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The limits to Infiniti: how Ford needs more from lincoln.


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The limits to Infiniti


A MONTH before launching Lexus in America in 1989, Toyota considered running a television advertisement showing German aristocrats at a wild party in a hilltop castle. The voice-over intoned that the Teutons had dominated upmarket, high-performance cars for nearly 60 years but they had only “30 days left to enjoy it”.

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The ad never made it to the TV screens, which is just as well: three German brands, Mercedes, BMW and Volkswagen’s Audi, have become ever more dominant as emerging-markets growth has expanded global demand for premium cars. Lexus, Acura and Infiniti, the upmarket brands dreamed up in the 1980s by Japan’s big three carmakers, Toyota, Honda and Nissan, have been left trailing (see chart). Together the German trio now have 70% of the market for fast, expensive and luxurious cars, whereas the Japanese have just 10%. And they are being overtaken by Jaguar Land Rover (JLR), a British (but Indian-owned) firm, which last year sold almost half a million cars, just behind Lexus.

The Japanese three are making renewed efforts to close the gap on the Germans. Last month Infiniti said it was redesigning its cars, starting with the new Q50 (pictured), to give them a more “passionate” Latin feel, distinguishing them from the “cold and clinical” German models. Lexus is about to launch a baby SUV, the NX, to rival JLR’s successful Range Rover Evoque and similar cars from Audi and BMW. Acura is pinning its hopes on the new RLX, a sleek, stretchy saloon.

For Toyota, Honda and Nissan, their premium divisions are, or at least should be, far more than just nice little sidelines. Profits in the fiercely competitive mass market can be vanishingly small, whereas those on upmarket models can be thousands of dollars per vehicle. So any improvement in the carmakers’ sales of premium models would have a disproportionate effect on their overall results. As Andy Palmer, a Nissan executive, puts it,

premium models account for “12% of the volume and 50% of the profits” of the entire car industry.

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2014 European Sales:

 

BMW - 676K

Mercedes - 652K

Audi - 726K

 

Infiniti - 0

Lexus - 31K

Acura - 0

 

Add to that the growth from Utilities by the German brands who have multiple new Utilities over the last 2-3 years compared to the Japanese who only have one or two and it's not earth-shattering news.

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"Luxury cars are profitable, therefore we should spend billions of dollars launching luxury cars" is a really really really bad idea.

 

Consistent, sustainable investments in a stable brand identity is the only way you're going to build luxury. There's no short cut.

 

It's also worth noting that Ford's margins on the F-Series probably rival the margins on any luxury car.

Edited by RichardJensen
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12% of the volume and 50% of the profits??????????????? hmm,what does that make the F-150

 

a product only primarily sold in North America, which as it happens if Ford's only consistently profitable market.

 

2014 European Sales:

 

BMW - 676K

Mercedes - 652K

Audi - 726K

 

Infiniti - 0

Lexus - 31K

Acura - 0

 

Add to that the growth from Utilities by the German brands who have multiple new Utilities over the last 2-3 years compared to the Japanese who only have one or two and it's not earth-shattering news.

 

China now leads the World in premium cars sales. Europe is mature all the growth in Asia and South America.

 

My point is there isn't an F150 type product for Europe, Asia or south America and ford profitability in the regions shows this is a problem.

 

If one day the chicken tax is repealed Ford's fortress in light trucks would be overrun.

 

 

"Luxury cars are profitable, therefore we should spend billions of dollars launching luxury cars" is a really really really bad idea.

 

Consistent, sustainable investments in a stable brand identity is the only way you're going to build luxury. There's no short cut.

 

It's also worth noting that Ford's margins on the F-Series probably rival the margins on any luxury car.

 

Lets be even more honest, there isn't a way to beat the germans at their own game. I feel you have to go around them and create niches they are either unwilling or unable to go into. buyer preference for luxury goods is very Fickle, you cannot look at your product like its an value proposition. it is at it's core is an Emotional Decision.

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Biker, hows Infiniti doing here...? answer...abysmal, B) I think Chinas a bubble, watch.......I would, if I was a manufacturer be wary of THAT market...Lexus gave the Germans fits for a while, seems that wave has subsided, germans countered and are stronger then ever. Not sure that Chicken tax effects anything, Toyotas built here, Nissan etc, and VW etc also have that opportunity, as does anyone else...guess what...no ones really made a dent ( steel OR aluminum...lol )

Edited by Deanh
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2014 European Sales:

 

BMW - 676K

Mercedes - 652K

Audi - 726K

 

Infiniti - 0

Lexus - 31K

Acura - 0

 

Add to that the growth from Utilities by the German brands who have multiple new Utilities over the last 2-3 years compared to the Japanese who only have one or two and it's not earth-shattering news.

 

Infiniti sales in Europe is not 0 - but close to it.

 

On a global basis, the growth of German brands are basically driven by China, which the Japanese brands have so far failed to make a dent. Jaguar Land Rover sold more vehicles in China than Lexus did last year as the article pointed out.

 

Each of the Japanese brand have its own issues... the article didn't really dig that deep to further the discussion.

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Infiniti sales in Europe is not 0 - but close to it.

 

On a global basis, the growth of German brands are basically driven by China, which the Japanese brands have so far failed to make a dent. Jaguar Land Rover sold more vehicles in China than Lexus did last year as the article pointed out.

 

Each of the Japanese brand have its own issues... the article didn't really dig that deep to further the discussion.

I wouldn't doubt that the difficulty of the Japanese brands to break in China is due in large part to anti-Japanese feelings that trace back a long way.

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The chicken tax isn't preventing competition with light trucks in the U.S. Toyota has the best shot of any import to compete and you see where they're at right now.

 

you could argue that the chicken tax keeps prices Artificially high because importer cannot use their lower cost production and lower overhead to bring down prices in the segment.

 

Unlike the luxury segment where buying decisions can be more subjective keeping the Prices high, the light truck Segment is not completely free from the forces of traditional mainstream models where buying decisions can be based on objective means and not purely on subjective things like premium brands.

 

An imported full sized truck that was significantly lower cost but still capable would force a reaction from the major players and bring prices down, remember how the import got a foot hold in the US market by offering cheap cars, and they grew from their.

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Doesn't China hate Japan and therefore everything Japanese? Wouldn't that account for growth of U.S. and European brands but not Japanese brands?

 

That's an excuse not a real problem. Toyota and Honda have no problem selling cars and competing with European and American brands in China. Lexus and Acura on the other hand...

 

Lexus in particular has an image problem. It is considered a brand for "weirdos" (in the Chinese context) that like impotent hybrid cars. The luxury car market in China is 100% Nouveau riche - there are no existing pool of luxury car owners... everyone buying a BMW (or Audi or Mercedes etc) is basically buying his or her first luxury car (in many cases, the first car, period). The marketing is therefore very heavily focused on the "halo-pull" of high performance and flagship models. Basically, buying a luxury car in China today is a left-brain exercise appealing to one's base instincts... it is all about flaunting your wealth and status. You can see some of this distortion in the product offering - everyone wants LWB everything because it is bigger. Lexus is a very right-brain brand. The persona of the brand was calibrated to appeal to a segment of US car buyers that were being under-served. And that drove product decision which runs counter to what Chinese luxury car buyers want.

Edited by bzcat
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you could argue that the chicken tax keeps prices Artificially high because importer cannot use their lower cost production and lower overhead to bring down prices in the segment.

 

Unlike the luxury segment where buying decisions can be more subjective keeping the Prices high, the light truck Segment is not completely free from the forces of traditional mainstream models where buying decisions can be based on objective means and not purely on subjective things like premium brands.

 

An imported full sized truck that was significantly lower cost but still capable would force a reaction from the major players and bring prices down, remember how the import got a foot hold in the US market by offering cheap cars, and they grew from their.

If it were that big of an issue, you could build it cheap in Mexico and import it to the U.S. with no tarrif (Thank you NAFTA). So far the only company that does that is Ram.

 

 

Edited for redundancy

Edited by fuzzymoomoo
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you could argue that the chicken tax keeps prices Artificially high because importer cannot use their lower cost production and lower overhead to bring down prices in the segment.

 

Unlike the luxury segment where buying decisions can be more subjective keeping the Prices high, the light truck Segment is not completely free from the forces of traditional mainstream models where buying decisions can be based on objective means and not purely on subjective things like premium brands.

 

An imported full sized truck that was significantly lower cost but still capable would force a reaction from the major players and bring prices down, remember how the import got a foot hold in the US market by offering cheap cars, and they grew from their.

 

Eh, I see the US truck market being completely different than the car market where the imports swooped in and took over. Americans are loyal to their truck brands. Look at Toyota's attempt with the Tundra and Nissan's with the Titan. They tried the same thing and haven't really gotten anywhere. So why do you think all of the sudden buyers would jump ship for some unproven cheap POS truck?? On price alone? And it's not like there's some magical perfect truck product offered elsewhere in the world that could conceivably swoop in and take over if the tax were eliminated. Could Ford more easily import the Ranger? Perhaps. But that would go against your theory that eliminating the tax would cause "Ford's fortress to be overrun," as customers would still be within the Ford brand. So I'm just not sure where you're coming from.

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Lets be even more honest, there isn't a way to beat the germans at their own game. I feel you have to go around them and create niches

 

BMW currently makes 13 distinct models (counting the 3-Series coupes as separate models), not counting wagons or the upcoming FWD offering.

 

Out-niching these companies is not going to happen.

 

---

 

What is also not going to happen at Ford is spending billions in an effort to 'move the market' the way GM did with Cadillac.

 

If you are not content to watch Ford grow Lincoln volume organically the way they did with Ford brand products in NA, you can go join GMI and cheer GM along right into bankruptcy.

Edited by RichardJensen
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If it were that big of an issue, you could build it cheap in Mexico and import it to the U.S. with no tarrif (Thank you NAFTA). So far the only company that does that is Ram.

 

 

Edited for redundancy

 

Mexico isn't cheap enough to make the investment worthwhile, you have to set up a new supplier network for a dissimilar product in a country far from your native supplier base. it simply isn't worth the risk, new entrants would have to be much cheaper to make an impact and overcome the barrier to entry.

 

BMW currently makes 13 distinct models (counting the 3-Series coupes as separate models), not counting wagons or the upcoming FWD offering.

 

Out-niching these companies is not going to happen.

 

Good companies find ways to win, you have to be creative and find that weakness in the marketplace. Niches Aren't always structural, you have to try new things. it shouldn't be expensive or extensive but has to appear Unique.

 

What is also not going to happen at Ford is spending billions in an effort to 'move the market' the way GM did with Cadillac.

 

If you are not content to watch Ford grow Lincoln volume organically the way they did with Ford brand products in NA, you can go join GMI and cheer GM along right into bankruptcy.

 

I don't think ford has recovered the market share it lost in the last decade, I wouldn't use that as an example.

 

I don't think GM did it right either, but I think they appreciate the importance of premium brands more than Ford, their heart is in the right place but they don't get it.

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I don't think this needs a separate thread. :)

 

Lincoln in China

 

http://www.detroitnews.com/story/business/autos/ford/2015/02/02/lincoln-scrubs-new-car-smell-china/22724131/

 

 

Walk into a Lincoln dealership in China, and you'll find a living room-like atmosphere, with elaborate tea selections, interactive LED televisions and a lounge where you can watch as your car is worked on. If you'd rather leave the dealership, you'll receive a password to access a live video stream from your smartphone, tablet or laptop to watch the work.

Lincoln allowed Chinese customers to watch their cars being worked on after learning they are unusually distrustful of dealer repairs.

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