Russo Says China's Automakers Need To Consolidate

Bloomberg Television, March 26, 2012

March 26 (Bloomberg) --- Bill Russo, president of Synergistics, talks about the automotive industry in China. He speaks with Rishaad Salamat from Beijing on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

Click here to view the interview posted by Bloomberg


How BMW, Mercedes & Audi stack up and what their strategies are

The Economic Times of India, March 25, 2012

BMW global and India report card

Brand positioning: 

The luxury car brand targets younger customers. Often self-driven, it lays thrust on speed and emphasises on driving as pleasure. Its advertising campaigns often show the car being driven around. Its tagline is "joy forever". 

India Strategy: 

BMW is aggressive and fast, and its Indian journey proves that. Within four years of its launch, the company unseated Mercedes to become the top-selling luxury car in India, its market share has moved up from 9% in 2006 to 42% in 2011. 

Appealing to the younger buyers (average age of a BMW buyer is 40 years), it has introduced a varying product range at different price levels, starting with its cheapest model X1 available at Rs 23.7 lakh. It will further strengthen its portfolio by bringing in its MINI range, a new 3 Series and the new M5 sometime soon. On the back of all this, the country head Andreas Schaff is hoping to make India among the top 10 countries for BMW globally in the next 10 years. 

At its Chennai plant, BMW assembles 3, 5 series and X1 while others like X3, X5 are imported as a fully built unit. But with growing sales, it may set up its second plant by 2015. It might also scale up its manufacturing facility from just complete knock-down (CKD) kits. Their local component sourcing, currently low, will rise. Already, they have a global sourcing team here to cater to their global needs and have identified 20 vendors so far. This number should go up in future. 

Its marketing strategy has largely been to create touch points like professional golf tournaments, wine tasting sessions and events with fashion designers. Last year they organised an Xperience Drive in Gurgaon which brought in international trainers with a live performance by the Australian Raw BANG. A test course, with 10 obstacles, was especially designed to bring out X range's special features. 

BMW is growing its dealer network and hopes to touch the 60 mark by 2015. With 80% of its cars being financed by its own financial services arm, BMW financing is a brisk business. Its recently launched used-car business BMW Premium Selection will soon be available across all its dealerships. 


Mercedes-Benz global and India report card

Brand positioning: 

A symbol of power. The ultimate car for those who have arrived and is almost always chauffeur driven. The brand symbolises social status with the tagline "The best or nothing", says Pradeep Saxena, executive director, TNS Automotive. 

India Strategy: 

This is the oldest and the best luxury car India has known. It set up India operations in 1994 and has the best infrastructure among the three in terms of dealer reach and domestic component sourcing which stands at around 34%. But the leader has been on the backfoot ever since younger and peppier BMW unseated it in 2009. 

Mercedes is now reorienting its India strategy to target the youth. The company is working on its model line-ups, marketing and brand positioning to keep them aligned. For example, the luxury brand is now increasingly emphasising on performance and sportiness of its brand in India. It is now closely associated with F1 in India. Further, the company has brought in performance cars from its AMG stable to appeal to young Indian buyers. 

It is planning to invest Rs 350 crore as part of its strategy to introduce new small and compact cars in India by 2015. The company is expected to bring in its B-class, front-wheel-drive small family car sometime around the festival season (October-November) this year. Currently Mercedes' cheapest car is the C-Class. 

With B-Class hatchbacks, it will lower the entry threshold. The B-Class hatch, owing to its styling and agile contours will be positioned as sports tourer. During the next few years, Mercedes-Benz has planned the introduction of most of its 10 new global cars in India, and for this it is considering assembly of its SUVs ML, GL and GLC-Class here. 

The company has recognised the need for more compact cars in countries like India and China and assembling them in local markets is considered beneficial. With better localisation of content, they will have a pricing edge over others. On the back of all this, as Indian luxury car market expands, the company is hoping to sell around 55,000-60,000 cars (from current 7,430) by 2020. This is part of the bigger plan for Mercedes to regain its top slot in India. 


Audi global and India report card

Brand positioning: 

Like BMW, it targets young buyers who love to drive. The car emphasises design and style rather than speed (BMW's thrust). Positioned as a well-engineered stylish car, its tagline is 'Vorsprung durch Technik' in German, meaning 'Lead by Technology'. 

India Strategy: 

The second largest luxury car seller in the world and the third largest in India is nurturing some serious India ambitions. By 2015, Audi says it will be the largest luxury car seller in India as well as the world. Currently they have a marketshare of around 20% but they are the fastest growing luxury car company among the three.

In 2012, Audi is widely expected to beat Mercedes and wrest away the No. 2 slot on the back of volume driver Q3's launch this summer, which will lower Audi's entry threshold. The Q3 will compete with BMW's X1, a model which has given BMW a significant jump in volumes. 

Audi is also looking to launch more volume models by 2013, among which the A3 sportback (large hatchback) is being considered after a recent customer meet. Expected to push Audi's entry pricing further down, the A3 competes with Mercedes' B-Class. The B-Class is scheduled to be launched in India soon. In 2012, the German luxury carmaker will launch an improved version of the A4 sedan, apart from the Q3. 

Audi head Michael Perschke is hoping to sell a minimum of 50,000 cars by 2020 (5,511 in 2011). This will involve "deep indigenisation" as volumes grow. The biggest weapon that Audi has vis-a-vis the other big two is that it is part of the bigger Volkswagen Group which has and is investing big sums on plant and infrastructure in India. Audi and Skoda share an assembly plant in Aurangabad while parent company, Volkswagen, has commissioned a full-fledged production facility in Chakan. 

"In China Audi leads because of its first mover advantage, localisation and good adaptation to the local market," says China-based Bill Russo, founder, Synergistics. Now it is getting its India act together with at least one "heavy-hitting" launch every year, starting with Q3 this year. 

Vehicle Dependability Ranking* 

(Long-term quality) 

1) Mercedes-Benz 

2) Audi 

3) BMW 

*Dependability Ranking: It measures problems experienced during the past 12 months by original owners of three-year-old vehicles. It checks 202 different problem symptoms like dependability of body, features, accessories, interiors and powertrain.

Vehicle Apeal Ranking** 

(Extent of delight with feature contenting and vehicle styling and layout) 

1) BMW 

2) Audi 

3) Mercedes-Benz 

**Apeal Ranking?: The ranking study examines how gratifying a new vehicle is to own and drive, based on owner evaluations of more than 80 vehicle attributes including feature and instrument, comfort, style and performance of the vehicle. 

Clearly, Mercedes-Benz has performed well in quality in the recent past, both in terms of initial quality and longer-term quality. BMW performed better in terms of feature contenting and delighting consumers via styling and vehicle layout. Audi, positioned close to where BMW is pitching itself, has grown rapidly in the recent past to become the second largest luxury car seller on the back of successful launches and better value offering in its cars.