With no retreat in the luxury market’s shift to crossovers and SUVs, the two biggest luxury players are adding more light-truck models, and this year they expect cars to account for less than half of their U.S. sales for the first time.
That tipping point to trucks for Mercedes-Benz and BMW has been a long time coming. While the overall U.S. light-vehicle market went majority-truck in 2002, luxury brands — anchored by flagship sedans — were dominated by cars for much longer. The luxury segment finally crossed over to truck dominance in 2016, but the top German brands continued to rely more on cars.
For them, “a flagship luxury vehicle is still a sedan,” said Rebecca Lindland, executive analyst at Kelley Blue Book. “It’s still an S class, it’s still the 7 series, and, for Audi, it’s the A8. So investing and migrating away from that tenet is really hard for them. It’s something that goes against their roots.”
The decades spent by the German luxury makers building up the aura of their flagship sedans helps explain why those companies have been slower to capitalize on the crossover and SUV boom.
“Let’s not forget: We have some very, very strong and successful cars,” Mercedes-Benz USA CEO Dietmar Exler said in an interview. But even with compelling sedans, coupes and convertibles, the car side of the U.S. luxury business has faced a “difficult environment,” Exler acknowledged.
U.S. sales of the S class dropped 16 percent in 2017. Mercedes sold 15,888 S classes last year, nearly half what it sold in 2006.
Mercedes’ overall car sales in the U.S. fell 4.5 percent last year, while its crossover and SUV sales rose 3.3 percent. BMW’s 7-series sales plunged 28 percent last year, with its overall car sales falling 5.5 percent and truck sales rising 1.9 percent.
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In many cases, the production networks of the leading luxury automakers have been unable to keep up with this market’s demand for crossovers and SUVs. That has pressured the brands’ U.S. distribution arms and dealership networks. Luxury dealers clamoring for more crossovers and SUVs has become a popular refrain in recent years. Mercedes, for instance, ran short on its GLC compact crossover at times in 2017, Exler said.
|Light trucks accounted for a majority of U.S. luxury vehicle sales in 2016, 14 years after the overall industry first hit that milestone. Luxury leaders Mercedes-Benz and BMW are about to top the 50% truck mark.|
|2017 truck mix||2016 truck mix|
|All light vehicles||65%||61%|
|*Excludes commercial van sales|
|Source: Automotive News Data Center|
Luxury brands have responded to the pressure by adding truck models and increasing production.
The U.S. luxury market’s truck mix rose to 58 percent of sales in 2017, up from 55 percent the previous year, according to the Automotive News Data Center. Luxury-brand executives expect another increase this year.
Trucks represented a majority of Audi’s U.S. sales for the first time in 2017, when crossovers and SUVs accounted for 53 percent of its volume. Mercedes closed in on that threshold but fell just short last year, with 49 percent of its U.S. sales coming from crossovers and SUVs. BMW, the No. 2 seller in the U.S. luxury market, lagged all its major competitors on truck mix in 2017, when only 44 percent of sales were light trucks.
“We were struggling with the balance,” BMW of North America CEO Bernhard Kuhnt told Automotive News late last year. “There’s a huge global demand in SUVs, so we are fighting” for production allocation.
An update to one of BMW’s top-selling crossover lines also played a role. The redesigned X3 reached U.S. dealerships in November. A month earlier, as inventory of the outgoing X3 was running out, BMW’s truck mix dropped to 40 percent, Kuhnt said.
But the picture looks brighter this year.
BMW’s Munich headquarters pledged more inventory of crossovers and SUVs to the U.S. this year in numbers that match the U.S. unit’s requests, Kuhnt said. He projected that those vehicles would amount to 55 percent of BMW’s sales here in 2018.
“For ’18, I’m completely confident that we’re going to have the right mix in the U.S.,” Kuhnt said. “We’re going to get the supply in line with the market demand.”
In addition to more X3s, BMW will introduce the X2, a coupe-styled crossover, in March. Redesigned X4 and X5 crossovers also are expected this year.
Late in the year, the new X7, BMW’s long-awaited full-size SUV, will go into production, though U.S. sales aren’t slated to begin until early 2019. BMW has high hopes for the X7, considered well overdue for this market.
Mercedes’ GLB Photo credit: BRIAN WILLIAMS/SPIEDBILDE
Mercedes also expects its mix of crossovers and SUVs to top 50 percent this year, Exler said. In January, they were 50.3 percent of its luxury vehicle sales, which exclude commercial vans. More inventory is coming, including a “substantial increase” for the GLC, he said. Mercedes will begin selling a redesigned G-class SUV late this year. The brand will unveil its redesigned GLE in 2018 though U.S. sales are unlikely to start until next year.
And Mercedes is planning new entries in the segment beyond those updates. A new compact crossover, likely called the GLB, is expected to go on sale in the U.S. in 2019, though Mercedes hasn’t yet confirmed the vehicle.
“There is room for more growth in the SUV segment, and we have ideas there,” Ola Kaellenius, Daimler AG board member responsible for group research and Mercedes-Benz Cars development, told Automotive News. “It’s not just a U.S. thing; it’s a worldwide thing. That doesn’t mean that sedans are not important. The overall cake has grown.”
Mercedes executives also have acknowledged interest in an ultraluxury SUV that could carry the Mercedes-Maybach name. That hasn’t happened yet because the obvious foundation for such a vehicle is the GLS large SUV — and the GLS’ current platform isn’t suited for an ultraluxury SUV, Kaellenius has said. Doing a Maybach variant on that platform wouldn’t be authentic, Daimler design chief Gorden Wagener said.
Mercedes began pitching the GLS as the S class of SUVs when it freshened and renamed the large SUV in 2016. While the update garnered good reviews, a number of them specifically weighed in on that positioning to say the freshening didn’t quite put the SUV in the S-class strata.
That assessment could change in 2019, when the GLS is expected to move to a new platform for its redesign.
Despite substantial recent midcycle makeovers on the GLS and the GLE, they are “still the old car with the old interior,” Wagener said.
The next generation, however, “will be very different,” he said. “It will be similar changes to what you’ve seen on our cars — changing from a generic design to a more sophisticated, superluxury, sporty design.”
Those future large SUVs could change how U.S. consumers view the epitome of German luxury, said Lindland, of KBB.
“For Americans,” she said, “now a flagship can be an SUV.”