- The Washington Times - Friday, November 15, 2002

Ultimately, it may be he who has the most luxury brands wins.
That is if the brands are well managed and manage to hold their value in the face of a competitive onslaught.
Auto analysts see prestige brands names such as Mercedes, BMW, Lexus, Jaguar and Cadillac as the engine that will power automotive sales growth in the years ahead.
Worldwide, deliveries of prestige vehicles have increased 42 percent since 1997, says Ulf Nord, executive managing director of forecasting firm, Global Insight. That compares with a paltry 4 percent rise in sales of volume brands such as Ford, Chevrolet, Fiat, Honda, Opel and others.
That trend will continue, says Mr. Nord, who projects worldwide prestige brand sales to grow 23 percent between now and 2007, compared with a 13 percent gain for the volume brands.
So what's driving this movement?
Two things: trucks and the need to feel special. As consumers trade in their cars for SUVs they have spearheaded the movement upscale. Five years ago, SUVs made up just 3.7 percent of prestige brand sales, according to Global Insight. Today they make up 9.6 percent, and by 2007 they'll account for 12.9 percent. In Europe, one of every two SUVs is expected to sport prestige-brand badging five years from now.
Despite the bumps in the global economy, consumers overall are more affluent and apparently, they need to show it. "Buying a prestige brand car tells the neighbors you're doing well," Mr. Nord says. "It's not necessarily a reliable indication, but people still like to do it," he adds.
In addition, there simply are more prestige vehicles on the market today, and luxury vehicle manufacturers are doing what's necessary to lure buyers with attractive pricing.
"We used to say, Mercedes didn't sell cars, they delivered them," Mr. Nord says. But with the new competition, "they've had to get more aggressive." With all that, it is no wonder General Motors and Ford believe it is critical to revive their Cadillac and Lincoln brands, or why the two were quick to gobble up Saab, Jaguar, Land Rover and Volvo over the past decade or so.
But as prestige brands become more commonplace, do they remain prestigious?
When everyone on the block has one, is an Audi or BMW still a sign of having arrived? As volumes increase, pricing will come down even more, "and that could dilute the perceived exclusivity" of these brands, Mr. Nord notes. "Automakers will have to watch that carefully and manage growth very skillfully," he concludes. "It takes many years to build a prestige brand, and you have to be persistent. Not many companies have the organizational culture to do that."
The question is which auto makers will be up to the task.
Ultimately, brands such as Saab, Volvo, Jaguar, Cadillac maybe even BMW and Mercedes might not mean all that much down at the country club.
It may take a quarter-million-dollar Rolls-Royce, Bentley or Ferrari to inspire any real envy over at the Joneses' house.


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