premium brands — an unstoppable force? · – toyota and other japanese brands will ... in...

Premium Brands — An Unstoppable Force?Ulf Nord

Executive Managing Director

Copyright © 2006 Global Insight, Inc.2006 GLOBAL AUTOMOTIVE CONFERENCE 2

Global Sales GrowthPremium vs. Volume Brands

11.6

21.4

11.5

22.5

0

5

10

15

20

25

2000-2005 2005-2010

Volume Brands Premium Brands

%Cars, SUVs, MPVs and PUPs


Total Premium Brand Sales

2,5422,863

3,208

1,6482,046

2,554

131 161 305 133 266 459

0

1,000

2,000

3,000

4,000

WesternEurope

North America Japan Rest of Asia

2000 2005 2010

(000’)

Cars, SUVs, MPVs and PUPs

Global Volume Growth: 2000–2005 - 1.0m units/21% 2005–2010 - 1.3m units/23%


Total Premium Brand Market Shares

16.9

19.421.0

8.610.6

12.6

2.7 3.4

6.2

2.8 3.0 3.5

0

5

10

15

20

25

WesternEurope


2000 2005 2010



Premium vs. Volume Brand Growth2000–2005

-4.912.6

-1.7

24.2

-2.2

23.0

89.2100.0

-100

102030405060708090

100110

WesternEurope



% Cars, SUVs, MPVs and PUPs


Premium vs. Volume Brand Growth2005–2010

1.712.1

2.2

24.8

0.9

89.3

46.4

72.9

0102030405060708090

100

WesternEurope





Premium Brands’ Share of Total Market Growth

2000-2005 2005-2010

Western Europe 100% 63%

North America 100% 57%

Japan 100% 78%

Rest of Asia 3% 5%



Premium Brand Segment SharesWestern Europe

2.75.4 7.0

9.1

15.0 16.3

39.4

44.0 45.4

05

101520253035404550

Super Mini Lower Medium Upper Medium

2000 2005 2010

%


Premium Brand Segment SharesWestern Europe

89.394.8 90.3

25.6 30.034.4

0

20

40

60

80

100

Large/Luxury SUV

2000 2005 2010

%


Premium Brand Segment SharesNorth America

6.112.3

15.4

66.9 65.6 66.6

8.912.3 15.4

0

10

20

30

40

50

60

70

Upper Medium Large/Luxury SUV

2000 2005 2010

%


Global Premium Brand Sales

1,0591,098

1,297

808

1,1251,174

637

828

1,006

243

394

650

163233

301

85151

281

0

500

1,000

1,500

MERCEDES BMW AUDI LEXUS ACURA INFINITI2000 2005 2010

(000’) Cars, SUVs, MPVs and PUPs


Shares of Total Premium Brand SalesWestern Europe – 2005

Others7.4%

Land Rover3.4%Lancia

4.1%

Alfa Romeo4.5%

Mini4.5%

Volvo8.7%

Audi21.2%

BMW22.5%

Mercedes23.7%

Cars, SUVs and MPVs


Lexus15.3%

BMW14.3%

Volvo6.8%

Infiniti7.1%

Acura11.4%

Mercedes11.8%

Cadillac12.0%

Lincoln6.4%

Audi4.6%

Others10.3%

Shares of Total Premium Brand SalesNorth America – 2005



Regional Growth Dependence

• Premium brands will derive 79% of 2005–2010 sales growth from Western Europe, North America and Japan

Whereas

• Volume brands will derive 89% of 2005–2010 sales growth from all other regions


What impact will the entry of the

Lexus, Acura and Infiniti brands have

on the Premium Market in Japan?

Japanese Premium Brands Enter Domestic Market


Jaguar2.1%Alfa Romeo

2.8%

Porsche2.2%

Lexus6.4%

Volvo8.3%

Others3.9%

Mercedes28.4%

BMW27.9%

Mini8.4%

Audi9.6%

Shares of Total Premium Brand SalesJapan – 2005

Cars, SUVs and MPVs


• Buyers of Imported Brands - “Our competitors are Mercedes and BMW” (President Watanabe)– Competitive price positioning– IS base = 3.9 mils vs. BMW 3 series base = 3.9 mils– GS base = 5.2 mils vs. MB E class base = 6.4 mils

• Migration from “Non-Premium” Brand Cars– Market segment for “Non German” luxury brands as in US, Korea, Taiwan – Will Japanese consumers pay for the Lexus badge

• Altezza base IS base; 77% price premium• Aristo base GS base; 46% price premium

– Toyota and other Japanese brands will continue to offer luxury models• e.g. Crown, Mark X, Legend, Skyline, Fuga, Cima in the short term

• Deteriorating Environment for Larger Cars– Fuel consumption– Hybrid Lexus may prove to be Toyota’s “trump card”

Lexus Target Market and Challenges


• First Year Sales Below (Toyota’s) Expectations– 2005 sales target: 20,000 units– 2005 results: 10,293 units (GS 5,843, IS 3,911, SC 539,) - 51% of

target– Buyers of Lexus so far are mostly Toyota owners; Limited

evidence of switch from premium import brands

• Second Year– 2006 sales target revised down from 50,000 to 40,000 units– 1st quarter sales results: 5,643 units (GS 2,406, IS 2,718, SC 519)

• The GS hybrid, launched in March– LS due in August 2006. Sales target 8,600 in 2006 (order target is

15,500)

• New Harrier in 2008 Will Be Sold As the Lexus RX in Japan

Lexus Sales Below Target So Far


• Impact likely to be strongest at lower end of premium market with more value for money conscious buyers

• Buyers of foreign brands often seek to stand out and will continue to prefer import brands

• Initial surveys of Lexus buyers indicate that 80% have switched from Toyota and only 5% from BMW and Mercedes

How Will Lexus Affect Import Premium Brands?


Lexus Sales Mix in Japan ...With Toyota Models It Replaces

IS-SERIESARISTO

GS-SERIESCELSIOR

LS-SERIES

RX-SERIESHARRIERFLAGSHIP SEDANGS-SERIES CUVLEXUS CUV

0

20

40

60

80

100

120

1990

1993

1996

1999

2002

2005

2008

2011

2014

2017

Thou

sand

s


Shifting From Toyota to Lexus: Price Also Became “Premium”

Lexu

s SC

Soar

er

Lexu

s LS

*

Cel

sior

Lexu

s G

S

Aris

to

Lexu

s IS

Alte

zza

0

2

4

6

8

10

12

14

Pric

e in

Mill

ion

Yen

Price Range

* Price for the Lexus LS has not been announced, but price range is expected to be upper 9 million to 12 million yen, right at the MB S-class price.


3 se

ries

MB

C c

lass

Aud

i A4

Nis

san

Skyl

ine

Lexu

s IS

Volv

o S6

0

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

2005

sal

es v

olum

e

2000

3000

4000

5000

6000

7000

8000

9000

10000

Pric

e 1,

000

Yen

Lexus IS and Competitors: Prices and 2005 Sales Volumes

Price Range


MB

E c

lass

5 se

ries

Toyo

ta C

elsi

or

Lexu

s G

S

Hon

da

Lege

nd

Aud

i A6

Nis

san

Cim

a

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

2005

sal

es v

olum

e

2500

5000

7500

10000

12500

15000

Pric

e 1,

000

Yen

Price Range

Lexus GS and Competitors: Prices and 2005 Sales Volumes


• Acura Brand Likely to Launch in Later Part of 2008– Premium, sporty and performance

– Honda unlikely to make the same level of investment as Toyota isdoing for Lexus

– No sign of separate production for Acura Models

• Model Line-up for Japanese Market Expected to Include:– RSX (Integra), TL (Inspire) and NSX in 2008

– RL (Legend) in 2009

Acura Brand Not Expected to Have a MajorImpact in Japan


• Infiniti Launch in Japan Is Not Part of Nissan “Value-up”Plan Which Runs Until March 2008– Launch has been progressively delayed; now expected early 2010 – Will study and learn from Lexus and Acura progress

• Model Line-up for Japanese Market Expected to Include:– M35/M45 (Fuga) and I35 (Teana) in 2010– G35 (Skyline) and Q45 (Cima) in 2011

Infiniti Launch Unlikely Before 2010


Premium Brand Segment SharesJapan

10.116.1

22.0

11.9

19.0

51.5

1.44.7

19.8

0

10

20

30

40

50

60

Upper Medium Large/Luxury SUV

2000 2005 2010

%


Premium Brand Sales — Japan

46,16152,800

45,10339,300

15,42019,100

10,293

84,600

0

39,100

0

17,800

0

50,000

100,000

MERCEDES BMW AUDI LEXUS INFINITI ACURA

2005 2010


Mini5.2%

Volvo4.9%

Others7.3%

Acura5.8%

Audi6.3%

Infiniti12.8%

BMW12.9%

Mercedes17.1%

Lexus27.7%

Shares of Total Premium Brand SalesJapan – 2010

Cars, SUVs and MPVs


Regional Sales Mix — Lexus

Europe8%

Rest of Asia7%

Japan3%

Rest of World

2%

North America

80%

North America

62%

Rest of World

3%

Japan13%

Rest of Asia11%

Europe11%

2005 2010

Global sales 394,000 units Global sales 650,000 units


Regional Sales Mix — Infiniti

Rest of World

2%Rest of Asia

2%

North America

96%

North America

72%

Rest of World

1%

Japan14%

Rest of Asia6%

Europe7%

2005 2010



Regional Sales Mix — Acura

North America

100%

North America

93%

Japan6%

Rest of Asia1%

2005 2010



Key Factors Behind Strong Premium Brand Growth

• Extended product choice covering new segments

• Wider product choice in traditional premium segments

• Development and adoption of new vehicle concepts

• Increased marketing efforts

• Improved value for money positioning

• Extended geographical market presence

• Growing and wider spread affluence

• Demographic and lifestyle developments

• Increasingly demanding and refined consumers


Summary

• Significantly higher growth potential for premium brands than for volume brands in developed markets

• Relative growth rate of premium brands will continue to exceed that of volume brands also in emerging markets

• Premium brands will derive most of their growth from developed markets over the 2005–2010 period

• Volume brands will achieve volume growth predominantly in emerging markets during the same period

• Introduction of Lexus, Acura and Infiniti in domestic market will contribute to significant expansion of premium brand market in Japan

Thank YouUlf Nord

Executive Managing DirectorE-mail: [email protected]

premium brands — an unstoppable force? · – toyota and other japanese brands will ... in...

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