| BUSINESSWEEK ONLINE : JUNE 26, 2000 ISSUE | ||||||||
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| INTERNATIONAL -- EUROPEAN BUSINESS
The High End Heats Up (int'l edition) Imagine a car so luxurious that it comes with a humidor to keep the passengers' cigars moist. That's in addition to a flat-screen TV that folds down from the roof, matching his-and-her golf sets, and--of course--a personal computer. It's all in the top-of-the-line Mercedes-Benz Maybach, expected to sell for something over $200,000 when it hits the market in 2003. The car is DaimlerChrysler's bid to reenter the superluxury market after a 20-year hiatus. Car sales may be sluggish in Europe overall, but German carmakers are gearing up for high times in the ultrapremium niche. Even Volkswagen now wants a piece of the action. The profit margin can be as dreamy as the new models: 30%, six times the industry average. Several new contenders are in the works, ranging from a Bugatti from VW to a Rolls-Royce from BMW and a Mercedes SLR sports coupe. Carmakers see no downside in ramping up production and crowding the market. Although estimates vary, manufacturers expect worldwide demand for cars priced at $150,000 or more to grow substantially over the next few years. The superrich have no problem with rising gas prices. ''These people buy cars to furnish their garages,'' says VW marketing director Robert Buchelhofer. Rolling out a pricey new model also allows a manufacturer to showcase its design tastes and technological prowess, conferring prestige on its other products. The Maybach, for example, underscores DaimlerChrysler's claim to be ''the absolute creme de la creme'' in every segment, says company Chairman Jurgen E. Schrempp. ON A ROLLS. To get a piece of the action, VW fought a fierce bidding war with BMW for Rolls-Royce in 1998. In the end, BMW got the rights to the Rolls-Royce brand, while VW ended up with Bentley. But besides Bugatti, VW also has Lamborghini. The company, which has developed two Bugatti concept cars, the Chiron and Veyron, plans to roll out a new Bugatti in 2003. For its part, BMW has announced plans to develop a new Rolls-Royce, which will be built in a new plant in the British town of Goodwood in 2003. ''It will combine all the traditional values of the Rolls-Royce brand but with a forward-looking interpretation,'' says Karl-Heinz Kalbfell, senior vice-president of BMW. Not everyone is convinced that the premium market is worth the effort. While sales of Ferraris, Bentleys, Aston Martins, and other top models boasted a 38% jump in the first three months of the year, they accounted for only 1,421 of the 4.3 million cars sold in Europe. Even with the high margins, the market is so small that the contribution to a carmaker's bottom line is negligible. Analysts estimate that the Maybach, for example, will generate minimal profits for DaimlerChrysler. Indeed, Jurgen Pieper, an auto industry analyst at Frankfurt brokerage Metzler, dismisses the drive to produce new sports cars and limousines as ''an ego thing'' for the carmakers. He also doubts that consumers retain a link between a company's superluxury models and its down-to-earth brands. ''Fiat owns Ferrari, but that hasn't given it any advantage,'' he says. While that may be true, the manufacturers are certain there are a lot of car buyers out there with money to burn--and a taste for fine cigars. By Christine Tierney in Frankfurt _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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