Germany: Sales Way Down, Business Way Up
Germany’s new car market continues to be anemic. In September, sales for the first nine months were down 27.5 percent. Official October data are expected later in the day, or tomorrow. Nobody expects sudden growth. (The whisper number is -20 percent.) Nevertheless, the German car industry runs extra shifts and out of cars.
Why?
Exports.
The German industry association Verband der Automobilindustrie (VDA) expects exports of 4.15m units when the year is over, up 21 percent. The German market is expected to absorb only 2.9m units this year (after 3.8m last year). Bottom line: Despite a disastrous home market, German automakers will make 10 percent more cars this year than in the boom year 2009, reports Automobilwoche [sub].
Who’s buying all those cars? The Chinese, of course. Plus 53 percent in the first 8 months. But also U.S. exports are slowly recovering. Meanwhile in Europe, the economy is up, but car sales are down, afterpains of the cash for clunkers orgy. 2011, 2012 latest, everything should be back to normal. Interesting how they cheated fate. It’s good to have cars that are popular the world over.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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1. Yes, US consumers are more fussy. but - 2. No, the gap is not perceived, it is quite real. I can cite all the German cars I've owned in the last 25 years, cite the (pretty much) unbiased sites / reports you mention above, my experience as a service adviser at high-line German dealerships, or the many car biz pros I've know for decades - the gap is real, it exists, and it goes way beyond fussy customers. 3. Desirability? Hell, given a bottomless (or much deeper than it is currently) wallet, I'd never drive anything but the latest M-series BMW or S-line Audi. I have kids and a mortgage and my last name ain't Gates or Buffet, so I have learned to love my Hyundai Sonata for what it is - a well designed, reasonably well put together, and supremely reliable appliance. That plays my iPod without a 500 dollar connector, and whose lack of Bi Xenon headlights is made up for by the fact that THEY (my current halogens) WORK ALL THE TIME.
The luxury market in the US at least has gone through a number of dramatic shifts. Back in the Mad Men days, a Lincoln or Cadillac really was a prestige product. All of that fell apart in the '70s and '80s, and the gold standard of what to own became a Mercedes, with BMW later joining that group. Audi had a following, but they were not at the same level, and after the UA hit job, it took them another decade to begin to recover. At the time, Mercedes quality was top notch, and Detroit quality was, well we know what it was. The Acura Legend and the LS400 started to shake up the market, but really only for price shoppers. They were really just Mercedes imitations, and the rest of the Acura and Lexus ranges were mediocre variants of mass market US or JDM products. Nobody ever cared about the Vigor or the ES250. Infiniti was never taken seriously. At the end of the '90s and early '00s, German quality basically became a punchline, and I think they lost a lot of buyers to Lexus, especially frustrated ML and X5 buyers to the RX300. Acura products were still cheap and bland although the MDX was a hit, and Infiniti was still a joke. I think the buyers that stuck around despite the quality problems did so because Germany was still the best in terms of the driving experience. This was the era of the E39 5 series. Even if it was in the shop a lot, what would you sell it for? A Seville? A GS400? I don't think so. Fast forward to today, and German quality is coming back, although they are still having some issues with their bleeding edge tech and some more serious mechanical issues here and there such as the infamous BMW high pressure fuel pumps. That said, a Lexus or Acura used to be bullet proof. Problems with LS400s or Legends were unheard of. That's not the case anymore. Acura TLs were not immune from Honda's exploding transmissions, and current RL had a very shaky start. Cracks in the once impenetrable Lexus armor started back with the first gen GX. Then the ES and IS weren't so perfect either, and now even CR describes the GS300/350 AWD as serially unreliable. The most interesting shift though is from the company nobody ever really cared about, Infiniti. Lexus products started out boring and still are. Acura started out cheap and still is. Infiniti has made a remarkable shift though from peddling awkward JDM Nissans and transparent Maxima rebadges to the best challenger to German performance/luxury dominance that Japan has. Acura simply has no ability to compete with the 2011 M, and while Lexus will try, the GS has always been a weak disappointment since the '93 original. Only the M really has what it takes to take on the new E and 5.
I beg to differ. The GS in the 400 and 430 form are very good cars. Reliability on the 1st and 2nd generation are very good compared with the 5 and E-class counterparts. With the 3rd generation, Lexus lost the plot on build quality. The reality is that most German car drivers never get the 9/10ths performance that sold them on the car in the 1st place. I love the idea of tearing it up in the twisties but the reality is stop and go driving with some freeway mixed in. I think most drivers face what I face with traffic. After one or two bad experiences with transmissions or electric gremlins, some move onto more reliable makes. Some don't. The notion of owning a Merc / BMW for 15/20yrs is largely impossible. The idea of leasing and releasing every 3-4 yrs also turns my stomach. Can you honestly imagine getting 300k miles out of a Merc or BMW v8? You can with the GS engine. Can you imagine getting 150-200k out of the tranny? You can with the GS tranny I am not sure the driving experience is worth the repairs but everyone votes with their own wallet.
The more relevant stats are: what is the average term of ownership and what is the percentage of leasing as to total sales per marque. I'm quite sure that most of the high end german marques are mainly lease term holders and only that length of term. Reliability won't be a factor by much amongst all brands.