Mercedes Adds Coupe Crossover as Rivals Expand SUV Lineup

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A Mercedes-Benz Concept Coupe is on display during the 2014 Beijing International Automotive Exhibition at China International Exhibition Center in Beijing on April 20, 2014. Close

A Mercedes-Benz Concept Coupe is on display during the 2014 Beijing International... Read More

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Source: ChinaFotoPress via Getty Images

A Mercedes-Benz Concept Coupe is on display during the 2014 Beijing International Automotive Exhibition at China International Exhibition Center in Beijing on April 20, 2014.

Mercedes-Benz, the world’s third-biggest maker of luxury cars, is planning a coupe-style sport-utility vehicle with a low, sloping roofline to gain on larger rivals Bayerische Motoren Werke AG (BMW) and Audi AG. (NSU)

The four-door crossover, which incorporates both SUV and sedan elements, features 22-inch tires for higher ground clearance, a sporty grille with the iconic Mercedes star integrated into it and rear lamps in a slim band to make the model look broader. The vehicle, unveiled over the weekend at the Beijing auto show, will go into production next year.

The model is “a harbinger of Mercedes’s further growth,” Thomas Weber, the automaker’s development chief, told reporters in Beijing. “We are keeping our foot on the pedal.”

Mercedes, Audi and BMW are all expanding their SUV lineups in the coming years to six models, and overhauling those currently on the market, as they vie to nab the top position in luxury car sales by the end of the decade. The segment is critical in their competition with one another as premium SUV sales will surge 32 percent to 4.93 million vehicles in 2020, with the strongest growth coming from China, according to an IHS Automotive forecast.

China, the world’s biggest auto market, is increasingly dictating luxury automakers’ development decisions as it grows faster than other major sales regions. SUV demand will continue to outstrip global premium car sales and will account for 40 percent of deliveries in five years, compared with 37 percent this year and 26 percent five years ago, according to IHS estimates. The vehicles, which often share many parts with traditional sedans and are sold at higher prices, are also key profit contributors for high-end carmakers.

Off-Road Concept

“SUVs are really in big demand, and they are growing in every region worldwide,” Luca de Meo, Audi’s sales chief, said in an interview in Beijing. “Being strong in SUVs is fundamental to being successful in the premium market.”

Audi debuted an off-road compact SUV at the auto show. The Ingolstadt, Germany-based Volkswagen AG (VOW) brand is testing customer reactions to the sleek four-door vehicle as one possibility for expanding its SUV range, de Meo said.

Audi is also contemplating adding an SUV above the current Q7, its biggest vehicle in the segment. The Q7 is in the process of being revamped as a lighter and more fuel efficient model. In compact crossovers, Audi will add the Q1 in 2016. All the additions would double the marque’s SUV offerings.

Though manufacturers are rushing to meet customer demand for roomy vehicles, they also must still consider tightening emission regulations globally. Because SUVs generally are heavier and less aerodynamic, they increase overall pollution.

Fuel Consumption

“The efforts to reduce fuel consumption can’t keep up with the speed the SUV segment is expanding,” said Richard Viereckl, a partner with consulting company PwC Management Engineers in Dusseldorf, Germany. “The SUV boom will continue until the next fuel price shock, which will probably lead to a drop in demand.”

The coupe SUV from Mercedes, which is owned by Daimler AG (DAI), will share underpinnings with the M-Class SUV and be built at the automaker’s U.S. plant in Alabama. The vehicle will join the compact GLA crossover in Mercedes’s lineup. The GLA went on sale in Europe last month and is the manufacturer’s 5th SUV.

BMW, the world’s biggest maker of luxury cars, established coupe-style SUVs in 2008 with the X6. The new X4, derived from the midsized X3, shares the dropping roofline of the bigger X6 and will come to market in July.

BMW’s SUV expansion will also include the X7, a new top-of the-line model, which will be built in Spartanburg, South Carolina. The Munich-based carmaker is spending $1 billion to increase production at the plant by 50 percent to 450,000 vehicles annually by 2016. After the expansion, the factory will be BMW’s biggest facility globally.

“Luxury SUVs play a role as status symbols,” said Marcus Berret, a Stuttgart-based automotive partner with Roland Berger strategy consultants. “People buy premium vehicles to show a wider public what they can afford. SUVs emanate a ’get-out-of-my-way’ mentality that prevails globally.”

To contact the reporter on this story: Dorothee Tschampa in Frankfurt at dtschampa@bloomberg.net

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net Sara Marley

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