Tag Archives: BMW

Why BMW should look at Volvo to shape its future

Screen Shot 2017-09-23 at 13.20.29The furore over the looks of the BMW X7 concept car revealed at the Frankfurt motor show this month, which triggered criticism of the company’s entire presence at the show, was not, at its heart, about design or product.

The X7 betrays a BMW brand which has gradually been losing its sense of purpose. And now it appears to be forgetting what its values are, just when it needs to evolve them into a relevant proposition for a market undergoing massive change. There’s a cultural confusion infecting how it develops products which need to resonate with a changing marketplace yet still articulate the brand. This, then, is a brand issue.

tvh8tjgkxqplakwxhr28The current trajectory can be traced back to the early 2000s when BMW commoditised itself by selling the 3-Series heavily into the world of discounted business fleets and aggressively targeting the less brand-conscious private customer with cheap leasing deals. The 3-Series became the new Ford Mondeo. Its appeal was a prestigious badge but the trigger was affordability. The badge began to stand for driveway bragging rights, not engineering, and the ubiquity made it, well, common. And meantime BMW was becoming more a bank that sells cars than a car company. This was a big cultural shift.

More recently the company has, like its rivals, thrown itself onto the altar of the SUV. The problem for BMW was that it had no brand heritage in four-wheel drive vehicles. It bought Land Rover, absorbed the technical knowledge and promptly sold it off. But technical know-how is not the same as brand equity or fit; Mercedes-Benz and Audi, on the other hand, had history in proper off-roaders and performance-oriented 4WD systems respectively.

BMW merged its new-found 4WD knowledge with the chassis engineering for which it is rightly renowned to create the X5, the first SUV you could corner like a conventional car. An impressive engineering achievement, but one which summed up the coming confusion: the brand whose strapline was ‘The Ultimate Driving Machine’ was engaging its engineers in trying to make a car with a high ride-height, high centre of gravity and excessive weight from the 4WD system do things which a conventional car would do much more easily. The 4WD would probably never be used off-road and was not there to improve handling dynamics. It was work of inherent engineering compromise. And it compromised the brand.

BMW_X4_xDrive35d_M-Sportpaket_(F26)_–_Frontansicht,_11._April_2015,_DüsseldorfPorsche did the same with the Cayenne of course, but Porsche needed saving; BMW didn’t. Every third car made today by BMW is an SUV, and the production X7 will book-end the line-up with an X2 model to be launched in early 2018, both additions to the range. With the lust for SUV volumes came a dip in quality. And the compulsion to proliferate, to find niches nobody has asked for, led to cars like the dumpy and universally disliked 5-Series GT and, more recently, the X4 – a visibly confused creation which is neither fish nor fowl. Or perhaps it’s both.

BMW then brilliantly took the initiative on the first of the big new challenges facing the car industry – low carbon. It stole the electric vehicle high ground when it launched the i3 and i8, making EVs desirable and cool overnight. Yet one is an urban-centric EV solution, the other a £100k sports car halo product, with nothing in between and no longer-term narrative. And that was four years ago. Only in the past couple of weeks has it indicated its next move, in the form of the iVision concept, expected to go into production as the i5 – but not until 2021. Mercedes, Audi and VW have all articulated more coherent strategies and have already started to occupy the premium EV territory.

And now, of course, the low-carbon imperative has been joined in the list of key challenges by automation and the sharing economy. Automation squarely challenges BMW’s indelible mantra of ‘The Ultimate Driving Machine’ – how is this sustained when cars not only drive us, but when integrated mobility dictates that commoditised pods shuttle us around our cities in bland efficiency. Does BMW become merely the hardware provider? And car sharing is, by definition, a cultural shift where not only ownership but brand allegiance are secondary to the ideology, service and efficiencies on offer.

These challenges are the same for all carmakers of course. But they’re greater when your fundamental brand tenet has been about the pleasure of taking the wheel.

bmw_joyThis is why BMW shifted its emphasis away from ‘The Ultimate Driving Machine’ to ‘Joy’ a few years ago. Joy was still the core theme in a presentation given this summer at the Automotive News Congress in by BMW’s brand boss Hildegaard Wortmann. But it means nothing. It’s feel-good lifestyle marketing-speak which could be applied equally to SEAT. It’s not a principle or a solution.

The vision of the brand she gave was strapline-centric – one where it’s hoped that customers will somehow absorb generic messaging and convert it subliminally into something meaningful, rather than one where the business’s culture, products and services define the brand, and where straplines are a consequence of demonstrable values and real assets.

There was little substance on how BMW would achieve relevance among an audience which does not want to own or lease a single car, and the impression given was that the company feels a need to outsource its brand articulation to Millenial-derived content generated by social media campaigns.

For BMW or any major carmaker to truly flourish in the new automotive market, they need clarity of vision and the courage to use their brand values as the foundations for addressing changing market needs.

volvo-xc40-care-by-volvo-13BMW doesn’t appear to be doing so. To see how to use existing brand values to reinvent a brand for the age of EVs, automation and sharing, it need only look at Volvo. If safety, practicality and family-friendliness can become cool, what can the can The Ultimate Driving Machine become?

There are no easy answers but BMW, surely, can find them. Meantime they can be confident about that Joy isn’t one of them.

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Automotive News Europe Congress – how are the industry’s leaders facing up to unprecedented change?

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Four weeks today I’ll be at the Automotive News Europe Congress in Barcelona. It always attracts senior executives from across an ever-broadening industry, and now is a better time than ever to be part of it – the industry is on the cusp of dramatic structural and cultural upheaval.

POSCO_main_1300x550_170407The excellent speaker line-up reflects those changes. With SEAT, Lamborghini and Italdesign all on the speaker’s podium, VW Group is somewhat over-represented – that’s because SEAT’s the Host Sponsor, but it also means we get to hang out in Barcelona. And the line-up does reflect many of the changes facing the industry.

This is what I want to hear from them.

Luca de Meo – President, SEAT:

How is he intending to give Spain’s national brand sustainable relevance? They tried to become an Alfa-Romeo-esque sport-driven brand, and now they’re committing heavily to SUVs, but so has most of the competition already. Aren’t SEAT’s differentiators of small/compact cars and a weighting towards southern Europe also its weaknesses? How will SEAT integrate the VW brand’s surging EV technology into its own offering? And what’s the dynamic within the bulging VW group brand portfolio, especially the no-longer budget Skoda brand? As keynote speaker, de Meo’s positive claims for SEAT will be under close scrutiny.

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Brigitte Courtehoux – Head of Mobility Services, PSA:

More than one OEM has now publicly stated that they’re transitioning from manufacturer and retailer to mobility provider, but what’s the substance behind this? Nissan and Volvo have extensive ongoing consumer trials of autonomous vehicles; what is PSA doing? How is it approaching the potentially seismic consumer shift from purchase and conventional leasing to flexible and ultra short-term leasing, on-demand usage, and personal mobility platforms encompassing public transport, Uber and growing non-driver urban populations? And where does the Opel brand fit into this scenario?

Jim Farley – Executive Vice President, Global Markets, Ford:

With Mark Fields having vacated the top seat at Ford Motor Co this is interesting timing. Ford has lacked focus globally since Alan Mulally departed in 2014. In Europe the company has made money when others haven’t, and GM Europe has thrown in the towel. But Ford is still part of that squeezed middle – mainstream brands which cannot become premium but are not value brands or challengers. What is the global vision? The company could – should – be leading the world in mobility, just as it did with the Model T a century ago. And what is its future in a fracturing Europe? With profits in the region down could it even follow GM to the exit door? Farley, newly promoted to a global role but with European oversight, is touted as a future global Ford chief so his view will be fascinating.

Didier Leroy – Executive VP, Chief Competitive Officer & President, Business Planning & Operation, Toyota Motor:

Toyota’s first foreign executive VP, Leroy provides a uniquely European focus for the Japanese giant. From a European point of view Toyota is nowhere near its global standing – 10th in volume terms, behind Skoda – and Lexus has simply never taken off. Globally it has never owned the EV and hybrid territory the way it should have done as the pioneer, which has clouded its brand purpose and allowed the likes of Skoda, Hyundai and Kia to steal hard-earned European market share, and the current uncertain next-generation technology strategy isn’t helping. Now there’s a global profits crisis, so how will this affect Europe operations? The man with the longest job title in the industry in uniquely placed to make the company’s case.

Hakan Samuelsson – President & CEO, Volvo Car:

As a challenger brand Volvo has the agility to reinvent itself and shift to meet changing market needs. And, sure enough, it has just announced that it will stop making diesels altogether, admitting that meeting emissions targets is too expensive. Other than VW’s virtue-out-of-necessity move to EVs, the bigger players have too much invested in existing technologies to be as bold, but Volvo’s move to EV and hybrid power brings the tipping point into view. The company is also at the forefront of automation, with its brand imperative of safety meaning that Volvo automation systems will effectively become the industry benchmark. Can this small OEM be the catalyst to both the demise of the internal combustion engine and the mass adoption of automated cars?

Alain Visser – Senior VP, LYNK & CO:

As the face of LYNK & CO, Alain Visser is fronting a company embodying many of the challengers facing existing OEMs. It’s not only offering cars designed for electric powertrains and connectivity, it’s challenging the whole existing business model by designing one around emerging market expectations. Direct, online sales, fixed pricing, home delivery and a subscription model for the app generation. “The word doesn’t need another car brand,”, Visser said. No existing OEM would establish itself now using the archaic distribution models they’re tied to, but LYNK & CO is part of Geely and was dreamed up at Volvo labs, so can the company make it work and head off the Teslas, Ubers and as-yet-unknown disruptors who come in totally fresh, with no automotive background?

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Hildegard Wortmann – Senior VP, Brand, BMW:

For me BMW is in some ways the most interesting OEM represented in the speaker line-up. Recently replaced by a resurgent Mercedes as the number one premium brand globally, it has lost its way a little: a commoditised 3-Series, bland and questionable styling, not enough true SUVs, an i-Series low-emissions sub-brand which has stagnated with just two, polarised products book-ending a product void. And now it faces a fundamental challenge to its very purpose – the Ultimate Driving Machine – in the shape of automated mobility. What will BMW’s place be in the future automotive landscape, and how will it get there? As the brand chief, Wortmann should provide a clear insight.

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I’m a little biased as I worked with ANE for several years in the 2000s, partly on this event, but for me the Congress is the best automotive trade event in Europe. Readers wanting to register can get a €100 discount by visiting the link below and quoting the code LONGSHORE. It can be used for either the Congress/Rising Stars combo or the Congress only.

Hope to see you there.

https://www.regonline.com/registration/Checkin.aspx?EventID=1934274 

Why Audi’s fall to 3rd place premium brand is a good thing – it’s simple

audi-logoAudi, the recent king of volume growth among premium brands, is about to be overtaken by Mercedes and slip to third in global premium-car sales.

It will be a big change from just a few years back. Mercedes was overtaken as number one by BMW in 2005, and was replaced as number two by Audi in 2011.

And last year, in Europe, ended with Audi as Europe’s number one premium brand. But Mercedes, with a dramatic product offensive, industry-leading quality, a turnaround in China, punchy marketing, domination of Formula 1, steadily growing profits and record sales, is on its way back to number one here too, quite possibly by the end of the year.

So this is a significant moment.

Paradoxically, it may be Audi’s very drive for volumes that’s seeing it slip behind Mercedes and BMW. Last year it was the 6th-highest selling brand in Europe overall, and fifth in the UK, where its volumes approach twice that of Toyota. It’s done this by storming into new segments, fuelling new niches, and aggressively invading mainstream territory.

It has trumpeted the number of models and derivatives it offers, talking of an extraordinary 60-plus model lines. So there’ something for absolutely everyone, and ultra-low interest rates have meant that anyone can get into an Audi, including people who may have only ever had cars from mainstream brands. If you can lease one for the same as a Nissan, Toyota, Renault or Ford, why wouldn’t you?

So how can all this lead to a slowing of sales growth? It has unavoidably become commoditised, but more importantly it has become complicated.

With such a vast product range, what’s needed is simplicity. Audi has a wonderfully simple and recognisable graphic identity, and product design which shows a confident simplicity. Design and engineering teams across all car manufacturers are engaged in delivering a sea change in how we interact with our cars, through the integration of connectivity and the emergence of autonomous driving systems. The human-machine interface is having to be transformed in order to deliver such complex technology seamlessly and intuitively.

But the same drive towards a necessary simplification of these for the user has not been applied to distribution and retail operations, and how the car manufacturers present their products.

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SUV? Low-riding SUV? Crossover? Coupe? Sportback?

Is there anything less intuitive than navigating vast product ranges of SUVs, crossovers, off-roaders, soft roaders, sportbacks, liftbacks, hatchbacks, high-riding hatchbacks, low-riding SUVs, SUV coupes, people carriers, sports tourers, sportswagons and estates? This doesn’t help the consumer. And in this respect the premium brands are failing delivering an appropriate brand experience at a critical point in the customer journey.

In brand consultancy Siegel+Gale’s last Global Brand Simplicity Index, Audi, Mercedes and BMW were all categorised as ‘low score/high premium’, meaning that “They need to simplify their brand experiences, and they’ll be able to reap significant rewards if they do”, according to the report. Tellingly, only Ford – a mainstream brand which has simplified its product portfolio – was in the ‘high score/low premium’ category, for brands already seen as simple and needing instead to focus more on showing the value of the simplicity they offer. Ford was also the only car brand to make it into the world’s top 40 brands across all sectors, in an impressive 17th place.

It’s clear: by expanding their product ranges so fast and so far, the German premium brands have made a rod for their own backs. Mercedes, in 44th spot, is doing better than BMW and Audi, in 65th and 66th places. But it’s humble Ford which leads the way, and ironic that Audi’s mainstream VW parent brand beats it in all the key markets.

It’s a picture reflected in how these brands fare in the UK. Ford is streets ahead at number 19 in the list, with Mercedes at 59, BMW at 81 and Audi at 89. And in the USA, not one of the German brands makes it into the listing of 125 brands, while Ford is at 24.

Look more closely and you see that, in the UK, Audi is the only car brand classified as ‘low score/high premium’, emphasising the gap between where it is an where it could be. But you’ll also see that BMW dropped 15 places in the latest GBSI. That followed another nosedive of 23 places the previous year in the global rankings, and a remarkable fall of 35 places in the listings for Germany, where the native car brands normally perform far better than they do elsewhere.

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Two different models from two completely separate model lines – apparently

So BMW, right now still the highest-selling premium car brand around the world, tumbling down the order. An anomaly, surely? I don’t think so. Audi has been the most aggressive of the three German premium car brands, but BMW was first to attack the mainstream when it pushed the 3-Series hard into fleets in the last decade, effectively making it an upmarket Ford Mondeo. Mercedes followed, with extremely aggressive lease pricing, and paid for it; Audi has merely taken it to the next level with its model proliferation, while BMW has tried to do the same, but has introduced a number of unloved, neither-fish-nor-foul models for tenuous niches. It has lost brand focus and the GBSI reflects that.

And this is the real significance of the current shift among the German premium brands: Audi and BMW may come to be glad of their soon-to-be status as numbers two and three in the premium sales charts. They could focus more on other ways of achieving success, like customer retention, car-sharing and on-demand mobility, to better fit consumer needs in a world where Apple, Netflix and Uber have set new paradigms for consumption.

Volume for volume’s sake is the enemy of the premium brand. Simplicity, clarity, vision and a better brand experience are its friend. Achieve that and the volumes will follow.

Cars drive Brand UK around in a vicious circle

Clydebank-Used-Car-Sales-Finance-GlasgowIt’s often said that car sales are a barometer of the economic climate. But, in the UK at least, they’re not – the booming market of the last five years has been way sunnier than our overcast economic conditions.

However, with a turnover of more than £70bn the retail motor industry is unarguably an indicator of national sentiment – even of our character and values. It’s one of the core elements of UK plc. And in a post-referendum landscape where the nation is redefining itself that makes it important.

The car sales figures for the first half of year show the market at an all-time high. Registrations were a record for any six-month period, up 3.2% on the same period last year, the previous best. March was the biggest ever month since the introduction of the bi-annual plate change. Last year was the best ever. And even post-referendum the indications are that 2016 could still beat it.

If we’re doing these numbers we must be in a pretty good place as we prepare to head up the slip road and off the EU highway – right? Well, no.

The extraordinary, counter-economic motor retail success story is really about the way car companies make their money – and in particular the British attitude to credit.

In the first quarter of this year the growth rate of UK consumer credit stood at almost 10%, Borrow-Money-to-Investthe highest since the banking crisis. Car dealer finance is a big part of this, accounting for £28bn in 2015 – twice what it was just four years earlier. Four out of five new cars are bought using borrowing, and today the car companies are effectively banks which sell cars. Finance is a core profit centre, and the PCP loans which the majority of customers take out to gain usership – not ownership – a brilliant retention tool.

The ultra-low interest rates enjoyed by consumers since 2008 also mean that almost anybody has been able get behind the wheel of a nice new car. Forget the £30,000+ sticker price – £195+vat a month for a Mercedes C Class, anyone? How about a Nissan Micra for £85+vat a month? That’s what you’d spend in a five-minute shop at Waitrose on the way home from work.

With PCPs, customers are becoming used to the notion of cars as mobile phones – something you get on a pay-monthly contract and replace every couple of years or so. When you do that, the man in the dealership will strongly resist any efforts on the customer’s part to pay cash. Even if you take out finance for a 48-month term he’ll be on the phone after 24 months offering something better, with no cost of change.

Some analysts are forecasting that sales could fall by over 5% next year as the UK adjusts to its new economic realities. However, with the near-certainty of even lower interest rates in the coming months, the appetite for new cars in the UK is likely grow – probably most among those who can least afford it.

And if the referendum fallout creates a drop in demand in the second half of 2016 then expect incentives to kick in swiftly to clear stock which was ordered for a market in economic status quo, not shock. The car industry will distress-sell. And the vicious circle keeps turning.

So while we like to view the Eurozone as a basket case, it’s the UK which has raced headlong back to the very conditions which characterised the economy at the time of the 2008 crash, and will probably continue to do so.

Let’s compare ourselves with Germany. While UK car sales rose by 37% between 2011 and 2015, the German market grew by just 1%. The German economy is humming along nicely, but when it does, the Germans don’t reach for their credit cards.

companybannerThe difference between the UK and most European countries is that we’re a finance-driven economy and they’re not. What does that say about Brand UK, our character and values? That we’re a nation of borrowers. That we’re no longer creators but consumers (preferably of German cars – VW, Audi, Mercedes and BMW alone account for almost 30% of the market). That we support our financial services industry more than we do our domestic car industry. That we see our cars, like our homes, as a measure of our success, yet we usually own neither. We just own the debt.

If the UK is redefining itself, this should not be part of our DNA. The EU may not have a clearly defined brand, but the UK’s is in danger of being devalued. British business culture should contain an element of daring, even risk. But not a lack of self-awareness or foresight.

 

MINI at Geneva: not there but showing the way

rocketman3The strongest statement by any company at the Geneva motor show has been made by one which isn’t even there.

By skipping Geneva MINI is underlining that it’s the holy grail for car companies – a generic lifestyle brand rather than merely a car brand.

Yes, it will still appear at motor shows, but they will largely be those held in the most cosmopolitan centres, like New York, not the ones in corporate and financial centres like Geneva.

And of course it will increasingly put itself in non-automotive environments, where fashion and technology coalesce, where other lifestyle brands are present, and where people go to consume and experience rather than go from stand to stand in an exhibition hall.

MINI has moved outside the constraining parameters of everyday carmakers, and in that sense it mirrors its fellow BMW group unit, Rolls-Royce. Where that great brand is the pinnacle of luxury personalisation, MINI has become the pinnacle of popular personalisation.

rocketman03It’s something we all engage with on a daily basis without even registering it – every smartphone is highly personalised, not so much by covers and wallpapers as through the apps we choose. MINI knows this: the car of the future will be personalised through use of technology, not just paint and trim.

Other brands, from Volvo to DS, claim lifestyle status, but these are the ones which have been forced to reinvent themselves. The rest pay lip service or remain wedded to the same old formula, MINI’s parent BMW brand included.

In an era when retail is being transformed by digital, and with the consumption of personal mobility by young and urban populations likely to change radically, MINI is showing the mainstream car brands the way to go.

Where is BMW’s Vision at Geneva?

IMG_0025The traditional positioning of Mercedes and BMW next to one another at the Geneva motor show provides a neat and obvious chance for comparing Germany’s two traditional powerhouses. And as a show of brand strength Mercedes squashes BMW this year.

Yes, Mercedes is a little brash these days. Chrome and polished surfaces are so ubiquitous that they’re in danger of undermining the quality of the fit-and-finish and engineering.

But being Geneva show neighbours does BMW no favours. It looks reticent by comparison. Understatement is a good thing – and BMW has traditionally been a master of managing and exceeding expectations – but the Bavarian company’s stand gives the distinct sense of a lack of new product and vision.

When BMW introduces new generations of it core models it starts with the 7-Series, followed by the smaller 5-Series and then the 3-Series. The 7 has just been launched, and we’re currently awaiting the 5. With the 7 being a notoriously slow-seller against the Mercedes S-Class, and the 5 replacement set to be revealed later this year, BMW is in limbo.

It’s a position made more uncomfortable by the fact that, in the real world, a new, larger 5-Series routinely makes the 7-Series seem rather redundant. When the latest 3-Series is launched it has the same effect on the 5.

The most significant car on BMW’s stand this year is the 330e, a plug-in hybrid offering the same performance as a petrol 330 for the same money. But it’s there only as a single four-door variant, untrumpeted and barely noticed alongside the i3 and i8. It’s also very clear that BMW is painfully aware of the car’s biggest limitation – reduced boot space because of the battery pack – as there are no standard four-door 3-Series models to provide an unfavourable boot capacity comparison.

The i3 and i8, beautifully marketed though they are, pose another issue: what are the next i cars? BMW leaped ahead of the market when it launched these, making EVs desirable and cool. But they’re bookends, one a true EV solution, the other a £100k sports car halo product. Where’s the middle ground, and what is the technical solution? For a company so brilliant at brand-building and engineering, the lack of narrative is puzzling.

IMG_0028Butting right up against the BMW stand is Mercedes’ vision of the future, a concept car with an interior rethought around the autonomous driving capability. It’s backed up by a plethora of plug-in hybrids, a new E-Class (5-Series competitor) and new variants of the C-Class (3-Series competitor).

BMW is celebrating its centenary this month but Mercedes has trumped it even there, with the deliciously poisonous public statement, “We warmly congratulate the globally renowned company BMW on its anniversary and invite all employees of BMW AG to discover the complete history of the automobile at the Mercedes-Benz Museum.”

p90212587-highres-1A week after the Geneva show opened, BMW marked its centenary by announcing the Vision Next 100 autonomous-driving concept car – a step on from the autonomous Mercedes at Geneva. How the Geneva stand could have done with that. BMW should hold the high ground in engineering for the future. If the Vision had been at Europe’s most important motor show it could rightly have claimed that territory. Far better that than a longer history.

Geneva 2015: Audi R8 saves the (real) world

maxresdefault-2Most reports of the 2015 Geneva Motor Show, which opened its doors last week, have adopted the view that it’s primarily about the exotic supercars. It’s not.

Yes, there were new supercars from Ferrari, Aston Martin, McLaren, Lamborghini and other exotic brands. Even the mainstream crowd was at it, with the revival of the iconic Ford GT.

But the real trend among exotic performance cars was more subtle. Not only that but it tells us something about the future of EVs (electric vehicles). Honda geneva-2015-94showed its own reborn icon, the NSX, but has reinterpreted it supercar as a three-motor hybrid. It’s a contemporary performance engineering approach far more in line with the hybrid hypercar holy trinity of LaFerrari, McLaren P1 and Porsche 918. But where their price tags are $1m-plus, the NSX will be more like $150,000.

Yes, that’s still a lot of money, but it positions the NSX in a new, real-world exotic sports car environment – a place where price, performance and poor taste are images-24restrained and the cars better for it – alongside BMW’s i8 and the Audi R8 e-tron unveiled at Geneva. Audi has gone a step further than Honda and BMW and given the R8 e-tron a pure electric driveline – producing 456bhp and a range of 280 miles for not much more money than the Honda. And not an engine in sight.

This reflects a rapidly growing trend – EVs are going upmarket. As everyday small-to-medium size cars like the Nissan Leaf and Renault Zoe, EV sales remain minimal. Even BMW’s avant-garde, brilliantly engineered, brilliantly marketed and affordable i3 isn’t shifting. So the carmakers are putting EV tech into high-end models and positioning them as the top variants – as in the new Audi Q7 e-tron SUV shown in Geneva, with a hybrid drivetrain. BMW, Range Rover and Volvo have all chosen this strategy already.

photo_20_0Audi has admitted that the pure electric technology in the R8 e-tron will be introduced in at least one more mainstream model in a couple of years or so – most likely a medium-sized SUV with a target of a 300m-plus range. No coincidence that Tesla, which has shaken the establishment with its battery-only performance and range, will have introduced its first SUV by then. This part of the market will be the epicentre of EV growth.

After publicly doubting battery-only EVs Audi has done a U-turn and is now clearly committed to them. It is effectively leading VW Group’s EV efforts, and may well become the leading EV OEM bar none, because it operates in the premium space where the additional cost of electric technologies can be absorbed, yet has mass-volume appeal. Audi could be a catalyst to widespread EV acceptance and adoption.

In this sense Geneva 2015 is all about the real world. Look past the roped-off stands, fake tans, carbon-fibre and colossal combustion engines and there’s an electric future coming into focus.

Large MPVs – the next big thing?

Renault-Espace-0Large, stylish MPVs could be making a comeback. At the recent Paris motor show Renault relaunched the Espace as a bold, well designed MPV-cum-crossover, and Ford showed the latest S-Max, which will be a recipient of the company’s new Vignale luxury trim and concierge service.

The premium brands are making moves too: Paris saw the launch of the production BMW 2-Series Active Tourer, a compact MPV, while Mercedes – which replace the MPV-style A-Class with a conventional hatchback a couple of years ago – reaffirmed its interest in that segment by revealing a new B-Class.

That the two German premium brands are investing effort into MPVs is significant, but they may be missing an opportunity beyond the compact, higher-volume segments. Large MPVs are a neglected niche: after Toyota introduced the innovative and stylish Previa in the mid-1990s, the territory was commoditised by the mainstream brands, with utilitarian van-based models and products marketed as bland school-run devices offering space but no character and a mediocre driving experience. MPVs had become merely ‘people carriers’.

SUVs then entered the marketed. They were premium. They needed to be, because of the cost of the four-wheel-drive technology and – starting with the first BMW X5 – the additional cost of engineering decent handling into a heavy, high-centre-of-gravity lump. But more importantly the SUV concept was American, so they were marketed as lifestyle vehicles, recreational tools. They enhanced your life rather than announcing to the word your grim acceptance of its responsibilities.

Of the premium brands only Mercedes persevered with the large MPV, but its products have remained van-based. So Renault may have hit on something with the new Espace. Not everyone wants an SUV – Audi Q7s, BMW X5s and Mercedes MLs have begun to symbolise some of the less appealing characteristics of the monied middle-classes. And very few need off-road capability.

2015-volvo-xc90-steering-wheelI was with a Volvo strategy guy at Paris and it got me thinking. I’d probably buy an S-Max if it had a different badge. I’d almost certainly buy the Espace if they produce it in right-hand drive. But I’d far prefer it with a Volvo badge.

Volvo can carry off a contemporary interpretation of a large, MPV. It has the brand-width to do it (unlike Jaguar, another near-premium brand, which can stretching itself to SUVs but no further). An MPV would suit Volvo’s brand values and its design aesthetic. Volvo is about stylish functionality – vehicles with a purpose but also a personality, confident but classless, luxurious but life-2015-Volvo-XC90-interior-controls-press-imageenhancing. And its products are increasingly about cabin design – supremely comfortable but understated, ergonomically intelligent, with natural materials, authenticity and the influence of Scandinavian home interior trends. What better medium to express this than an inherently spacious, light and flexible MPV cabin?

Volvo’s boss recently said that until 2020 it will only replace existing models. That’s a pity, because there’s a gap in the market and a brand fit. And if Volvo were to fill that gap it would challenge the German big three by setting a trend rather than merely offering an alternative to a product type already offered by the competitors. Which would make the brand far stronger.

 

More Discovery, less Land Rover

The replacement for Land Rover’s compact, family-friendly model, the Freelander, was announced this week with a new name – the Discovery Sport.

lr_ds_statics_07Pulling the Freelander into the Discovery range is a sensible move for the Land Rover/Range Rover brands. It rationalises the model ranges, and it co-opts a name which has assumed sub-brand status thanks to the Discovery’s combination of modern but uniquely Land Rover looks and unbeatable functionality. The intention is clear from the oversized ‘Discovery’ bonnet badging where ‘Land Rover’ used to sit.

The new Discovery Sport has been engineered and packaged to provide more space than the outgoing Freelander, including a third row of seats, in a barely-bigger footptint. That’s clever. And it manages it while looking sleeker, more premium and completely contemporary.

But in doing so it leaves behind the Land Rover design language which has helped make the existing Discovery a brand icon and a statement of resolute differentiation from SUVs produced by other brands, which are mass-adopting a lower, less utilitarian look. The exterior styling also has a lot in common with Range Rover’s urban, fashion-oriented Evoque model, and plenty of similarities with the Evoques’ big brother.

It even shares that Range Rover’s Sport tag. This merges and confuses the two brands. But, more importantly, sportiness has little if any relevance to Land Rover. It’s diffuses the brand.

So what makes the Discovery Sport a Land Rover? And what will make the Discovery replacement a Land Rover? It’s no longer the styling – if anything, Range Rovers now have the more utilitarian body shapes. And it’s not the core value of functionality – after all, the Range Rover Sport also offers seven seats.

The increasingly high price point for Land Rovers doesn’t help. At launch – with only one engine, taken from the existing car – the Discovery Sport will cost from £32,000 to £43,000. A few options and the price will creep towards £50,000. That’s well into Porsche Macan territory – an SUV which is sporty because the brand dictates it.

Compare Land Rover’s price positioning with, say Audi’s. Equivalent versions of its Q5 SUV range top out at £37,500. OK, it’s not a Land Rover – but if the unique identity of the Land Rover brand is diluted then so is the emotional appeal of its products. Which is where Audi, BMW and Mercedes come in. They’ve aggressively targeted every market segment, especially SUVs. They’re premium but they’ve opened themselves up to everyone rather than adopt exclusive pricing. They’re a threat, the more so as Land Rover becomes more premium and less obviously functional.

Land Rover makes excellent cars. Sales will continue to grow in the short-to-medium term. But it has serious brand challenges. It should ensure that sales ambitions don’t shape the brand, and that Land Rover’s brand differentiation, achieved over decades of leadership, is both preciously preserved and clearly stated. That starts with the design of the product, but with the Discovery Sport it has become more generic. In the long term that’s going to help Audi, BMW and Mercedes more than Land Rover.

 

 

Volkswagen group not profiting from its brands’ equity

_origin_Fakti-kas-tevi-parsteigs-9Martin Winterkorn, boss of Volkswagen Group, admitted this month that the business “urgently” needs better profits, and today’s half-year results announcement confirmed falls in both profits and sales. This is the company, remember, which has targeted global number one status by 2018, and since Winterkorn became CEO in 2007 CEO has increased production by 4m units and doubled its revenues.

One of the reasons for VW’s poor profitability is that it isn’t global in terms of geographical spread. It’s in the key growth market, China, but is actually over-dependent on it, whereas it has little traction in south and south-east Asia. And market share is relatively low in the USA, with the VW brand on the slide. Another factor is that VW is light on compact SUVs, the biggest growth segment globally. A further reason and perhaps the most significant is its sheer size – a company this big simply can’t avoid inefficiencies.

But here’s the elephant in the boardroom: VW’s problem is also down to brands. VW group isn’t merely huge; it has a huge brand portfolio, with 12 brands in total – stretching to trucks and motorbikes – and over 310 models. Paradoxically, rather than providing economies of scale, in the accumulation of brands the collective mass has outweighed the ability to exploit the efficiencies.

By 2007 it already had the considerable challenge of consolidating and managing a passenger car portfolio of SEAT, Skoda, VW, Audi, Lamborghini, Bentley and Bugatti. Each was struggling for both individual relevance and group synergy. Skoda had already begun to produce cars in the VW brand’s space. VW in turn was encroaching on Audi, which was moving onto mainstream segments previously the preserve of these brands while simultaneously launching de-facto Lamborghinis. Bentley was doing a fine job. Bugatti was, well, Bugatti, and SEAT was struggling not to be a Spain-only brand and was being jumped by Skoda. The group was competing with itself, and the mainstream brands were sharing the same market space but without sharing the economic benefits. And meanwhile the world was plunging into an economic downturn.

So what did VW do? Since Martin Winterkorn’s 2007 accession it’s added four more brands: Porsche, Ducati, MAN and Scania. It has also become the largest stakeholder in Suzuki and even consumed the design house Italdesign Giugiaro. And Skoda has stated that it wants to sell on quality and style, while Lamborghini and Bentley have announced SUVs.

VW’s strategy goes directly against the new automotive industry paradigm. Toyota has continued to excel in financial performance. It has not acquired other makes but concentrated on its core brand, which has maintains clear values, and its own premium-luxury brand, Lexus. Hyundai, which led even Toyota on profitability in 2013, was forced into a merger of unequals with Kia when the South Korean business bubble burst in the late 1990s. They produce cars for the same market segments, yet with only two brands they’ve not only managed the situation by differentiating the brands but have grown stratospherically since 2007. Meanwhile Ford has divested itself of Aston Martin, Volvo, Jaguar and Land Rover, and is emerging strongly under the ‘One Ford’ mantra. GM is now doing the same in Europe, discarding Chevrolet to concentrate on Opel/Vauxhall. And VW’s German rival BMW has limited its acquisition trail to the very distinct Rolls-Royce and Mini brands and retained the BMW group values across its portfolio.

They’ve all benefitted from a focus on a single brand or a primary and secondary brands. It’s very hard for Volkswagen group to do the same. The VW range’s own brand is still strong in spite of becoming part of the uncomfortable brand portfolio dynamic. But the group’s brand is infinitely less than the sum of its parts. It’s impossible to say what it stands for in the way that you can about its volume peers Toyota and Ford.

That VW’s profits are suffering is not surprising. That’s what happens when a goal defined by volumes is set. If the goal were instead to define and differentiate the brands more clearly, with each given the objective of becoming the most desired among consumers, then the volumes would follow. They would do so more slowly but they would do it sustainably.