Automotive giants target super-luxury markets

FRANKFURT -- Three of Germany's top automakers, Daimler-Benz, Bayerische Motoren Werke and Volkswagen, hope their reputations for quality and reliability can challenge such pedigrees as Ferrari, Rolls-Royce and Aston Martin in the super-luxury and sports-car markets.

To test market reaction, all three unveiled concept cars last month at Tokyo's car show that analysts said could fetch from $120,000 and $350,000 apiece if they go into production.

The concept cars come as all three companies are posting robust profits and using common platforms and engines to offer new models. That strategy, analysts said, will make forays into the upper-end of the car market more economical, even though it could be years and many design revisions later before these super models go into production. "They have accepted the inevitable fact that major markets are mature, saturated markets," said Peter Schmidt, an analyst at Automotive Industry Data in London. "Unless they widen their net, they will be stuck. They need to look at niche markets for untapped potential." Daimler's offering for the ultra-luxury niche market may be its Mercedes Maybach concept limousine. While the car retains the basic Mercedes shape and bears its trademark star, its 19-foot length and two-tone paint scheme are different from today's shorter, one-tone models. The carmaker said it won't decide whether to make the Maybach until early next year and then it could be another four years before production begins. "We see a market for about 2,000 cars a year in this segment," said Olaf Meidt, a Mercedes spokesman. The Maybach is named after the late car designer Wilhelm Maybach, who worked for years at Daimler before he founded his own company in 1907 that made motors for the Zeppelin blimps. Years later, Maybach's son Karl decided to make cars and Maybach became one of the three major German luxury automakers in the 1920s and `30s, competing with Horch, which later became Audi AG, and Mercedes. The company produced about 2,000 cars between 1921 and 1941, the most popular being the Zeppelin and D12 models. The new Maybach, which is powered by a six-liter V12 engine, has three telephone connections, television and video, a bar and reclining rear seats -- all of the luxurious trappings now found under such names as Rolls-Royce and Bentley, the two British brands made by Rolls-Royce Motor Cars. "We wanted to show that we can make this sort of car too," Daimler's Meidt said. "I think this makes a lot of sense for Daimler," said Lothar Lubinetzki, a car analyst at Enskilada Securities. "They would blow Rolls out of the water." For its part, Rolls said it would welcome a Mercedes entry into the super-luxury class with the Maybach. Last year, Rolls sold 1,744 cars, a 12 percent increase over the previous year, and posted an operating profit of 37.6 million pounds ($63 million). "As far as we are concerned, it's a good sign that others have confidence in the high luxury sector of the market," said Janette Green, a Rolls spokeswoman. Green said the carmaker was not concerned about its market share waning with new entrants, as Rolls buyers tend to own several luxury automobiles. "Our average customer has about six cars, so it's not a direct competition for product, it's more of a competition for time," she said. Another option for Daimler would be to buy the British carmaker, which was put up for sale last month by Vickers. Daimler, however, has said it is not interested in Rolls. But rival BMW is, as is Volkswagen -- setting up a potential $862 million bidding war. Until Thursday, BMW has been the only carmaker to openly express an interest and was widely seen as the most likely buyer -- because of its contract to supply engines for the next generation of Rolls- Royce and Bentley cars, as well as its airplane engine-making joint- venture with the owner of the Rolls-Royce brand name airplane engine maker, Rolls-Royce Plc. Other companies that are reported to be interested, include General Motors, Chrysler, Toyota and an independent management team. None have confirmed their interest. VW, which is best known for its mass-produced Golf and Beetle cars, said Thursday it wants to upgrade its image by entering the high-end luxury car market. It intends to develop its own model to compete against BMW and Mercedes-Benz, adding it may pursue Rolls- Royce. Both BMW and VW are targeting another market -- the high-end sports car market now dominated by Ferrari and Aston Martin. Like Mercedes, the Bavarian carmaker is also looking back to the future for its ZO7 roadster. The ZO7 combines today's rounded aerodynamic body designs with the feel of the 507 series BMW made in the 1950s. The company has allocated much of the length of the car to its V8 engine under a long curved hood in front of the two-seat cockpit. "There are obviously a lot of people who like the car," said Lubinetzki. "The old 507 was a brilliant car." If BMW decides to make the car, analysts said it is likely to sell for about $115,000. While the jump into the most exclusive end of the car world is not a great departure from the norm for established luxury carmakers like Mercedes and BMW, that is not the case for Volkswagen. VW at Tokyo presented an Italian-designed sports car with a 12- cylinder, 420 horsepower engine. The concept car is known as "W12," in reference to the two V6 engines that are joined at a 72 degree angle to resemble the letter W. While the company has declined to reveal its plans for the engine, analysts said it will probably be used in either an upper-class VW brand car or for a new Audi model, using one of its existing chassis platforms. "I think they are trying to upgrade their position," Lubinetzki said. "I don't think they can compete with the image of Mercedes, but that's not the point. `Quality-wise we can compete' is the message they are trying to get across."

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