Ford Must Face Down the Germans if Lincoln Is to Succeed
NEW YORK ( TheStreet) -- Ford's (F) effort to revive Lincoln has caught the auto industry's imagination, but the market for luxury automobiles isn't exactly a place where dissatisfied consumers are lining up to buy a so-far-unseen vehicle because they can't wait to switch brands.
Rather, some Mercedes owners treasure the moment when "they park their car, get out, click the close button and then they look back and stare at their car," said Steve Cannon, CEO of Mercedes Benz USA, in an interview at the New York Auto Show. It is a moment of pride, he said, that even other luxury automakers cannot provide. As a result, he said, 57% of Mercedes buyers, the highest rate in the industry, are repeat buyers.
At BMW, the top selling U.S. luxury brand, competition is nothing new.
"We started with the Europeans," said Ludwig Willisch, CEO of BMW-USA, in an interview. "Then the Japanese came after us. Now Detroit is coming after us, and even the Koreans are saying, "If only we can get close to BMW," and they all use the 3 Series as a benchmark. But we are one step ahead: The old 3 Series ran out."
BMW began selling a redesigned 3 Series in February. Its March sales rose 18%, while Mercedes March sales rose 6% and sales of Toyota's (TM) Lexus luxury brand fell 3%. Last year, BMW became the top selling U.S. luxury brand, slightly ahead of Mercedes, while Lexus fell to third after leading the category for 11 years.
Analysts say Lincoln faces a tough challenge. Joe Phillippi, principal of Auto Trends, said to call him "in seven or eight years" for an accurate read of whether Lincoln can make a difference in the luxury segment. "It will take that long to revitalize the brand in North America," he said.
Introducing a new vehicle costs $500 million, Phillippi noted.
"Ford has the money. It has to make a definite commitment to stick with it after Alan Mulally is gone and if they run into a few snags," Phillippi said.
But Karl Brauer, CEO of Total Score, said the barriers to acceptance aren't quite so imposing as they might initially seem.
"You know Lincoln has a chance when you look at how well the Cruze has been received," he said. Toyota and Honda (HMC) seemed to own the compact market, he said, yet GM(GM) , helped of course by inventory shortages at the Japanese automakers, seemed to step right in with the Cruze.
"Cruze is genuinely compelling and well-executed," Brauer said. "People are not so brand-loyal if they see a better alternative. People who thought American cars weren't good enough were willing to give Cruze a chance, and it is certainly within Lincoln's grasp for the same thing to happen."