Premium automakers can’t afford the luxury of current business model, analyst says
For years, Germany’s luxury brands have been a model of automotive success and the envy of rivals because of their combination of prestige, global reach and profitability. Their heyday may be over, a London-based analyst says.
“We think the German premium business model is at risk” of no longer continuing to grow, Houchois said.
Premium automakers need to rethink their strategy, Houchois said. “If I’m right [that] premium demand has reached a peak, then there must be a reinvention of the premium business model,” he said.
Houchois praised Volvo for moving in that direction with an early push into electrification through plug-in hybrids, along with new subscription models. However, Houchois said, a stock market listing didn’t make sense for the Swedish automaker.
“There was an attempt to list Volvo last year, but the price didn’t make sense to investors, and conditions haven’t changed today,” he said.
The investment community has long feted premium automakers for successfully expanding their reach into segments traditionally dominated by mainstream automakers, such as small cars, and delivering big profits in the process. But the challenges of electrification and the additional cost of delivering vehicles that reduce carbon dioxide have damaged their business model.
The premium automakers also have been threatened by the growth of Tesla. At BMW’s recent annual shareholders meeting, CEO Kreuger was criticized for his caution when expanding BMW’s electric-car range.
Source: Automotive News Europe