The new C-class sedan will be launched at the NAIAS Monday. (Mercedes)
Mercedes and BMW’s dominance of the U.S. premium vehicle sector looks set to continue this year, and both of these German manufacturers will have plenty to brag about on their stands at the 2014 NAIAS Detroit car show.
Mercedes is unveiling its new C-Class sedan, which will compete with the BMW 3-series and Cadillac ATS. Other recent new vehicles like the top-of-the-range S class limousine and GLA AMG compact SUV will also be powerful sales magnets. BMW will launch the little 2-series coupe at the show, and a couple of souped-up versions of current cars — the M4 and M3.
In 2013, Mercedes won the crown as number one luxury-vehicle manufacturer in the U.S. with 334,324 sales, according to LMC Automotive, boosted by the new small CLA sedan launched at the Detroit show last year. Mercedes powered past BMW’s 309,280. BMW held the title the previous two years. Toyota’s Lexus was in 3rd place with 273,847. Lexus will unveil the RC-F at the show, a competitor to BMW’s M4 and Mercedes C63 AMG. General Motor’s Cadillac put in a creditable performance with sales of 182,543, led by the ATS, for fourth spot.
The luxury or premium sector has massive appeal because of the fat profit margins won by these sexy, powerful and impressive cars which boast cutting edge technology and are sought after by buyers wanting to make sure everybody else knows that they are doing very nicely, thank you. Most of the world’s big manufacturers have been investing heavily to try and topple German dominance, which is supplemented by Volkswagen subsidiaries Audi and Porsche.
But Mercedes and BMW hegemony looks set to continue. There are some theoretical threats on the horizon. Perhaps a currency crisis might see the dollar crumble in value against the euro. This would threaten profit margins by forcing prices higher. But BMW and Mercedes, not to mention VW and Audi, are already insulating themselves against this threat by building more vehicles in America and Mexico. Maybe the Chinese market, where the Germans have made huge profits recently, could fall off a cliff? That would torpedo their balance sheets, but it would do the same to most of their competitors too.
They could be blindsided by a sudden change in technology. That doesn’t look very likely as the Germans are leading the charge towards plug-in hybrids, and BMW will be selling its new carbon fiber i3 electric car this year. Mercedes is at the front of fuel cell technology. The Germans have written the book on diesels too.
Perhaps one of the competitors like Nissan’s Infiniti, Honda’s Acura, Ford’s Lincoln or Tata of India’s Jaguar Land Rover might come up with a snazzy new, must-have product? They’ve been trying to do this for some years now without eating into German dominance, demonstrating that it is well-nigh impossible to compete against the powerful brand image which years of investment and success have achieved. Could a revived Alfa Romeo be a long-term wild-card that might succeed?
As a last resort, maybe the wannabes can dream of another unintended acceleration moment, which blighted Audi’s attempts to win big in the U.S. for about 30 years.
But the Germans look safe for a while yet.
“I don’t see any big threats. The German premium car manufacturers have a really good image which is based on long-term thinking on a wide technological knowledge base and they have a broad spectrum of models,” said Professor Stefan Bratzel of the Center of Automotive Management in Bergisch Gladbach, Germany.
“So it is very difficult for brands like Cadillac, Infiniti and Acura,” Bratzel said.
Could the Germans be surprised by new technology?
“They are a big step in front in terms of many technological innovations. They (BMW, Mercedes and Audi) are leading the move to the connected car, and safety related issues which are big this year; but also the high quality of their power trains which are quite good compared with the Americans and Lexus,” Bratzel said.
“Image building is not a short-term issue, but a long-term effort. They are doing the right things and they have the positive image of winners and those people that can afford these cars would buy a Mercedes, BMW or Audi and not a Cadillac,” Bratzel said.
Audi doesn’t have anything new for the show, but it will be demonstrating a small, plug-in hybrid SUV concept which might emerge as the new Q1, and a sports car styling exercise which might hint at the new TT, the third generation of which is expected later this year.
Richard Hilgert, analyst with Morningstar Inc of Chicago, agrees that the Germans will carry on dominating the sector, but likes what Cadillac has done.
“Mercedes will capture the most interest this year with the new C-class on the stand and the GLA AMG along with the S600 12-cylinder. The folks around Detroit love their horsepower and Mercedes will have plenty of it,” Hilgert said.
“Cadillac is doing better and has got more traction than previous years,” he said.
Cadillac is expected to unveil a coupe version of the ATS at the show, which will compete with the BMW 4 series and Mercedes C-class coupe.
Hilgert was disappointed by a lack of progress at Ford’s Lincoln.
“I’d like to see more in terms of expanding that brand to take Lincoln to the next level. That’s not to say it’s not in the works, and I’ve been impressed with some of the styling,” Hilgert said.
Alec Gutierrez, analyst with Kelley Blue Book in Irvine, California, said the European premium manufacturers including Jaguar Land Rover will continue to improve market share in 2014. He calculates 2013 U.S. market share at 5.9 percent, which could improve to between 6.0 and 6.1 percent in 2014.
“I think the European auto manufacturers are poised for another strong year in the U.S.,” Gutierrez said.
Jeff Schuster, analyst with LMC Automotive in Troy, Michigan, agrees that BMW and Mercedes will dominate in 2014, but he also likes the way Cadillac is developing.
“We do see some growth in 2014 and more so going forward. This is being driven by the brands moving downstream to the entry premium market with the (Mercedes) CLA, (BMW) 1 and 2 series, and smaller BMW SUVs, and this is all helping to gain market share in the U.S.,” Schuster said.
“I don’t believe there’s much of a threat to their (the Germans) position. There are some problems though. There is often too much fragmentation in their lineups for the American consumer to figure out which one is the right one. That adds an element of confusion,” Schuster said.
The sheer amount of new technology offered by these cars can also be confusing, he said.
“Cadillac is to an extent emulating some of the positioning strategies taken by the Germans,” Schuster said.
Could Cadillac even attack the Germans in their home market, which it has attempted to do over the years, but half-heartedly?
“Yes that’s the medium to longer-term plan. They’ve got their eyes on taking them on at home. Cadillac is looking to develop a line-up that is more acceptable in other markets than just the U.S.,” Schuster said.
Fiat of Italy’s Alfa Romeo subsidiary has tentative plans to relaunch in the U.S. market. Now that Fiat and Chrysler have finally merged, will Alfa Romeo mount a challenge to the Germans in the U.S.?
“I do expect them to come into the market. The opportunity is now stronger,” he said.
Pictures of Alfa Romeos
Dream on, says Professor Bratzel.
“Alfa Romeo is of course a very interesting historical brand, but I don’t see it getting near to the German premium brands, after all it is lacking a lot of models. It’s rather a forgotten brand; when I talk about it to my students I have to show them pictures. I think (Fiat-Chrysler CEO Sergio) Marchionne will try and bring Alfa Romeo to a new level, but it will take a long time and cost a lot of money,” Bratzel said.
Neil Winton, European columnist for Autos Insider, is based in Sussex, England. E-mail him at firstname.lastname@example.org