In terms of luxury auto sales, Europe dominates America

Weekly Corporate Growth Report, Jan 24, 2000 by Nasri, Jennifer

In the 1980's, Japanese auto makers set their sights on capturing a huge portion of the American market for small and mid-sized cars. To say that they were successful in this endeavor would be an understatement. Nearly a decade ago, the Japanese decided to try their luck in the American luxury auto market, which at the time was dominated by Cadillac and Lincoln.

Cadillac and Lincoln continued to lead the competition throughout most of the 1990's. However, last year, both these American auto makers were surpassed by not only one, but two foreign auto makers, and a third competitor is not far behind.

Lexus, the luxury division of the Toyota Motor Corporation, was the only Japanese company in this group, and took the second place position. Racing by to leave the competition in the dust was Mercedes-Benz, which emerged as the clear leader. BMW, whose sales were once miniscule in comparison with its rivals, ended the year nearly even with Cadillac and Lincoln in terms of sales.

As recently as 1991, European-- brand luxury cars were outsold nearly three to one by their American counterparts. In 1999, the Europeans accomplished what once seemed like an unlikely dream: beating the American luxury makers in their home market.

The Japanese, however, have not done as well in the luxury auto market. Honda's Acura and Nissan Motor's Infiniti have had unimpressive sales, and even Lexus can't seem to keep from losing ground to the Germans. Not even the most optimistic European executives had imagined taking over the lead from Cadillac and Lincoln. "We were surprised, "said Juergen Hubbert, the DaimlerChrysler A.G. management board member who runs Mercedes. "It was not our target to become No. I."

Experts in the auto industry agree that the Europeans seized the first place position because they have the strongest brands. This is especially important in a time when a rising stock market and lively economy mean that price is of little concern to most buyers. Europeans, however, are covering all bases, and have targeted numerous new models to appeal to the "entry-level" luxury market with cars that feature base prices of $24,000 to $32,000. Not to mention, of course, that most Americans agree that the latest European models look and drive better than their American or Japanese counterparts.

Mercedes and BMW executives claim they have little to fear from their American competitors. As Henrich Heitmann, BMW's management board member for worldwide sales and marketing stated, "I think that the American manufacturers have concentrated in the last years on the sport utility vehicle side of the market and they've probably paid too little attention to the passenger car side."

To be successful, the American auto makers should learn from the Europeans and maintain a consistent approach to management, advertising and brand strategy; a combination that the American luxury auto makers have managed to avoid.

(Source: The New York Times)