If you were concerned about the short-term futures of Audi, BMW or Mercedes-Benz … don’t be. The German big three’s manufacturing plants are bracing for record numbers this year, hiring staff like nobody’s business, cancelling holidays, shortening breaks and running many factories around the clock and into the redline, in an effort to meet global demand.
Above: Mercedes-Benz E-Class factory is approaching redline
Audi plans to unseat BMW on the prestige car podium by 2015 – but Munich-based BMW is also upping its own ante by shortening the recent summer break at its Munich plant, which makes the 3-Series. It’s also running other plants hard and investigating the feasibility of building a factory in Brazil.
Mercedes-Benz has added a Saturday shift to its Sindelfingen plant to boost C-Class and E-Class production and is building a new factory in Hungary for small car production. Benz is confident it will overtake BMW emerge at the end of 2011 as the USA’s top-selling prestige brand. In the USA’s year-to-date figures for July Mercedes sold 138,759 vehicles to BMW’s 135,114. If Benz does unseat BMW at the year’s end it should probably send a big thank you to all the tradies in the USA who bought Sprinter vans – the vehicle USA Today calls Benz’s “secret weapon” in the prestige brand sales stakes. This vote of thanks should also include the grey nomads who use the Mercedes-Benz Sprinter as a mobile home/camper.
Mercedes-Benz Sprinter is the prestige marque’s so-called ‘secret weapon’ in the USA
It’s not just the prestige brands’ bread and butter models that are kicking big goals. At Audi’s Neckarsulum plant, which makes the coveted Audi A8 flagship, the company has imposed a third production shift, boosting capacity by almost 60 per cent, from 115 vehicles a day to 180.
The only thing Audi A6, A7 and A8 – and their sporty ‘S’ counterparts – are having trouble keeping up with is consumer demand
The Audi Neckarsulum plant also manufactures the S6, S7 and S8 performance variants. Production at the plant dropped to ‘only’ 180,000 vehicles amid the gloom of the GFC in 2009 (a serious hit by ‘fat cat’ standards) but since then the numbers have been rising steadily. It’s on track for 260,000 vehicles in total this year and the target is 300,000 for 2012 – that’s a lot of elite Audis.
Australia isn’t the only place globally with a not-so-healthy two-speed economy. The world’s three largest prestige carmakers are riding a wave of uppercrust prosperity among the world’s ‘have mores’. Despite the slumps in consumer confidence here and in other western markets, debt crises in western Europe and geopolitical instability and economic uncertainty elsewhere, society’s elite are bucking the trend. They still have plenty of cream to splash on cars.
Beyond 2012, however, some economists propose that BMW, Audi and Mercedes-Benz won’t be able to continue decouple themselves from the trend towards economic stagnation and slumping stock markets around the world. (At least, to the extent that the future can actually be foreseen by economists that far in advance…just like the weather bureau.)
For now, however, it’s boom time in the German prestige automotive manufacturing sector. Audi’s second-biggest plant in southwest Germany, which makes the Audi R8, among other cars, also added extra shifts and about 500 additional workers this year just to keep up with rising demand. Capacity will jump more than 20 per cent – to 260,000 vehicles. Production is up internationally as well – in Spain, China, etc.
Audi R8 is also on a roll
Interestingly, China has the capacity to absorb as many prestige cars and SUV’s as the big three can chuck at it. That country has the capacity – almost – to double the number of cars on earth merely by mechanising to the same per capita level of car ownership that we enjoy in the west. The developed countries enjoy (if that’s the right word) about 750 cars for every 1000 people. China has 25-30 cars for every thousand. Last year, the global car park topped one billion cars – but growth in China alone has the capacity to swell that number to 1.8 billion when the car is as prolific there as it is here.
Above: Recent reports claim only one Toyota Prius hybrid was added to China’s swelling car park this year
And, while China has a healthy thirst for luxury cars and SUVs, a report emerged last week that Toyota managed to sell only one Toyota Prius hybrid there last year. Remember, this is the world’s number-one mass-produced hybrid vehicle from the company that has made it their ‘Coca-Cola’ of environmental self-righteousness. If that report is indeed true, that means the Big C’s commitment to reducing emissions is – let’s be kind – somewhat less than that recently professed by Greens Senator Christine Milne and others with an allegedly green agenda here.
Away from prestige cars and back in the mainstream, the USA will likely sell 200,000 fewer light vehicles than earlier estimated this year. German passenger car sales were also recently revised down by 25,000. Consumer confidence in the developed world has jumped into the express elevator and hammered the button marked ‘basement’. When that happens, one of the first casualties is new car sales.
To an extent, every new car sold is a discretionary purchase – at least in a developed market such as ours. Businesses and individuals can effectively hang on to the car they have for a little longer, instead of going again, until the economic eye of the storm passes overhead. Big hits on Wall Street, the Footsie, Hang Seng and the ASX tend to make companies and individuals twitchy about spending discretionarily $30 or $40 grand they might not have tomorrow.
Another big trend the car industry has yet to grapple with successfully here is personal austerity. It’s no longer cool to be in debt, in the minds of many. However you look at it, the car industry has been wonderfully effective at selling people cars they really don’t need at prices they really can’t afford, leveraged against personal desire and a future that is yet to come. However the dealership finance experience is sexed up, it’s exactly the same as swiping your credit card to the tune of $40k over the next five years – or something. Many people really don’t want to be that far in hock in the face of economic uncertainty – especially after being burned during the GFC just two years ago. (Against this sentiment, the only thing the car industry can offer, albeit beautifully filmed or photographed, is the promise of short-term gratification.)
Audi is still managing to grow sales in Australia – unlike BMW or Mercedes-Benz
That’s already happening here, with the Australian motor vehicle market off the pace overall by some six per cent in the year to date, according to the latest industry figures. This might seem like a blip on the radar to many, but it’s actually a serious hit.
If the average price of a motor vehicle in the Australian market is $40,000, times one million vehicles, the new car industry contributes about $40 billion in turnover to the Australian economy. A six per cent downgrade – if that’s how it pans out at the end of the year – means $2.4 billion fewer dollars exchanging hands in the economy.
Meanwhile, Australian numbers for Audi, BMW and Benz aren’t quite so clear-cut. The Audi juggernaut is 9.4 per cent up on last year’s sales so far this year, but BMW is five per cent lower and Mercedes-Benz is even further behind, down more than seven per cent or almost 900 vehicles. Interestingly, however, Benz has the biggest volume (11,645 units to July, versus 9804 for BMW and 9024 for Audi). Among the flagships, the new A8 has revitalised its sales – up to 90 units so far this year compared with just 21 in the same period last year (‘just’ 550 per cent up…). The 7-Series and S-Class are flagging, however – 45 per cent down for the 7 and 38 per cent down for the Benz, to July 2011.
The big question is: How much longer will Mercedes-Benz head the prestige segment in Australia? And, given the funds, which brand would you buy today: Audi, BMW or Mercedes-Benz?