Bayerische Motoren Werke AG (BMW) and Daimler AG (DAI)’s Mercedes-Benz are boosting incentives and emphasizing sales leadership instead of brand value, the chief executive officer of car dealer Group 1 Automotive Inc. said.
“The conclusion of every month brings more comments and boasts regarding which brand is selling the most,” Earl Hesterberg, who runs the fourth-largest U.S. dealership, said in a speech today at the Automotive News World Congress conference in Detroit. “Quantity seems to be surpassing quality and brand value in terms of emphasis.” He called rhetoric of BMW (BMW) and Mercedes “concerning.”
Mercedes said Jan. 9 it held back final 2011 U.S. sales results this month because the luxury brand suspected BMW would adjust its own number to become No. 1. BMW (BMW), which snapped the Toyota Motor Corp. (7203) Lexus brand’s 11-year run as the top-selling premium automaker in the U.S. last year, denied the accusation while taking a swipe at Mercedes’s incentive spending.
BMW, Mercedes and Volkswagen AG (VOW)’s Audi are in a global contest for sales leadership, Hesterberg said in an interview after his speech. Automakers are counting on China, which became the biggest market for brands such as BMW’s Rolls-Royce last year, to help make record deliveries in 2012.
“The concern is if China dries up,” he said. “We’ve seen it in Europe already where certain countries have dried up, and too many vehicles are getting pushed into market. That can be very damaging to a brand and to the dealer business model.”
Hesterberg said he has similar concerns about too much supply of full-size pickups in the U.S. Inventory of those trucks grew through much of midyear 2011, which helped result in the segment leading the market in incentives, he said.
BMW outsold Mercedes by 2,715 vehicles in 2011 in the U.S. Mercedes and BMW both waited until Jan. 5 to release results, a day after other automakers announced final figures. Ultimately, Mercedes announced its results about two hours before BMW did.
“The luxury brands seem to be locked in a perpetual sales contest no different than the Ford (F) versus Chevy wars of several decades,” said Hesterberg, a former Ford sales executive.
One bulletin describing December incentive programs that was distributed to dealers was 29 pages long, Hesterberg said in his speech. He declined to name which brand issued it.
“Luxury goods aren’t about pushing volume,” he said in the interview. The brands’ year-end push to boost deliveries with discounts was “the most aggressive one we’ve seen, I think because somebody had a chance to unseat Lexus.”
BMW, including its Mini non-luxury brand, accounted for 13 percent of Houston-based Group 1’s new vehicle sales in the first three quarters of 2011 while Daimler brands including Mercedes were 5.5 percent. Group 1 disclosed the figures on Oct. 25 when it reported third-quarter financial results.
Group 1 still sees BMW and Mercedes franchises as “attractive” and won’t adjust plans to add stores selling those brands to its dealership chain, Hesterberg said.
Both BMW and Mercedes say they expect the fight for luxury supremacy to continue this year. Mercedes forecasts its U.S. sales to rise at least 10 percent in 2012, aided by the refreshed C-Class.
BMW predicts its U.S. sales will rise as well, helped by the introduction of the redesigned 3-Series compact sedans. Ludwig Willisch, chief executive officer of BMW of North America, declined to say how much sales would increase, though he said BMW will remain No. 1 in the U.S.
Sales of Munich-based BMW’s luxury vehicles rose 13 percent to 247,907 last year, boosted by the redesigned X3 sport-utility vehicle, while Lexus sales fell 13 percent to 198,552.
Mercedes narrowed the gap with BMW toward the end of the year, helped by a refreshed C-Class compact sedan and new coupe. Stuttgart, Germany-based Mercedes saw sales rise 13 percent to 245,192 in the U.S.
The results exclude Daimler’s Sprinter and Freightliner vans, Smart cars and BMW’s Mini brand vehicles, which aren’t luxury models.
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