Spending up, but Europe finds share hard to budge

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Jaguar Cars North America will stick to what it knows best.

While such upscale marketers as Mercedes-Benz USA and BMW of North America plow the off-road field, the Ford Motor Co. upscale British marque hopes to grow share by staying the course with luxury cars.

With the addition last year of the S-type, Jaguar saw its U.S. sales volume increase more than 71%in the first six months of 2000. To keep the surge going, Jaguar is broadening its line further by bringing out the "Baby Jag," as its 2001 X400 sedan is known, mounting a serious challenge to BMW's critical profit center, the successful 3 series.

Increased advertising spending has accompanied Jaguar's expansion of its product line. Measured media spending for the marque hit $58.8 million in 1999, up .6%

In all, European automakers spent $796.4 million in measured media in 1999, up 28.7% accounting for nearly 10%of total U.S. automotive ad spending.

Still, European brands managed only 5.7%of the total U.S. car and light-truck market in 1999.

SUVS IN THE PIPELINE

Luxury SUVs and segment-bending cross-over vehicles may be the key to future market gains by the Europeans. With the exception of Land Rover North America, their brands have been late-comers to the SUV trend. Being late to the game doesn't mean the European marques should be counted out, though.

"Luxury SUVs are a growth area in the fragmenting SUV market," says Bob Schnorbus, director of economic analysis at consultancy J.D. Power & Associates. "With the Europeans entrenched in the luxury market, they are well-positioned to move into SUVs. Their quality and reputation carries over from cars and gives them an edge."

Mercedes-Benz has profited by beating other Europeans to the SUV market. Its successful M-Class SUV, launched in September 1997, was its best-selling model in the first half of this year, edging out the E class and accounting for a quarter of the marque's U.S. sales.

There are plenty of new products on the way. The German parents of Volkswagen of America and Porsche Cars North America are collaborating on separate versions of a jointly developed SUV for 2002. BMW, which launched the X5 in December, is planning a full range of SUVs. Saab Cars USA also has an SUV slated for 2003 based on a modified minivan platform from parent company General Motors Corp.

Ford's Land Rover, the only all-SUV brand from Europe, is planning to bolster sales by broadening its line-up, bringing the smaller Freelander to the U.S. in calendar year 2001. Its unit sales have fallen 4%in the first half of this year.

Ford's Volvo Cars of North America, with no SUV in its stable, is taking another tack. It attacked the crossover market with a redesigned Cross Country station wagon. The 4-wheel-drive wagon uses the tagline, "To your body, it's a luxury car. To the elements, it's an SUV. To your peace of mind, it's a Volvo."

Audi of America, with sales up nearly 43%in the first half of 2000, will employ a similar strategy when it launches the allroad quattro, based on the A6 Avant wagon in early November.

VOLKSWAGEN MODELS LEAD

Volkswagen, the only non-luxury European brand marketed in the U.S., grew 44%in unit sales last year and 19%in the first six months of 2000. In fact, in the first half of this year Europe's top three by unit sales are Volkswagens.

The Jetta, backed by a hip ad campaign, is the top-seller, as it was in 1999. This year the mid-sized Passat has moved into the second slot, pushing the new Beetle down to No. 3, just ahead of the redesigned BMW 3 series. Last year, Volkswagen's measured ad spending hit $281.1 million, up 55.5%

Diversification of the product line is even more critical for a non-luxury brand than for the others. Volkswagen is readying its yet unnamed SUV, but may need to broaden its line-up further. "A balanced mix of products is important" for VW, according to Mr. Schnorbus. "They [VW executives] are still building their client base. To move substantially beyond their current position they need to look at other segments."

In the U.S. market, those other segments are minivans and pickups. Volkswagen's slow-selling Eurovan doesn't really play in the minivan segment, and there is no U.S.-style minivan in the works. "Eurovan is not a minivan. It is a midsized van" for those who want "a lot more room and a lot more utility," says Volkswagen spokesperson Tony Fouladpour.

At the North American International Auto Show in Detroit this year, Volkswagen displayed the AAC concept pickup truck. "The public reaction was very positive," notes Mr. Fouladpour, "it surprised us."

But the AAC is not currently slated for production. "There is a possibility a pickup will be added but we have not made a decision. We're looking at a lot of things."

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