US sales have taken a hit – but growth in Emerging Markets is counterbalancing the decline for Bentley, engineering director Ulrich Eichhorn tells Mark Bursa.
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Basic motorisation and low-cost manufacturing may dominate editorial coverage of Emerging Markets – but at the other extreme of the car market, the BRIC markets and their satellites are having an increasing effect.
You only need to take a drive round Moscow, Bucharest or Shanghai to see increasing numbers of very expensive automotive hardware – indeed, it’s the top end of the market that stimulates the automotive market, believes Dr Ing Ulrich Eichhorn, Bentley’s board member responsible for engineering.
“Motorisation always starts at the top – some very rich people always want the top cars first,” he says. “It has been like that everywhere – including in the UK, America and Germany. So typically we are in markets for a long time before manufacturers get in with a manufacturing infrastructure.”
The result has been very positive for Bentley at a time when sales in its core market – America – are being affected by the credit crunch. America is still the largest market for Bentley, accounting for 40 percent of the 9,000-10,000 total sales expected this year. But sales have fallen, not as badly as less prestigious brands, he says: “Most of our customers don’t live in sub-prime houses. Their buying power is not directly affected. But the “general mood and atmosphere” in the US is dragging everything down.
Against this background, sales figures in the BRIC markets – Brazil, Russia, India and China – make encouraging reading. Indeed, Bentley’s BRIC sales will total around 1,000 this year – more than 10% of total Bentley sales. And these are more profitable sales for the company – the weakness of the US dollar means Bentley makes less money on cars sold there than just about anywhere else.
“We cannot raise prices in America because of something so unimportant to a US buyer as the rising value of the Euro,” he says. “The US is 40 percent of our volume – it’s our main emphasis and it will come back. Always some markets are struggling while others are flourishing. America was booming for a long time, but now some other markets are booming – that’s one of the joys of being in our position.”
Bentley’s BRIC sales are certain to grow – but predicting just how far they will rise is not easy, Eichhorn says. “Nobody can predict sales with any accuracy in the BRIC markets. If we take a very positive view, China may grow to have an upper income level market the size of America – or it could turn out very differently. It depends on what the economies are doing and, especially in Russia and China, how the Governments are steering the economy.”
The growth in Emerging Markets sales is not so high as to get Eichhorn thinking about local assembly of Bentley cars – indeed, it’s something to which he’s resistant. “We do not foresee that – one of the main ‘brand pillars’ is ‘Made in Britain’,” he says. Indeed, he’s not even keen to repeat the exercise of 2005, where Bentley made around 1,000 Flying Spur sedans at the VW plant in Dresden in Germany because of production constraints at Bentley’s plant in Crewe, north-west England.
“At that time our capacity was 7,000, but we had a huge demand peak and a huge order bank for the Flying Spur,” Eichhorn says. “The question was – do we not build those cars or do we build them somewhere else – so we decided to build them in Dresden.” This made sense as Dresden builds the VW Phaeton, which shares much of its platform with the Bentley_Continental range.
Bizarrely, the Dresden Bentleys are now collectors’ items – Eichhorn likens them to rare misprinted postage stamps that are coveted by Philatelists.
“Strangely enough, they are very sought-after as used cars as – like the “Blue Mauririus “ stamp – it’s not the real thing. But I’ve seen them sell for higher prices.” He says they were “100% same as Crewe-built cars, only distinguishable by the VIN number”. Indeed, they were effectively CKD-assembled in Germany, as final assembly was the only bottleneck at Crewe at the time.
Capacity constraints have been lifted now – indeed, there’s room to grow beyond 10,000 units – though Eichhorn is more concerned about unit profitability rather than volume. We will always try to build one car less that there is demand!” Unit profitability has been improved this year thanks to more up-market versions being sold, in particular the Speed models, which Eichhorn says have been “an incredible success”. Making more Speed versions is easy at Bentley’s Crewe plant.
“We have a very high degree of flexibility as we build all models down one track – we can shift production from one to another very quickly,” Eichhorn says. “The GT Speed model is selling at more than twice the rate that we expected. It’s the best of the range – and our customers want the best!”
What customers want is something Eichhorn pays great attention to. He’s keen to avoid any pressure to extend the brand into the wrong areas of the market. A few years ago, there was a lot of talk about super-luxury SUVs – it worked for Porsche’s Cayenne, so why not Bentley. But Eichhorn was careful to separate the media hype from the actual demand.
“A lot of people who thought it wads a great idea weren’t our customers. But if you asked our customers, they were appalled! – they won’t even get into their Bentleys with dirty shoes, let alone drive it through the muck! There were far too many negatives outweighing the positives,” he says. “And if at the top of this hype we had started the development of an SUV, we’d be launching now – would that be a good thing?”
He has a point – especially as a Bentley SUV – or indeed the even more fanciful suggestion of a Bentley pick-up – would have been designed with the US in mind. “If we did such a project it would have to have had a significant volume – so a large percentage of the Bentleys on the road would have been in this direction – and we think it would have taken the Bentley image and perception in the wrong way.”
Ultimately, Eichhorn believes the current model mix – two platforms with three bodies one each – is the right one. – “We have a rather comprehensive range around two platforms we know very well – and that is the model that we see going into the future.” That’s not to say other models could be considered – quietly, Bentley’s Mulliner division produces significant – between 50 and 100 – bespoke, super-luxury cars to special, bespoke order.
“We sell these to people who own the state that they live in,” says Eichhorn – and they’re very highly customised, so there’s not a huge amount of information about these – sshh, or every Sheikh’ll want one. But with prices of up to €1 million, the Bentley bottom line sees the benefit.
As the company’s top engineer, Eichhorn is embarking on another significant project – making green Bentleys – and we’re not talking the British Racing shade. “Over the past five years we have reduced CO2 emissions by 60g/km – a 15% reduction. And we will reduce this by a further 15% up to 2012,” he says.
Later, a more radical development is planned. “We will introduce a powertrain that is 40% more efficient than those we use today – without any sacrifice in performance or refinement. We’re not talking about it yet, but it will be in the market by 2012,” says Eichhorn. “The third leg of our low-CO2 strategy is that all our cars must by 2012 be compatible with renewable fuels – and that has to mean renewable biofuels of the second generation,” he adds.
Before joining Bentley, Eichhorn was director of research at VW group – where worked on developing second-generation biofuels. Bentley will be at the forefront of 2G biofuel implementation. “Not the pioneer – that is VW do Brasil where today all their cars are biofuel compatible,” he says. Back to BRICs again…
Brazilian biofuel comes from sugar cane, which Eichhorn says is “one and a half generation biofuel” – the recent UK government Gallagher report on biofuels recognised that Brazilian sugar cane is not a substitute for rainforest or food crops. Real 2G biofuels will come from algae, straw or even household waste.
And with that, he’s off, like a good German engineer, into a lengthy evaluation of how best to make these future fuels – using enzymes, microbes or complex petrochemical processes. He certainly didn’t expect to have to do so much chemistry in his auto engineering career – “I though I had it cracked when I knew the chemical formula for petrol,” he says, “but it’s all fascinating”.
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