Can the Japanese luxury car catch up with Germany's top brands? Nissan is flooring it—with plans for 80 dealers in the region by 2010
Europe—the home of Mercedes (DAI), BMW (BMWG.DE), and Audi (VOWG.DE)—wouldn't seem to have much room for a Japanese luxury car. Toyota Motor's (TM) Lexus, introduced in the Old World more than a decade ago, has never gained much traction, and its European sales have slumped this year because of the global financial crisis.
All the more surprising, then, that Nissan Motor (NSANY) this month is launching its Infiniti brand in five countries on the Continent, with plans to expand Europe-wide over the next two years. "We're aware of the difficulty," says Bastien Schupp, Infiniti's European marketing director. "It's like importing Japanese champagne to France."
But Infiniti is already selling strongly against German competitors in Russia, where it now has almost 10% of the luxury car market. Schupp says he's confident Infiniti can build a loyal customer base in Western Europe as well. "Already, more than 2,000 Infinitis have been imported [to Western Europe] without our even being there," he says.
Keeping Down the Noise
By yearend, Infiniti expects to open 15 dealerships in France, Italy, Poland, Spain, and Switzerland. By 2010 it expects to have 80 dealerships, including outlets in Germany and Britain, Europe's two biggest luxury-car markets. Initially four models will be sold, with prices starting at about $56,500 for the G37 sedan to more than $102,000 for the FX crossover.
Although Infiniti sells similar vehicles in the U.S. and Japan, it has tweaked their designs to appeal to European motorists. Because Europeans tend to drive faster, the European models will have noise-dampening features including 30% thicker carpeting and specially designed wiper blades and door seals.
The target market will be "males in their 40s," Schupp says. "There are a large number of progressive entrepreneurs [who] are not bound by large corporate car policies and can choose something that's different."
Yet Infiniti clearly faces an uphill battle—and not only because of the Germans' dominance. For one thing, it doesn't offer diesel cars, which are very popular in Europe because diesel offers better fuel economy and costs less than gasoline in most countries.
Prestige Is Elusive
Moreover, "Japanese cars are simply not associated with luxury in most of Europe," says Earl Hesterberg, chief executive of Group 1 Automotive (GPI), a Houston dealership group that owns BMW dealerships in Britain. Hesterberg was the U.S. marketing chief for Infiniti in the early 1990s and served several years as head of sales and marketing for Ford (F) Europe. Infiniti offered Group 1 Automotive an exclusive British dealership—but Hesterberg turned it down.
Unlike Russia, with its wide-open capitalism, "Germany and [Britain] are still very much caste-oriented in society, and that makes it tougher for 'new money' brands to be seen as prestigious," Hesterberg says.
Indeed, despite positive reviews and customer rankings (BusinessWeek.com, 6/2/06), Lexus has struggled in Europe since entering the market in 1991. Its European sales during the first eight months of this year fell 13%, to 31,940 units. By contrast, BMW sold more than 560,000 cars in the region during the same period.
Can Infiniti beat those odds, especially in the midst of a major industry slump? "We're not saying it will be easy," Schupp says. "But the products are ready now, and the company thinks it can benefit from the know-how [to be gained] from selling in the European market."