German Luxury Carmakers Press on Despite Slump

While most automakers are thinking about gas mileage and sticker price, Porsche, Rolls-Royce, and Daimler are expanding their luxury fleets

By Jack Ewing

The economic downturn seems to be little more than a speed bump for the world's super-luxury automakers. The latest evidence is Porsche's Panamera, which the Stuttgart company unveiled at the Shanghai auto show on Apr. 20. Selling for a bit over $100,000 in Germany before taxes, and boasting a V8 engine capable of up to 500 horsepower, Porsche's first four-door sedan seems almost an act of defiance in a time of environmental consciousness and less-conspicuous consumption.

But Porsche (PSHG_p.DE) is likely to meet its goal of selling 20,000 Panameras per year, says Marc-René Tonn, senior analyst at M.M. Warburg Investment Research in Hamburg. Though the Panamera would no doubt sell better in boom times, Tonn says, "there will always be a certain demand." In this rarefied segment of the auto market, "CO2 emissions and gas mileage are not an issue."

In fact, German carmakers have recently been expanding their fleet of top-of-the-line cars—never mind double-digit declines in mass-market auto sales in the U.S. and Europe. Rolls-Royce Motor Cars, a unit of Munich-based BMW (BMWG.DE), also used the Shanghai event to release more details about a planned new model in addition to the classic Phantom.

Rolls-Royce CEO Tom Purves said on Apr. 20 that the new sedan, which has had the working title RR4, will be dubbed the Rolls-Royce Ghost and begin production at the end of 2009. Equipped with a 500-horsepower V12 motor, the Ghost will offer sportier performance than the stately Phantom.

Daimler's Maybach Zeppelin

And in September, Daimler (DAI) plans to begin deliveries of the $525,000 Maybach Zeppelin, which the company unveiled at the Geneva auto show in March. The car, to be produced in a limited edition of just 100 units, features over-the-top extras such as an atomizer that, with the push of a button, infuses the car interior with a fragrance designed especially for Daimler.

Actually, it's not fair to say luxury carmakers and buyers are oblivious to environmental concerns. The Panamera comes equipped with so-called start-stop technology, which saves fuel by automatically shutting down the motor when the car is coasting or standing still. The motor restarts when the driver steps on the accelerator. The Panamera, which attracted large crowds in Shanghai, is also engineered to be aerodynamic, with an adjustable spoiler and a low-slung, roof-to-road height of just over 4½ feet.

Daimler's Mercedes unit also is making fuel economy a selling point in the luxury class. In Shanghai the company formally unveiled the hybrid version of the S-Class, which gets 30 mpg, according to Mercedes. The company also reported record sales in China, underscoring why premium carmakers are suddenly making big announcements in China instead of recession-afflicted Detroit or Geneva. Mercedes sold 11,000 vehicles in China, a 30% increase compared with the year-earlier quarter, the company said.

Eco-Friendly Gestures

Even Rolls is turning a faint shade of green. The Ghost will feature a turbocharged engine and eight-speed automatic transmission that will make it more fuel-efficient than the Phantom, Rolls-Royce says.

Porsche, too, plans to bring out later a hybrid-powered Panamera and a less thirsty six-cylinder motor, though the company hasn't yet disclosed what kind of mileage any of the models will get. The V8 version goes on sale in Europe, South America, and parts of Asia in September, with a U.S. launch in October. Though Porsche unveiled the Panamera in Shanghai, it won't go on sale in China until early 2010.

Though the Panamera is ostentatious by most people's standards, it follows the formula that has made Porsche's two-seat sports cars a success: It exudes status without seeming vulgar, and unlike the temperamental sports cars of the past, you can drive it to work every day. Says analyst Tonn: "The whole Porsche brand stands for reliability." The message may be that, these days, even expensive cars have to be practical.

Ewing is BusinessWeek's European regional editor.

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