Blog: Dave LeggettBMW and Daimler under pressure

Dave Leggett | 7 November 2008

If you make prestige products that come with a hefty price tag, you might well be feeling a bit nervous at the moment. Here in Britain you can buy a great big fully loaded three-year-old Mercedes luxobarge for the price of a bag of sugar. Horrific residuals are a part of an unfolding story that looks set to get worse in 2009.

What do you do if you're a bit typecast with product that isn't all that fashionable in credit crunched and energy cost conscious times? In Munich and Stuttgart they have long known that they need to have a strategy in case the market moves away from large, high-margin premium cars. Make hay while the sun shines, but have a plan for when it doesn't and don't have all your eggs in the premium car basket. There are other tricks to perform that can act as a kind of hedging for when bad times come.  

There are options. One thing you can do is develop alternative brands. This has worked well for the two prestige German companies (if we forget about BMW's unhappy adventure with Rover). Mercedes has Smart and BMW has Mini. For a long time, Smart looked like a millstone around the M-B/DCX neck, but no longer. Its time seems to have come and it will be providing Daimler some welcome support as its sales continue to grow. And BMW has pulled off something very, very clever with Mini, but it's hard to see how much more it can do with that brand (a Mini SUV might be stretching the product envelope about as far as it can go). Mini is a relatively mature brand. Watch how those brands perform in 2009; it will be interesting. BMW is also investigating new small cars and may well see a need for a completely new small car brand.

As well as looking at other parts of the car market to get into, you can also do your level best to convince the consumer that your product is different from the rest and not quite as it appears. It may look like a rather ungainly and overfed swan, but actually it's a super-efficient goose underneath (sorry for that slightly rubbish analogy). Thus, your BMW with its high-tech 'efficient dynamics' delivers tree-hugging and wallet preserving economy, while also managing to put a smile on your face with an engine and chassis set-up designed to deliver performance and driver appeal. You can have your cake and eat it. BMW is putting a lot of effort into this approach.

But, at the end of the day, a BMW is a BMW. I'm not saying the strategy isn't clever, but if big cars take a collective walloping, BMW won't be excused to leave the room simply because its cars are a bit cleaner and greener than the rest.

GERMANY: BMW October sales fall prompting full year uncertainty

GERMANY: Daimler car brand sales off 18% in October



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