BMW is renowned for sporty rear-wheel-drive sedans. But its front-wheel-drive 2-series Gran Tourer seats seven and needs only a sliding door to be a full-blown minivan.
Meanwhile, Mercedes-Benz may need to change its slogan to "engineered like no other [Japanese] truck in the world" when it begins building a luxury pickup based on a Nissan Frontier chassis before the end of the decade.
In their quest to boost sales and achieve double-digit profit margins, Germany's premium carmakers are divvying segments into ever- thinner slices. In the process, they are stretching their brands figuratively -- and their cars literally -- in ways previously unimaginable.
"We take into consideration what the investment is that we have to make, what's our gross sales potential, what's the net sales potential after cannibalization effects and what's the margin we make on the car," explained Ola Kaellenius, Mercedes board member for sales and marketing. "Then we run that through the machine, and if we get a net present value that meets our targets, we go for it."
In the coming five years, Audi says it will add seven new vehicles, including at least two SUVs, increasing its range to 60 models. Mercedes plans to add 10 models in new segments by 2020.
Carmakers often recombine the DNA of other vehicles as they try to create the next breakthrough concept that drivers didn't know they wanted. "Coupe-ifying" sedans and SUVs is the latest trend, including the new Mercedes GLE Coupe that costs nearly $17,000 more than its M-class sibling.
"In an increasingly crowded marketplace it's important to give their customers a sense of differentiation, so you are not driving the same BMW as your neighbor," said Anil Valsan, global lead analyst for EY's automotive team. Valsan adds that popular niche cars are typically packed with sought-after features, enabling automakers to charge higher prices and offer lower incentives.
Audi's A7 Sportback, a four-door fastback, "is based on the same architecture of the A6, [but] has average transaction prices close to the A8," Audi CEO Rupert Stadler said in an interview.
Moving downmarket
A study last year by U.K.-based CAP Automotive revealed that the number of vehicle derivatives introduced annually has quadrupled since 2009. Much of this has taken place in the smaller segments, leading to a considerable boost in prices as premium carmakers move downmarket with vehicles such as the Audi A1 subcompact or Mini Countryman crossover.
Mercedes and BMW are not alone in giving an existing chassis a nip and tuck and adding some sheet metal here and there to roll out a new vehicle.
Fiat offers European customers a choice among nine slightly different versions of its popular 500 subcompact. The higher profitability of niche vehicles enticed Ford into launching the Vignale premium trim level for Europe, where Lincoln is too weak to compete. In an unusual move, Land Rover will even launch a convertible version of its popular Range Rover Evoque SUV next year.
Nevertheless, the Germans may be the most prolific in their attempts to find untapped profit pools.
For one thing, high-end automakers have more leeway in pricing. Porsche sells more than 20 versions of the 911, for example. These include the Carrera S Cabriolet, Targa 4 GTS and GT3 RS and range from $85,295 to $195,595, including shipping, for the sportiest open-top 911 Turbo. Global 911 sales last year totaled 30,510 vehicles, or fewer than 1,500 per variant, and yet Porsche has among the highest profit margins in the industry, thanks in part to the drawing power of the 911.
It may seem risky, but experts say the economics largely work. Automakers' highly flexible platforms allow new, higher-priced niche vehicles to retain much of the underlying chassis and components, while reskinning the body at only an incremental increase in tooling costs.
"The trick is to use globally networked production plants employing standardized equipment and machines that build cars off scalable modular architectures," said Markus Schaefer, Mercedes production and supply chain head.
"Were we to take someone from our German compact car factory in Rastatt who builds the GLA crossover and put them the very next day in our Hungarian site in Kecskemet, they would be able to adapt to building the CLA four-door coupe very quickly," he said.
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