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BMW Sleds, Mercedes for Kids Battle $13,000 Audi on Santa List

For Luxury Automakers, Selling Toys Is No Game
Europe’s luxury car makers hope to bolster their brands by selling expensive toy cars aimed at children--tomorrow’s buyers.

Nov. 24 (Bloomberg) -- Germany’s three biggest automakers have been locked in a tight race for dominance of the world’s luxury-car market in recent years.

Now, the rivalry between BMW, Mercedes-Benz, and Volkswagen AG’s Audi has expanded to include a holiday season battle for playground prestige with new push cars and snow sleds that target the next generation of drivers, Bloomberg Businessweek reports in its Nov. 29 issue.

Audi set the standard for luxury kid toys with a limited edition pedal-powered version of the Auto Union Type C, which it showed at the Nuremberg toy fair in February. The scale model of the 1930s racer, designed for kids up to 135 centimeters (4.4 feet) tall, has an aluminum frame, hydraulic brakes, seven-speed hub gear, leather-clad steering wheel and oak dashboard. The car retails for 9,700 euros ($13,300), making it Audi’s most expensive kid toy; only 100 of the 500-unit run remain unsold.

Bayerische Motoren Werke AG is firing back in time for Christmas with new BMW- and Mini-branded sleds for 79 euros apiece. Daimler AG’s Mercedes is countering with a version of the gull-wing SLS supercar for toddlers, due in April for 90 euros each. The carmakers are quick to explain that there’s more to gain by promoting kid-focused merchandise than simply making a few euros from hawking toy racers.

“Merchandising is not important because you can make huge money with it, but because it’s another means of positioning your brand,” said Peter Schwarzenbauer, Audi’s sales chief. “We’re thinking about more products that are not directly related to our cars but set design standards in other areas,” such as a 12,900-euro tabletop soccer game.

Teddy Bears, Geckos

Audi, which aims to topple BMW as the world’s largest luxury carmaker by 2015, is revamping the Quattro GmbH unit to sharpen its focus on vehicle customization and accessories, Schwarzenbauer said. Merchandising sales have climbed 20 percent this year, according to the Ingolstadt, Germany-based company.

In addition to toy cars, Audi has a line of Teddy Bears, including one decked out in a motor-racing suit for 47 euros, and a modern pedal-powered alternative to the exclusive Type C, which premiered as a prototype in 2006. The red plastic racer for 299 euros features an adjustable rollover bar, handbrake, over-sized tires with Audi-style rims, and padded seats.

Then, there’s Rob the gecko, a black, grey and gold cartoon lizard featured in plush toys and baby items. Rob was developed as a companion for kids on car trips and is “made of such soft plush that you can hug and stroke him for ages,” Audi said in a brochure for the line, which includes a cocoon blanket, neck support, and play steering wheel.

BMW Snow Racer

Luxury carmakers go to great lengths to add details that ensure their toys stand out. BMW’s 79-euro Snow Racer sled has replaceable metal runners, a suspension-system in the red steering ski, and a horn to warn inattentive passersby.

In April, Mercedes will roll out the foot-powered SLS Bobby-Benz, which will share the shapes of its headlights, grill and rear end with Mercedes’s $183,000 SLS sports car. The toy SLS features quiet-running tires, an Ackermann steering system with tight cornering for living-room maneuverability and a steering wheel that absorbs impact to prevent injury in the event of a collision.

Toys are a particular attraction for car companies because they tighten relations with current customers and provide an opportunity to develop an affinity for the brand with future drivers such as the kids of Sonny Kim.

Driving Mom’s Car

The 36-year-old graphic designer from Berlin spotted a pedal car, which sells for between 179 euros and 205 euros, at the Mercedes Center in the German capital while having winter tires put on her 2007 A-Class hatchback and thought it would make a great gift for her two- and four-year-old boys.

“It would be nice for the kids to drive the same thing as mom and dad,” she said. “It would be a nice bond.”

The kid products “have to live up to Mercedes’ standards for quality and safety -- especially our toys, which are all-time favorites with the next generation of Mercedes-Benz customers,” said Christian Boucke, head of Mercedes-Benz Accessories. The 10-year-old unit offers 15,000 products including $24 silver Christmas ornaments, a $139 tote bag made from seatbelts, and a retractable pet leash for $15.50.

Merchandise has been a steadily growing part of Mercedes’s business, with sales rising on average more than 10 percent annually over the past decade. Car sales have been less consistent. Revenue last year at the Stuttgart, Germany-based company dropped 4.3 percent in the wake of the financial crisis.

Mini Rain Boots

BMW began its lifestyle business 15 years ago. It now sells more than 2,000 products including 39-euro Mini rain boots and a 1,500-euro bike from BMW’s M performance unit. The Munich-based company also introduced a kid edition of the M3 GT2 race car. The battery-powered version, which costs 349 euros, has forward and reverse gears and a top speed of 2.5 miles per hour.

“We are first and foremost a marketing initiative, and the main objectives are to broaden the brand’s presence and strengthen loyalty,” said Thomas Goerdt, head of BMW’s merchandising and lifestyle unit. “We are a marketing effort that makes money.”

BMW’s merchandise sales this year have increased 20 percent and the unit holds its own with profit margins generated from selling real cars, he said. BMW is targeting a margin of more than 7 percent this year on its auto business.

In China, which is now its third-largest market for car sales, BMW opened a store selling merchandise a year before it began assembling cars in the country. There are now 40 BMW stores in China, and BMW is considering expanding its retail presence to Korea, Russia and India, Goerdt said.

No Underwear

While luxury consumers want a wide range of products to communicate their association with the brand, “merchandising needs to be kept in check so that it doesn’t overstretch the brand or interfere with the core business,” said Michel Gabriel, managing director for consultancy Interbrand in Zurich, who has previously advised Audi on branding.

“Sometimes you have to say no, even if a lot of money can be made from a product” like branded underwear, he says.

Ultimately, the world’s top-three premium car brands are chasing Aston Martin when it comes to exclusive kid toys. The ultra-luxury British brand sold mini motorized replicas of the V8 Vantage Volante and Virage in the late 1980s and early ‘90s to customers including Prince Charles.

The Aston Martin Volante Junior, which retailed at 15,000 pounds ($24,000) plus tax, had a gasoline engine, radio and a top speed of more than 30 miles per hour. The cars have resold for as much as 25,000 pounds, according to Roger Bennington, managing director of Stratton Motor, one of the world’s largest Aston Martin dealers.

“A lot of people bought them as a collector’s item when they had a new car built and would normally have the Junior built to the same specification,” said Bennington. “I don’t actually think many kids got to use them as they were normally the prized possession of the Aston Martin owner. They were also a little bit too fast for children.”

To contact the reporter on this story: Chris Reiter in Berlin at creiter2@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net.

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