Customers in lower segments of the market are driven by price and perceived value, but premium brand buyer expectations are more complicated and have changed in the recession
BMW North America CEO Ludwig Willisch
DETROIT – The market for premium vehicles has changed dramatically during the past several years, and amazingly sales of luxury vehicles have soared while the U.S. economy has struggled.
Auto makers such as, Mercedes-Benz and Audi saw some of their best sales ever in 2011.
But a different type of customer now is driving the luxury market, says Ludwig Willisch, president and CEO ofof North America.
Luxury buyers no longer are interested in simply buying a pricey status symbol. They want vehicles that are efficient and loaded with technology, yet they don’t want to sacrifice performance for better fuel economy. And they are smart enough to tell the difference between bells and whistles and meaningful electronic features.
“Unlike customers in lower segments of the market that have been driven by price and perceived value, premium brand customer expectations are much more complicated and have changed in the recession years,” Willisch says at the Society of Automotive Analysts annual Automotive Outlook Conference here.
While affluent consumers have seen their personal wealth take a hit, price has not become the key factor in their purchase decision. Instead, values such as authenticity, efficiency, functionality, advanced technology and the retail experience have become more important.
BMW sales increased 26% during the past two years. The German auto maker sold 247,907 units in 2011, the highest volume of any premium brand in the U.S. Willisch attributes the auto maker’s success to its ability to satisfy these new customer values.
In thinly veiled swipes at Mercedes-Benz, Lexus and others, Willisch says BMW is authentic because it has been an independent company since 1960 and is dedicated to making only premium vehicles.
“BMW does not produce trucks or taxis or buses,” he says. “We don’t produce sofas on wheels either. We don’t take mass-market vehicles and re-badge them as premium.”
Willisch also believes buyers are gravitating to BMWs because savvy consumers appreciate sophisticated electronics but are not impressed when some auto makers go overboard with gadgetry.
“Our onboard technology systems are world class, (but) we are not trying to turn our vehicles into distracting circuses on wheels as are some others,” he says. “Premium brands can command premium prices because they continually provide best performance, comfort and safety technologies available in the market.
“BMW group spends about 5% of revenue on research and development to address future customer demands and increasingly different regulations,” he adds.
Dealers also are playing a key role in BMW’s success and have invested more than $3 billion in capital improvements in U.S.
On the sidelines following his comments, Willisch brushes off the suggestion that BMW won the 2011 sales race with Mercedes by piling on incentives late in 2011. Instead, he points out that the auto maker is renewing 60% of its lineup this year.
“I really think odds are we can defend the title.”