Tuesday, February 14, 2012

Interview: German Luxury Sales and the Luxury Car Market

I recently had an interview with Doug Scott who is Sr. Vice President of GfK Automotive. He has more than 29 years of experience in the automotive and marketing research industries. He has also worked with automakers such as Toyota, Chrysler, and Subaru. Mr. Scott was a national research manager for Toyota Motor Sales before joining GfK. GfK Automotive  conducts research for the global automotive industry.

My interview with Doug Scott focused on the German Luxury Car Brands and the Luxury Car Market. Check out the interview below:

Why are German luxury brands sales up?
Three things have occurred: 1. Lexus did get hurt by Toyota's quality issues from 2009-10.  2. All Japanese manufacturers got hit hard by the tsunami earthquake which hurt production. 3. The floods in Thailand created issues for parts. The fact is that Mercedes-Benz and BMW are coming back from the downturn with no tarnish, no basic issues, or structural issues. Audi from 2007 to present has really been on a major growth pattern. Audi's sales have risen by 15 or 20 % a year.

Is value even important anymore when considering a luxury vehicle?
Two things have occured. Lexus up until the quality issues was challenging Mercedes-Benz.. The Toyota product quality issues took some of the wind out of sales. Acura and Infiniti were selling on value and price but never got the luster in terms of brand prestige and value. Value needs to be looked at from two angles, prestige and aspiration. The Japanese luxury manufacturers have always been more reasonably priced. One thing that is hurting the Japanese automakers is the yen situation. The dollar to the yen is terrible for the Japanese. That hurts the Japanese in terms of exporting.

Japanese brands?
How do I maximize volume in the luxury side of the market? One could argue that you start down with the neo-luxury area of the market. 3-series..etc. You don't have to start with a flagship but you have to build up towards it. I think that the Japanese wouldn't want to perliferate models, they're trying to build their brands. There is a volume issue that impacts the Japanese automakers and they need to make sure that they have enough volume for their current dealers. These brands aren't nearly as established as Mercedes-Benz and BMW. Lexus has been positioned to take on Mercedes-Benz. Lexus has to add to its brand luster as it tries to get back on track. I think that at some point Acura and Infiniti need to have a flagship sedan. The lack of flagship sedans is what really hurts them.

What do you think the Japanese luxury brands need to do in order to increase sales?
I definitely think that they have to balance their cars and trucks. They have to spend more time on the development of their vehicles. For example, if you want to tackle the BMW 3-series, you have to have a car such as the Infiniti G37 to consistently handle their driving dynamics really well. If you are fighting Mercedes-Benz you have to build a flagship for prestige and you have to have volume sedans.  There is work to be done on brand building, it is far from over for the Japanese luxury automakers.

What are your thoughts on Lincoln and Cadillac?
Cadillac really began shifting it's portfolio in 2002. Is there a such thing a domestic luxury? At the end of the day the benchmark is the German luxury automakers. You don't want to be an American luxury brand you want to be an international luxury brand. Lincoln is far behind Cadillac, there is a huge prestige gap. Cadillac is doing all the right things.

I think that Lincoln needs a rear-wheel drive vehicle. That is synomous, it does not mean that you need to have all of your cars have to be mechanically equivalent to the German brands. The BMW 3 series is rear-wheel drive, they set the standard. There is no short cut pass. Cadillac is the poster child for that you cannot jump over stages. Cadillac has been focusing on handling, performance, and luxury image. They have spent millions of dollars over the years but are just now getting credibility. Lincoln has to get on the luxury path. There is no jumping over stages to get that credibility. Luxury and driving performance is key, which is no easy path.

Will German luxury brands always be the benchmark for luxury?
Certainly for the forseable furture.  The fact is that they have not been getting hit with quality issues, and been providing a flagship sedan.

I want to thank Adrienne Nardella for setting up this interview. I also want to thank Doug Scott for taking the time to answer my questions and for always willing to chat with me about the auto industry!

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