In super-luxury cars, Daimler's Maybach is failing to mount a challenge to BMW's Rolls-Royce and Volkswagen's Bentley
By Chris Reiter and Mike Ramsey
(Bloomberg) — Rick Teague is one reason the future of Daimler AG's (DAI:US) super-luxury Maybach brand is in doubt.
The 53-year-old Texan had his pick of elite vehicles like Rolls-Royce and Bentley when he bought his new ride in September. The Maybach didn't get a second look.
"The Maybach looks way too close to a Lincoln to spend that kind of money," said Teague, who owns a health-supplement company and opted for a Bentley Continental GT. "I was looking for a combination of sport, exotic, luxury in a coupe. I don't think the Maybach had anything really close."
Maybach, with models starting at $358,000, is failing to mount a challenge to Bayerische Motoren Werke AG's (BAMXY:US) Rolls-Royce and Volkswagen AG's Bentley. The struggle weighs on Stuttgart, Germany-based Daimler because defeat may reflect on Mercedes- Benz and hamper Chief Executive Officer Dieter Zetsche's efforts to challenge BMW as the world's top luxury-car maker.
Daimler aimed to sell more than 1,000 a year when it reintroduced the 1930s-era marque in 2002. Businessman Donald Trump has one, as does singer Madonna. Still, sales topped out at 600 cars in 2003 and sagged to 300 last year. Rolls-Royce sold more than 1,400 vehicles in 2008, and Bentley, 7,600.
Shutting down Maybach may be the best option, said Wes Brown, an automotive analyst at Iceology Inc. in Los Angeles.
"The destiny of that brand is clearly in question," Brown said. "The Maybach really never achieved the sales results they wanted it to achieve, even at the height of conspicuous consumption."
Zetsche said Daimler is committed to the Maybach brand.
"We have no long-term decisions on Maybach at this time," he said in an interview Dec. 14 in Abu Dhabi. "We have proven that for this segment, we can build cars second to none and that was basically what we wanted to accomplish."
Daimler plans to update the Maybach 57 and 62 models next year with lower emissions and newer electronics. The design will be "a little more prominent" yet remain "understated" in keeping with the Maybach philosophy, Mercedes-Benz spokesman Christoph Horn said. The Zeppelin edition, introduced in April and limited to 100 vehicles, has sold out, he said.
"Maybe they can stretch it another year and a half and do a final series and be done with it," said Christoph Stuermer, an analyst at IHS Global Insight Inc. in Frankfurt. "The most efficient way to handle this is if they found somebody in the industry, a small shop, who is working on a super-luxury vehicle anyway and just give the brand to them."
Even if the current models have a long lifecycle, Daimler would have to start designing the next generation this year, which would take about €500 million ($726 million) of investment, Stuermer said. Daimler doesn't break out expense or earnings figures for Maybach.
In the meantime, the number of Maybach dealers in the U.S., where 40 percent to 50 percent of the cars are sold, has dropped to about 40 from 85 in 2002.
"We are able to focus the distribution network on strategically important locations and thereby be more effective," Daimler spokeswoman Verena Mueller said.
The Zeppelin boasts the world's first car-interior perfume atomizer, a fixture with two scents developed by fragrance leader Givaudan SA (GVDNY) of Switzerland, which supplies Christian Dior SA. Maybach, which offers more than 2 million combinations of color, leather and accessories, also sells an open-top Landaulet that starts at €900,000.
Maybach competes in the ultra-luxury segment of cars priced at more than €200,000. IHS Global Insights predicts 4,265 worldwide sales of such cars this year, down 23 percent from 2008. That's a market valued at more than $1.5 billion if the top sellers, Lamborghini's Murcielago, the Ferrari 599 and the Rolls-Royce Phantom, are used for the calculation.
In what the consultant calls the super-luxury class of cars valued at €100,000 to €200,000, sales are projected to decline 27 percent this year to about 16,000 vehicles.
To promote Maybach, Daimler organizes a golf tournament and sponsors a winter polo team in the Swiss resort town of St Moritz. It recently had contemporary-art photographer David LaChapelle take pictures of the car.
"I don't see the strategy," said Arndt Ellinghorst, an automotive analyst at Credit Suisse in London. "They should either grow it or close it."
Under one estimate, Daimler may have to sell 10,000 Maybachs—four times the total number on the road now—to recoup the €500 million in development costs projected by Stuermer for the next-generation models. That's assuming Maybach matches Daimler's goal for its Mercedes-Benz brand of a 10 percent operating profit margin and that the average car sells for €500,000 with all customizations included.
Daimler declined to comment on Maybach's profit margins and said in an e-mailed statement that "every Maybach sold will make a contribution toward covering costs."
The brand's history dates to Wilhelm Maybach, an engineer who helped Gottlieb Daimler develop engines for the first automobiles. Wilhelm and son Karl made engines as well as luxury vehicles such as the Zeppelin in the 1920s and 1930s. The last of 1,800 original Maybachs was made in 1941.
Daimler decided to revive Maybach in 1998 under then-CEO engineered the failed merger with Chrysler. The goal was to compete with Munich-based BMW and Wolfsburg, Germany-based Volkswagen in elite motor cars after their acquisition of the Rolls-Royce and Bentley brands. Maybach also was intended as a showcase for the best of Mercedes-Benz technology.
"With Maybach, Daimler possesses the brand with the greatest mystique ever," said Helmut Hoffmann, Maybach Club president in Germany. "Daimler will never again dispense with this brand."
Iceology's Brown isn't so sure.
"The Maybach is a stealthy, slip-in-and-out kind of luxury vehicle," he said. "There is always a contingent of people who prefer to be much more quiet about their wealth, but the growth is with those consumers who wanted to flaunt their wealth."
Flashy status-symbol cars like Ferrari, owned by Fiat SpA (FIATY:US), and Lamborghini, a VW brand, are also outpacing Maybach. Lamborghini made 2,430 cars last year, and Ferrari's sales advanced 2 percent to 6,587 vehicles.
Competitors have increased pressure on Maybach with new models. Rolls-Royce has the Ghost, a smaller complement to the Phantom. Bentley launched the two-seater Supersports and the top of the line Mulsanne, which boasts a leather-covered steering wheel that takes as many as 45 hours to stitch by hand.
Maybach looks like a stretched version of the top-end Mercedes-Benz S-Class, which detracts from Daimler's dominant brand, said Jim Hall, principal of auto consulting firm 2953 Analytics in Detroit.
"They diminished Mercedes while never having the stuff to match with Bentley, much less Rolls-Royce," said Hall. "They introduced Maybach and took Mercedes down a notch."