Friday, April 7, 2017

BMW and Daimler Prepare To Make Big Changes

Alexander Carabitses

Let me make one thing perfectly clear:  I think that Daimler's Smart brand is one of the biggest jokes in the automotive industry and is in fact quite dumb (pun intended).  Let's go back in time for a moment, when Daimler first picked up the pieces of this hopeless mess of a car brand that was created by the same man who was responsible for the creation of the watch brand, Swatch.  From there, Daimler made several generations of a funky city cars that never managed to catch on in Europe where small cars tend to sell well.  Then, Daimler thought that it would be a fantastic idea to bring the brand to the US, a market where small cars tend to sell poorly, with the results of this move being predictable.

That brings us to the year 2017.  Daimler has yet to make a profit on the Smart brand and has now made a move that is quite aggressive.  To make a long story short, Smart will no longer sell naturally aspirated cars in the US and instead only sell the Smart ForTwo Electric Drive coupe and cabriolet.  Well, there are two problems with this strategy.  Problem number one is that Smart doesn't do well in the US because small cars don't sell well (and these things do look kind of like clown cars); problem number two is that electric cars don't sell all that well in the US, with most automakers failing to make a profit on the few that they do sell.  Did I mention that small cars have extremely low profit margins to begin with?

Perhaps this is part of a plan for Smart to slowly depart the US market.  I personally believe that we are nearing a time that would serve as a perfect opportunity for Daimler to kill the Smart brand.  Due to the fact that this shares a platform with the Renault Twingo, it is likely that the current generation car will have to live out its current lifecycle, but afterward, it would seem best for Daimler to cut the brand, as it is already considering killing off some of its other niche models after they live out their current life cycles, specifically coupes and convertibles (lack of demand in China is to blame according to Daimler).
(Image credited to Smart)

That brings me to another topic that I briefly want to touch upon.  I am very satisfied that both Daimler and BMW admit that they have too many models and that they have to cut back.  I am less satisfied at the fact that the models that enthusiasts and brand loyalists hate are going to live on, while the cars that these people aspire to own will get the axe.  Now, if these groups of people had their way, many of the niche models that have come along over the past few years, such as the 3-series GT, would be the first models to sing their swan song.

However, in the end I think that these brands have learned a valuable lesson about expanding beyond their bridges, and in many ways, the Mini brand can be thanked for that. As I reported a few years ago, Mini had too many models which diluted the brand's image long term.  I also noted that the larger German brands best be careful because what happened to Mini could happen to them, with more catastrophic effects.  However, given the amount of completely new products that both BMW, Mercedes, and even Audi  are expected to launch in the next few years, it seems like the end result could be the same number of models in each respective brand's range, with the models themselves being different.  If that is the case, then the brands will have moved even further down the path of obscurity, as a large majority of the cars that made them noteworthy and aspirational are put out to pasture.
(Image created to BMW)

It is quite scary that perhaps there is a place for a car like the Smart ForTwo electric in the US market and less of place for a vehicle like the BMW M6.

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