Automotive News Europe - September 2011 - 20

AUTOMOTIVE NEWS EUROPE

COVER STORY

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generation 1 series, which will become the brand’s first front-wheel-drive model. It’s a change that worried former BMW executive Kalbfell. “It is a clear risk that BMW is trying to expand the brand to smaller segments instead of leaving that territory to Mini,” he said. “It is a threat that they want to give up the unique sell position of rear-wheel drive. That will be a stress-test for the relationship with core customers.” Robertson said UKL models are BMW’s answer to growing demand for smaller-sized premium models, especially among customers in fast-growing, densely populated markets. Meanwhile, Audi CEO Stadler said he wants to increase the number of products offered to 50 from 42 by 2020. If that number sounds high it’s because of the way Audi counts its models. If you subtract variants such as the high-performance R versions of its traditional models, Audi has 21 models today, not 42. True new additions planned for the model family include the A9 Coupe (2015), which will compete against the Mercedes CL, and the Q6 (2014), which will target the BMW X6. Output increases The addition of the new cars is forcing the German automakers to look for ways to boost their production by either expanding existing plants or building new ones. A key part of Zetsche’s growth plan is Daimler’s new plant in Kecskemet, Hungary, which will have a capacity of 100,000 units when it starts producing the next A- and Bclass cars in early 2012. Daimler sources say Zetsche is looking at ways to expand the Hungary factory and would like to add production of the C-class coupe and the so-called MLC derivative of the M-class SUV to Mercedes’ U.S. plant in the second half of the decade. The U.S. plant currently makes the GL-, M- and R-class SUVs. And Daimler is mulling an additional plant in China. When asked about expansion in the world’s largest auto market Zetsche said: “We are continually in growth mode. In China, there are more than 120 billionaires and about 670,000 millionaires. Until they are all driving the S class, we still have things to do.” Audi is the best positioned premium brand in China, which will be the automaker’s single-biggest sales market as of this year. “We have to expand our current capacity of 300,000 units in the next few years,” Audi CEO Stadler said. “It took Audi 22 years to sell the first 1 million vehicles. We’ll sell the second million in just three years, between 2011 and 2013.” Audi, like Daimler, has a plant in Hungary. The Gyor factory, which was opened in 1993, is about to undergo a big improvement. “Starting in 2013, we will have a capacity of 125,000 cars in Gyor,” said Stadler.

FIERCE COMPETITION
How the 3 premium brands compare on key metrics Audi
Unit sales 2010 1,092,411 Europe (excl. Russia) 634,549 China 227,938 U.S. 101,629 Unit sales H1 2011 652,970 Europe (excl. Russia) 365,641 China 140,699 U.S. 55,909 Dealers worldwide 2,500 Europe 1,679 China 191 U.S. 285 Profit margin H1 2011 11.8% Model variants (body styles) 21 Production plants (passenger cars) 4* CKD plants 1** Employees 46,544 R&D spending as % of total sales 7.1% Key partner VW Group Partner for carbon fiber Voith

BMW brand
1,222,280 622,514 168,998 265,757 689,861 344,057 121,614 143,521 3,100 about 2,000 230 450 14.4% 19 7 7 96,943*** 4.6 % PSA SGL Group

Mercedes brand
1,167,700 604,535 148,400 216,400 710,922 307,770 92,174 110,926 5,000 1,800 >160 350 10.0% 23 6 6 96,281*** >5.5% Renault Toray

* Audi production plants excluding contract manufacturing by Seat in Martorell and by VW in Bratislava ** Audi CKD plants exlcuding Skoda factory in India ***Figures for BMW Group and Mercedes Benz Cars (incl. Maybach, Smart) Source: JATO Dynamics, companies

Audi’s biggest weakness when compared with its German rivals is that it is the only one without a factory in North America. This disadvantage is one reason why Audi sells about one-third as many cars in the United States as the BMW brand, which is on track to pass Lexus to become that market’s premium-car sales leader for the first time in 12 years. Key partners Audi’s biggest competitive advantage in the race to be global premium-sales champ is that it is part of the massive VW Group. Audi is getting Q3s made at sister brand Seat’s underutilized plant in Martorell, Spain, while Skoda’s factory in India also assembles Audis for the local market. A look at Audi’s structure (see box above) shows it has the fewest employees and plants of the three German luxury brands, but as industry veteran Lutz said, it can do more with less because it is “able to dilute a lot of the enormous basic development costs over the worldwide volume of VW, Skoda and Seat.” While being part of a mega organization has worked for Audi, attempts by BMW and Daimler to grow through acquisitions failed miserably. BMW’s bid to integrate the UK-based Rover group was a financial disaster. The

same can be said for the so-called “marriage in heaven” that Zetsche’s predecessor, Juergen Schrempp, arranged between Daimler and Chrysler Group. That union failed as did Daimler’s stake-holdings in Mitsubishi Motors Corp. and Hyundai Motor Co. Today, BMW and Daimler are more interested in strategic partnerships. They cooperate with each other – without major success – on the joint purchase of some parts. Each brand also has a partnership with a French automaker. BMW’s alliance is with PSA/Peugeot-Citroen and Daimler has teamed with Renault (see pages 24, 28). The threats But risks remain. “The long-term enemy is over-supply,” said Lutz, who has held key jobs at GM, Ford, Chrysler and BMW. “When everyone has a German prestige car on a $350-amonth lease, uniqueness, desirability, owner pride and resale values go down.” BMW marketing boss Robertson sees things differently. “The global car market this year will be around 70 million vehicles and the premium segment will be somewhere around 5 million vehicles, so it is still a small percentage of the overall car market,” he said.
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SEPTEMBER 2011

Automotive News Europe - September 2011

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