyundai and Kia.

But the ultimate irony is that, having developed a modern, lean and fit-for-purpose approach as Daewoo, Chevrolet has been driven to virtual extinction in Europe while a bankrupt GM Europe has emerged from global recession and Eurozone collapse with great-looking product.

Dropping Chevrolet in Europe may be the best decision for GM financially, and perhaps inevitable in a European market which has shrunk so alarmingly. But with all the places at the premium table taken and no value offering, the lack of strategic investment in the Chevrolet brand will surely prove to be a cause of regret.

Things are different today from when GM acquired Daewoo – excellent product is now a given. But that simply means that the brand is even more important, because it’s the differentiator, the I-want-one factor – something GM will be up against when it aims Opel and Vauxhall at those beautifully honed brands at BMW, Audi and Mercedes.

Is Audi sacrificing brand equity for volumes?

audi-nanuk3_1024-940x628The shape of the car market has changed completely in the last decade. It used to have a bulging middle, stuffed with the mainstream makes, and with premium and value brands occupying the poles.

Now it resembles an egg timer. The middle has been squeezed to within an inch of its life, by aspirational value brands from one direction and acquisitive premium brands from the other. Ford, Vauxhall/Opel, Peugeot, Renault, Honda and Toyota have had their market share ripped apart by Skoda, Kia and Hyundai, and BMW, Mercedes and Audi.

No brand comes close to Audi in shaping this new landscape. The company has embarked on an explosive product diversification programme, offering everything from a supermini to a supercar, with around 50 key model variants including crossover versions of all its volume products. It plans to increase to 60 variants by 2015, partly by entering some of the few segments it’s not already in, with Q6 and Q8 crossovers, a version of VW’s Up! mini and even a people-carrier. Audi’s value to VW was evident at the recent Frankfurt motor show, where it was given its own hall, separate from the one accommodating the group’s seven other brands, where its segment-busting mentality and naked ambition were shown by an off-road supercar concept.

It’s not only the largest of the premium makes by volumes; it outsells Fiat and Citroen, and is within 0.5% of Peugeot and Renault. And now it’s become the UK’s fourth-largest seller, behind just Ford, Vauxhall and VW. The fact that it’s achieved this without a single model in the top 10 emphasises its incredible spread. CEO Rupert Stadler’s recent comment that Western Europe’s market won’t recover before the end of the decade must have felt like a stab in the eye to the beleaguered mainstream brands.

An extraordinary success then. But the future may not be quite as simple: it will be a challenge to maintain brand equity as a result of shifting into so new market segments and growing so fast. Yes, Audi benefits from the scale of VW Group, meaning that it can develop high-quality products economically and price them competitively, so it will continue to churn out very good cars at affordable prices.

But the company has built its business on being premium and aspirational. Its ubiquity means it’s no longer truly aspirational and, by definition, it’s not exclusive: while the exceptionally low interest rates of the last few years have helped grow sales they’ve also helped commoditise the the productsA few years ago owning an Audi meant independent thinking and cool Bauhaus understatement; now it means nothing in particular.  If a brand is present in every part of the market including all the mainstream segments, conquesting business from the mainstream brands, can it continue to perceived as premium?

It will be interesting to find out, and only the customer will decide.

Hyundai needs to avoid joining the mainstream

2015-hyundai-genesis-rendering-1-1While the rise of the premium brands seems to have defined the changing dynamics of the car industry in the last decade, the growth in stature of the value brands is a more remarkable story. Hyundai and Kia in particular.

It’s much harder to grow a brand upwards from a budget baseline than it is for a brand to apply premium qualities to more functional vehicles as BMW, Mercedes and Audi have done. And Hyundai and Kia have done it without the resources of an existing group.

The Korean group has experienced phenomenal growth, with a doubling of European sales since 2008. Both brands have reeled customers in with competitive pricing and long warranties, and it’s easy to understand why the value brands have prospered in the years since economic meltdown.

But it’s not all about value. In a visionary move, in 2006 Kia recruited the European designer of the iconic Audi TT to head its styling. He’s since become the boss of all Hyundai-Kia design and the most senior non-Korean in its business globally. In so doing the management has elevated the brands and created a compelling combination of the rational and emotional. They now effectively offer what Toyota did a decade ago – reliable, hassle-free motoring for ordinary consumers – but with added style. And remarkably they’ve now comfortably overtaken the Japanese giant in Europe: Hyundai’s market share this year is 3.5% and steady, Toyota’s 4.0% and falling. Kia’s is 2.8% and climbing, giving the pair a combined 6.3% of the market, 50% more than Toyota.

And now Hyundai has become one of the world’s 50 most valuable brands according to the Interbrand Best 100 Global Brands index. To put that in perspective, we’re talking companies in all sectors. Companies like Coca-Cola, Google and Apple. Hyundai’s rank is 43, putting it ahead of Sony, Facebook and Heinz.

In automotive terms it’s just one place behind Ford at 42. It’s seventh out of all automotive manufacturers, with Toyota, Mercedes, BMW, Honda and VW the only other brands to beat it. Over the last five years Hyundai’s brand value has grown 96%, mirroring sales.

Like sister brand Kia and Skoda, Hyundai now wants to sell its cars more on quality and less on value. It wants to raise perception and prices, to create more profit. But like the premium brands moving into mainstream territory it faces the possibility of losing some its brand relevance. Unlike the premium brands however, when the value brands move towards the mainstream they risk becoming merely part of the squeezed middle to which they currently offer such an appealing alternative.

Hyundai’s challenge now is to grow sustainably: to retain brand differentiation and to nurture a strong enough brand personality to avoid joining the mainstream.

Frankfurt reflection #4: transformational Tesla needs transforming

The most important new car at the Frankfurt show. BMW i3? No. Jaguar X-C17? No. Porsche 918 Spyder? No.

The most important car was the Tesla Model S. This is a car from a company most people have never heard of, which has done what none of the major carmakers has managed. It is an all-electric vehicle without serious range issues, which competes on performance and price with hybrid offerings from Porsche, BMW, Audi and Mercedes.

However, pleasing though it looks, its styling is more stretched Mazda than premium, differentiated, cutting-edge, game-changing automotive landmark. It’s not just too conventional. The grille has a large, shiny-black-plastic element which looks cheap. And the interior materials are not good enough. One look at the BMW i3, costing close to a third of the price, tells you how a car like this should be executed.

Frankfurt - TeslaThese things can be forgiven and overcome. But the way the car was presented at Frankfurt was a brand crime. The stand was a bare, sorry affair surrounded by hall clutter and no attempt to communicate the significance of the car or the Tesla experience. The display was as underwhelming as the car’s technical prowess is astonishing. This from a company run by Elon Musk, PayPal billionaire and space pioneer as well as automotive trailblazer.

As battery technology improves, Tesla will be able to develop smaller, cheaper, battery-only electric vehicles which could take on the big players in the segments of the market which matter for volumes. But only if it realises it has a brand engineering job to do too.

Frankfurt reflection #3: Toyota – market leaders playing catch-up

The Frankfurt show was the moment when electric vehicles not only moved into the mainstream of the displays, but when they became the stars. Everyone had some kind of EV to show, and it was clear that the technology can be used equally well for economy and performance. BMW covered both angles by using the i3 as shuttles displaying and its production i8 big brother, which has been conceived around the performance and handling advantages of electric motors. A big slam dunk for the Germans.

Frankfurt - YarisAll of which was bad news for Toyota. Its Prius pioneered hybrids, which most people agree present the immediate way forward for EV technology, but it does not enjoy the recognition it deserves. The stats are remarkable: 5.5m Toyota and Lexus hybrids sold to date, resulting in savings of 37m tonnes of CO2 and 13bn litres of fuel. It’s now selling 1m hybrids a year and will launch 15 new hybrid models by 2015, so the stats will accelerate.

So Toyota owns this territory, yet it’s playing PR catch-up with companies whose EVs have only recently begun to surface – not just BMW but VW, Mercedes, Renault and others. I was in PR at Toyota in the 1990s and was constantly frustrated at the lack of recognition in Japan of valuable brand messages, how easy it was to uncover PR nuggets yet how difficult it was to use them.

In Frankfurt Toyota showed a high-performance hybrid concept of its Yaris supermini and gave its entire stand over to hybrids. The next few years belong to Toyota, but it will need to give its PR and marketing people as much credibility as its engineers if it is to take the high ground it’s already scaled in technical terms.

Frankfurt reflection #2: no escaping Mercedes

Frankfurt - MB confFrankfurt is a show of strength for the German motor industry: the local car companies have their own halls, each of which would accommodate an entire regional motor show.

For the last couple of events BMW has had a driving circuit in its hall, snaking around above the floor displays. Audi had one at the last Frankfurt event too, so this time it went for an upside-down night-time metropolis hanging from the ceiling. Why? No idea. But as VW Group’s premium volume brand, which has overtaken both BMW and Mercedes, it gets its own hall, separate from VW’s other seven car brands, and has to do something different.

But it’s still Mercedes which dominates. In the domed Festhalle building, opened by Kaiser Wilhelm II in 1909, it creates an extravagant world over three floors which is impossible to ignore and equally difficult to escape. Its press conference, allocated 45 minutes – longer than any other – attracts most of the 10,000 attending media. Almost no-one can see anything but, more important, once in you can’t leave.

Take the escalators and you’re on the top level and can descend only floor-by-floor, looping past endless displays like a nightmare vision of an automotive supermarket. But when there are 10,000-plus people standing, waiting for a press conference, unwilling to move an inch, you’re stuck. No chance of going down the stairs, and one lift for staff only.

I’m not sure what German Health and Safety’s like, but if there had been a fire or a security alert you may as well have reclined a seat in one of the new S-Classes, turned on the back massager and hoped for the best.