Deutsch marques pay a price for aiming low

How the mighty fall. Mercedes, seen by many as the pinnacle of German automotive engineering, has suffered the ignominy of being the second most-unreliable car in a survey of nearly 40,000 German motorists by the ADAC, the German equivalent of the AA.

Earlier this year, fellow German prestige marque Audi had to endure the embarrassment of its TT sports car being splashed over the national press as the most unreliable car in the UK, in a Consumers’ Association survey of 33,000 drivers. Mercedes and BMW were also pilloried for their poor performance.

German brands have long benefited from the cultural stereotypes of efficiency and reliability. Think of Audi’s long-running “Vorsprung durch Technik” tagline, BMW’s imperious “The Ultimate driving machine” and the early Nineties’ strapline: “If only everything in life was as reliable as a Volkswagen”.

Decades of consistent marketing might be able to provide the brands with a temporary reprieve from the negative publicity, but the question remains how long this can continue, and whether the German automotive halo has been tarnished.

Few commentators doubt that German car brands are to some extent viewed generally, feeding off each other’s good reputation. And the brands try to perpetuate this perception. A press release from Audi trumpets: “Huge rise in demand for the prestige German marques as Audi UK sees another record year.”

But German marques could be in danger of becoming victims of their own success, selling more cars in more sectors of the market than is consistent with their exclusive brand image and product quality.

Professor Garel Rhys, of the Institute of Automotive Industry Research at Cardiff Business School, explains that the German marques enjoy virtual hegemony at the prestige end of the market. Any competition is limited and is primarily from Toyota’s luxury brand Lexus and Ford’s Premier Automotive Group (incorporating the Jaguar, Volvo and Aston Martin brands).

But he says that the likes of BMW and Mercedes have become volume brands: “They pile ’em high and sell ’em expensively.” He adds that residual values, once a benefit taken for granted, are now taking a hammering as a result.

In addition, of course, there is the question of reliability. Rhys says: “The German manufacturers have led the way in increasing the electronic content of cars, but are now realising that is counter-productive. Too many problems are slipping through the net – the Germans have to increase quality control.”

A Mercedes insider says that the prestige marques were once the only brands delivering quality and reliability, but now that is no longer the case and they are trying to distinguish themselves from other car brands through technology. Now being at the forefront of that technological escalation, which is primarily electronic, means the brands are being humiliated by the teething problems of immature technologies.

Simon Oldfield, who was promoted last summer from head of Mercedes marketing in the UK to national sales director, is disarmingly frank about the situation that the three-pointed star now finds itself in. “We are not putting our head in the sand. There are problems with all products – it’s how you deal with them that changes customer attitudes. It would only be dangerous to the brand if we didn’t take any notice of them.”

He adds: “There is an historical perception of reliability and durability. But the Mercedes brand will evolve over time. Reliability is not as important as before, which is not to say that we shouldn’t strive to have the highest equation of reliability.”

Once satisfied with a limited range of models, the powers that be at Mercedes now wish to create a car in almost every niche of the market. The only exception is its city car, which carries the Smart brand. Likewise, BMW will next year launch the One Series, its cheapest and most mass-market car to date. A spokesman for BMW claims that waiting lists across the model range indicate that exclusivity is being maintained despite the much higher volumes of BMW cars on the road.

Porsche, too, while immune from the reliability issues affecting other German marques, is also expanding its brand downwards. It is producing a cheaper version of its Cayenne sports utility vehicle, powered by a Volkswagen engine, which will sell for £35,000 and is expected to account for half of Cayenne’s anticipated 2,500 sales in the UK next year. The Cayenne itself is the product of a joint venture with mass brand Volkswagen (MW April 12, 2001).

The challenge of being mass market and “special” at the same time is one that is shared with other luxury brands, such as Burberry and Gucci. For much of the time it has been successful. Since 1995, Audi, BMW and Mercedes have increased their combined market share from 5.8 to 9.9 per cent in the UK. During the same period, Mercedes’ sales have soared from 33,000 to 86,000, BMW’s from 55,000 to 85,000 and Audi’s, from 26,000 to 68,000 (the Society of Motor Manufactures and Traders).

Given those figures, it is hardly surprising that Toyota GB marketing director Matt Harrison cannot resist a touch of schadenfreude at the present reliability issues the German marques face. He says: “It is a constant source of frustration that German marques enjoy a reliability reputation that has not been warranted by consumer surveys. Now times are changing and their cover has been blown. Decades of marketing have eclipsed the reality.” As a result of this phenomenon, Harrison says the industry tracks perceived, as well as actual, quality.

While Toyota has come at or near the top of reliability surveys, Harrison admits that a reputation for reliability also contributes to a perception of boringness. “Its a rational quality, not an emotional appeal.” The marque’s recent Avensis campaign created by Saatchi & Saatchi, he says, is an attempt to inject some emotion into the Toyota brand.

Neil Christie, who runs the Citroën account at Euro RSCG Wnek Gosper Partners and who has also worked on the Mercedes account, says: “The people who pay over £30,000 for a car don’t just want to get from A to B. They want to say something about status.” But the punishment for leaving the owner frustrated by the side of the road is correspondingly higher, he adds.

Mercedes and compatriot brands may not have been seriously tarnished by their recent track record on reliability, but they may have given pretenders Toyota and Honda an opportunity to slip into the prestige club.