Detroit carmakers are losing ground to the Asians and Europeans. That trend started in 1999, when Daimler-Chrysler AG's Mercedes-Benz USA became the first European brand to wear the U.S. luxury sales crown. In 1998, it was Ford Motor Co.'s Lincoln, which unseated the 49-year rule of General Motors Corp.'s Cadillac. Last year, Toyota Motor Sales USA's Lexus was tops. BMW of North America led the pack in unit sales for April 2001.
"The barrage of car-based SUVs is really dominating the segment," says Jeff Schuster, director of industry forecasting for consultancy J.D. Power & Associates, referring to Mercedes' M-Class, American Honda Motor Co.'s Acura MDX, BMW's X5 and Lexus' RX300.
The Asians and Europeans have introduced cars and trucks that match consumer taste and appeal to the biggest group able to afford them-baby boomers, Mr. Schuster says. Detroit carmakers have an older owner base and are trying to reposition their brands younger.
"The domestics have lost quite a bit of share this year," he says but projects Detroit will recover a bit from the early-year slump, tallying combined luxury car and truck sales of 469,226 of the nearly 1.5 million units he predicts all luxury marketers will sell in 2001.
While concerns about the sluggish economy haven't yet sparked a big falloff in the luxury auto segment, buyers who came into the segment because of "the wealth effect of the stock market" could likely retreat, he says.
"Luxury players at the low end could get hurt" by consumers who can only marginally afford entry-level vehicles, says Jim Hall, VP-industry analysis at AutoPacific. Buyers of vehicles priced at $100,000 and under, as well as buyers of the high-end $200,000-plus cars, could decide to delay purchases.
Also, the strength from European makers is deceptive, because total sales gains this year have come from single models that offset weakness of other models, says Susan Jacobs, president of consultancy Jacobs & Associates.
BMW is "looking for a very strong year," says James McDowell, VP-marketing. The German brand had some unmet demand going into 2001 and was able to produce more units of popular models.
The carmaker has increased sales with new models and variants of existing models, such as adding a 323 C1 convertible and wagon last year to the popular 3 Series line. Coming this fall is the new X5 HP sport-utility vehicle, a high-performance version of the X5 that bowed in early 2000.
BMW recently launched the M3 convertible in an all-print campaign from Publicis Groupe's Fallon, Minneapolis.
Also, the client challenged Fallon to develop a breakthrough overall branding campaign. BMW kicked off the Internet-based effort in late April, and it will continue into July. It tapped five high-profile directors to create original, 5-minute online movies. The unifying thread is British actor Clive Owen, who's hired as a driver and faces obstacles in delivering his passengers.
The move makes sense, explains Mr. McDowell, because 85% of BMW buyers first do research on the Internet. Visitors to bmwusa.com can register to win prizes by filling out a survey. BMW is promoting the online program via commercials on spot TV and national cable networks.
BMW's core target is 25-to-40-year-olds. The brand has the youngest demographics of luxury vehicles, with a median age of 44, Mr. McDowell says.
The 3 Series is BMW's best-selling line. Of the 66,776 vehicles BMW sold in the first four months of this year, 32,180 were 3 Series models, according to Automotive News, a sibling publication of Advertising Age. The X5 SUV is its second-best seller, tallying 12,369 units during that period.
Luxury carmakers are readying several crucial launches this year.
Jaguar Cars North America, which suffered a 13% drop in sales in the first four months of 2001, is counting on the all-new, entry-level X-Type sedan to help the brand reach a record 50,000 units this year. With a base price of $29,950, the car will be the least expensive in the lineup of Ford-owned Jaguar.
"X-Type will be in the fastest-growing and largest [luxury] segment," says Michelle Cervantez, VP-marketing. Jaguar already has started to beat the drums for X-Type, with a blitz in Manhattan during April's auto show that included bus shelters, outdoor and mobile boards. One headline read: "You're under 40. We're under 30K."
Jaguar is out to correct the misconception, revealed in research, that its cars cost more than they do and that the brand is a bit stuffy, Ms. Cervantez says. One way she plans to achieve that is via a brand campaign that broke this spring from WPP Group's Y&R Advertising. Jaguar shifted its $125 million global account to Y&R after a shoot-out with siblings Ogilvy & Mather and J. Walter Thompson Co. Y&R coordinates the account from London.
This summer, Ford's Lincoln brand launches the 2002 Black-wood, an SUV with a pickup bed. Although volume will be low, the $50,000-plus vehicle is "really important from an image standpoint" for Lincoln, says AutoPacific's Mr. Hall. Lincoln, which has seen sales drop in the first four months of 2001, started offering 0% financing on all 2001 models in early May. The Irvine, Calif., office of Y&R created a TV spot touting the special deal.
GM's Cadillac is putting the biggest push of the year behind its redesigned 2002 Escalade SUV. The estimated $50 million ad campaign, from Bcom3 Group's D'Arcy Masius Benton & Bowles, Troy, Mich., broke in April. The Escalade EXT SUV-pickup model comes later this year, while Cadillac's CTS sedan is due in 2002. The CTS will replace the entry-level Catera, touted by Cadillac when it bowed in fall 1996 as the car that would attract baby boomers to the GM luxury brand. But Catera has been a disappointment; Cadillac sold just 3,179 from January through April, down 18.9% from a year ago.
Rebates apparently aren't in the cards for Cadillac. General Marketing Manager Mark LaNeve says "we don't do rebates on our cars. As a marketer, I'd rather advertise." Instead, Cadillac offers lease deals, which Mr. LaNeve says virtually every other luxury carmaker also does with the exception of high-demand models.