brand differentiation and competitive pressures to ...316...future of the global luxury vehicle...

Future of the Global Luxury Vehicle Market

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June 2014

Brand Differentiation and Competitive Pressures to Revolutionize the

Luxury Vehicle Market by 2020

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Executive Summary

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Executive Summary—Key Findings

1 In an increasingly competitive space, OEMs are exploring new means of differentiating their brand,

and the study finds that new brand attributes and positioning will propel the market.

2

To expand market share and improve profitability, traditional mass-market brands (e.g., Hyundai,

Ford, and Fiat) are attempting to expand their portfolio with the launch of premium models, such as

the Genesis, the C6, Avantime, and Ford’s upcoming Vignale brand. Chinese brands are to follow.

3

Size is no longer one of the key definitions of a luxury vehicle. There is a growing market for smaller,

fuel-efficient luxury cars. The compact segment is expected to be one of the fastest-growing luxury

car segments, growing by 70% to reach close to 3 million sales globally by 2020.

• To build sustained brand loyalty, luxury OEMs are targeting Gen X and Y with more compact,

sustainable, high-tech cars; for example, Mercedes CLA, Audi A3, BMW 1 series.

• The premium suburban utility vehicle (SUV) and crossover market is one of the hottest

segments, accounting for approximately 23% of global luxury sales.

4

Connectivity and autonomous driving are evolving into key parameters by which a brand will be

judged in the future. The race is on to launch the first fully automated car, which is expected to hit the

market by 2020.

5

The advent of eRetailling and digital technology has spurred the evolution of market channel

strategy of luxury OEMs from the traditional brick-and-mortar showroom to a more sophisticated,

digitally enhanced brand experience.

6 In 2013, China overtook the United States to become the largest market for luxury vehicles. By 2020,

China’s share of the global market is expected to grow to nearly 30%.

Source: Frost & Sullivan

Growth of luxury vehicle sales is set to outpace growth of the mass-market vehicle sales, with luxury expected

to account for 10% of the global automotive market by 2020.

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Key Mega Trends that will Impact the Luxury Vehicle Market

Big Data Smart

Mobility

Connected

Living and

Connected

Car

Growth of

HNWIs

Health and

Wellness

Future of

Mobility*

Women

Empowerment,

Gen Y

Bricks and

Clicks*

While all Mega Trends are important, the selection and ranking of these trends indicate which seismic shifts will

have particular relevance in shaping the landscape of the global luxury vehicle market.

Impact on the Luxury Vehicle Market Measured based on most impact on future products and services capabilities, resulting in new convergent and radical devices

Minor Conservative Radical

Gro

wth

Att

rac

tive

nes

s

Assessed b

ased o

n m

ark

et attra

ctiveness in t

erm

s o

f re

venue

Hig

h

Lo

w

*Social trends, bricks and clicks, future of mobility, and connectivity have been independently featured in demographic analysis, future

retailing, future of mobility ,and technology sections, respectively. HNWI stands for high net worth individuals.

Luxury Vehicle Market: Mega Trends, Global, 2010–2025


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Luxury OEM Types of the Future

High Sales Volume* Mid Sales Volume* Low Sales Volume*

BMW

Mini

Rolls Royce

Mercedes

Alfa Romeo Hongqi

Ferrari

Maserati

Lincoln

Volvo

Cadillac

McLaren

Acura

Hyundai

Genesis

Aston Martin

Lotus Infiniti

Jaguar Land Rover

Tesla

Lexus

Audi

Bentley

Lamborghini

Porsche

Volkswagen

Phaeton

*Sales volume within the luxury segment. Mass-market brands with premium models have been included; for example, Toyota’s Century, Volkswagen Phaeton.

Ferr

Asto

Be

Ja

Au

BM

AudiAu

guar

Romeo

Ac

Li

MaLotutututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututututussss

Lamb

HoHoHoHoHoHoHoHoHo

Vo

Sports and Super Luxury

Market Leaders

ac

Affordable Luxury and Near Premium

Luxury Vehicle Market: Classification of OEMs, Global, 2013


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How Luxury Cars will be Defined in the Future

New Luxury

Definitions Factors That Determine Luxury

Early Examples That Set

the Trend

Urban Luxury Cars designed for an urban driving environment to

deal with pressures of congestion and parking

BMW i3 and BMW i8 (Mega

city) luxury cars

Sustainable and

Green Luxury

Brands focused on alternative powertrains and

lower CO2 emissions Tesla Model S

Women

Empowerment Brand and vehicle model differentiated for women Acura MDX and Volvo V40

Individual Luxury Increased customization and limited-edition cars Rolls Royce Wraith and

Bentley Continental

Smart Luxury

Smart features in cars, such as increased

connectivity, advanced human machine interface

(HMI), and haptics that are intuitive.

Audi A8 and BMW 7 Series

Luxury Vehicle Market: Future Definitions of Luxury, Global, 2010–2025


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Design and

Styling Driving

Dynamics

Safety Sustainability and

Environment

Automated

Mobility

Quality and

Reliability

Comfort and

Convenience

Cost of

Ownership Connected

Mobility

Health,

Wellness,

and Well-being

y yDynamics

CComffortt andd

Pre-2000 Today Future

Luxury Vehicle Market: Future Brand Differentiators, Global, 2010–2025


How OEMs will Differentiate their Brand in the Future Focus will shift to connected mobility; automated mobility; and health, wellness, and well-being.

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Luxury Vehicle Market: Branding and Comparative Analysis of Brand Values, Global, 2013–2020

Quality

Environment

Innovation

Performance

Proud to own

Fun to drive

Safety

Prestige

Attractiveness

Elegance

Advanced

Smart

Conservative

Style

Dynamism

Excellence

Delight

Design

Well-being

Serenity

Functional

Original

Audi

Emotional Functional

Stylish, classy, discrete elegance, sporty,

progressive, “sober” design, solid, safe,

very well built, reliable, German origin

Sporty

Mercedes-Benz

Prestige, elegance, stylish, exclusive, smart

interior, high class

BMW

Prestige, engineering excellence, precision,

technically superior, sporty, dynamic,

smooth engine running, agility

Infiniti

Sporty, quiet, bold, aggressive, edgy,

stunning, attractive, less formal, performance,

dedicated, yet with a difference

Acura

Attractive, smart, advance, cool, safe, excellent,

quality, performance, efficient, health, cost of

ownership, appropriate, sleek, early adopter Efficient

Lexus

Conservative, functional, elegant, effective,

pride of ownership, consistent, clear, credible,

eco-friendly

Note: The list of OEMs is not exhaustive.

Branding Comparative Analysis of the Luxury Brand Values Brand values are segmented into functional and emotional categories. The future might see an emphasis—from

OEMs—on enriching the emotional values to build barriers to entry.


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Connectivity

Customization

HMI

Buying experience

Ride and handling

Green

mobility

Interior

appeal

Size and interior space

Apps/Internet/

network

Enhanced

safety

Autonomous

driving

Ownership

experience

Health/

wellness

features

Infotainment

Body style and design

vCommerce

Security

and access Personalization

and smoothness

of drive

Luxury Vehicle Market: Customer Value Set, Global, 2025

Cost of

ownership

Body style and design, interior appeal, size

and interior space, ownership experience,

autonomous driving, health/wellness, and

buying experience

Gen Y—Inherited Wealth

Interior Appeal, personalization and

smoothness of drive, customization, HMI,

connectivity, vCommerce, and apps

Gen Y—New Money

Body style and design, ride and handling, cost of

ownership, green mobility, vCommerce, apps,

and infotainment

Baby Boomers

Body style and design, size and interior space,

enhanced safety, ownership experience,

autonomous driving, health/wellness, and

buying experience

Women

Body style and design, size and interior space,

security and access, enhanced safety, HMI,

green mobility, and autonomous driving

Interior appeal, size and interior space,

security and access, customization, HMI, and

infotainment

Gen X—Inherited Wealth

Gen X—New Money


Attractive Attributes for the Future Luxury Customers Customer preference for traditional (hard) and future (soft) attributes is likely to influence the brand’s positioning

and the target demographic.

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• Baby boomers' buying

preferences have shifted as

their lifestyles have

changed.

• Mercedes and BMW are

brands preferred by this

demographic. Other popular

brands are Jaguar, Porsche,

Volvo, and Lexus.

• Luxury spending is

increasingly becoming the

domain of millennials.

• Millennials tend to buy a new

car when they have a change

in lifestyle or financial status.

• They value connectivity and

view their cars as an

extension of their digital and

social media lifestyles.

• Safety, reliability, and quality

are key considerations for

women.

• Women are 67% more likely

to prefer the crossover body

style when compared to

men.

Baby Boomers1 Millennials2

Women

1Baby Boomer: Born between 1946 and 1964 2 Millennial: Born between 1977 and 1996


Future Luxury Customers Luxury OEMs are set to target three major demographic segments.

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OEM 1

OEM 2

OEM 3

OEM 4

Brand A

Brand B

Brand C

Brand D

Brand E

Brand F

Brand G

Brand H

Authorized

Dealer

Authorized

Dealer

Authorized

Dealer

Authorized

Dealer

Horizontally aligned, authorized dealer networks and last-

mile deliveries with no vertical synergies

OEM

Warehouse

OEM

Warehouse

OEM

Warehouse

Current (2013)

OEM 1

OEM 2

OEM 3

OEM 4

Brand A

Brand B

Brand C

Brand D

Brand E

Brand F

Brand G

Brand H

Vertically aligned retail networks with synergies between retail

formats

Suburban

Areas Online Stores

OEM

Warehouse

City

Center Suburban

Areas

City

Outskirts

Big Box

Multibrand

Dealer

Big Box

Multibrand

Dealer

Authorized

Dealers

Small

Virtual

Stores

Experience

Flagship

Stores

Future (2020)

OEM

Warehouse

Cu

sto

mer

Cu

sto

mer

Global Vehicle Market: Smart Future Retail Network, Global, 2013–2020


The Smart Future Retail Network The development of vertically aligned retail networks will lead to synergies between retail formats, with a luxury

retail outlet in the heart of the city transforming into a strategic pillar.

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Digital Displays

(three-dimensional (3-D) visuals, holographic projections)

Interactive Rooms—VIP Customer

Lounge

(3-D configurator, projection system)

Digital Tools

(tablets, 3-D glasses configurators,

robotics)

Interactive Media

(gamification, augmented reality)

Digital Staff

(technical experts, product geniuses)

• Presentation of information in visual and virtual form within a showroom;

placed above the entrance area, showroom windows, and/or media wall

• Automotive showrooms equipped with gamification to improve user

engagement, data quality, timeliness, and learning

• Augmented reality included to experience a vehicle in simulated conditions,

explore, and test model features

• Relationship managers and product experts who advise and educate

customers with the aid of digital tools

• Direct online customers through digital tools to acquire pertinent information

on models, equipment, and color

• Digital, mobile, and interactive tools to engage customers with the product,

enabling exploration of an unlimited number of model ranges or

configurations

• High-tech dedicated lounges used to communicate with customers

• Lead to next level of engagement, i.e., retailing perspective (finance,

insurance)

Interactive and

Seamless

Experience-

based Consultative


Key Components of the 2020 Luxury Automotive Store Luxury automotive retailers are anticipated to employ an array of technologies and sales techniques to ensure

the highest brand engagement and a highly personalized customer consultation.

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Future Omni Channel Retail Stores To Be More Experience-based Than

Transactional

High Degree of Brand Immersion Low

Deg

ree

of

Dig

itiz

ati

on

H

igh

L

ow

3-D car configurators

Brand studios

Brand theaters

Small Pop-up Stores Virtual Stores (within

Stores)

Mega Flagship Stores

Genius bars

Virtual test drives

Digital configurators

Digital kiosks

Digital display

AR-based information

overlay

Online browsing

Virtual posters

• Use of 3-D, gamification, and high-

resolution display

• Emphasis on relaying brand

philosophy

• Ideal for city centers

• Display of physical inventory

• Higher use of gesture-based

technologies

• Emphasis on creating a brand

experience

• Ideal for city centers

• No physical inventory

• Mobile apps-based technology

• Emphasis on relaying brand

information

• Ideal for urban and rural areas

• No physical inventory

Brand Information Brand Experience Brand Lifestyle

Virtual Stores (Within Stores)

Omni channel retail stores are not likely to be transactional. The highest degree of brand immersion is

experience-based high-end flagship stores that convey product information through sophisticated in-store

digital solutions


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Customer visits an

OEM/dealer Web site to look

for the new car launched or

to browse existing models.

1

The technology works on

multiple car configurations.

2 3

A QR code is generated

based on the configuration.

4

QR code gets converted to a

virtual showroom in a car

dealership.

Sales representative

receives customer

experience report and is

advised on the next steps.

OEM manager receives data and

information from customers around

the globe and gains the ability to plan

targeted marketing campaigns and to

offer feedback directly to the product

development teams.

5 6

Image Source: IBM, Zerolight, JaguarLandrover.co.uk


Increasing Investment in Data Mining and Data Analytics Luxury OEMs are investing in data mining and data analytics to provide the highest level of customer service

and personalization and to enable a seamless transition from the online to the offline customer experience.

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Connectivity—HMI and

Personalization Comfort and Convenience

Connected Mobility

Autonomous Driving

• Touchpad with

handwriting recognition

and gesture controls

• Capacitive touchscreens

• Touch screens with

haptic feedback

• Apps or in-vehicle

features to monitor air

pollen levels and blood

sugar levels

• Driving dynamics

personalization

• NFC-based interior

personalization (through

phone)

• Active ventilated front seats

and massage

• Interior lighting (mood lighting)

• Laser or organic light-emitting

diode (OLED)_ headlights

• Long-term Evolution (LTE)

and over-the-air integration

• Wireless charging

• Vehicle-to-Vehicle (V2V) and

Vehicle-to-Infrastructure (V2I)

communication

• Integration with wearable

personal devices

• Map-enabled Automated

Driver Assisted Systems

(ADAS), including

powertrain and

suspension control

• Collision warning and

mitigation using AR

• Low-speed collision

avoidance and

emergency braking

• Powertrain automation

• Top view assist, park

assist, rearview camera

• Autonomous Cruise

Control (ACC) with traffic

jam assist

Luxury Vehicle Market: Future Differentiators, Global, 2013–2020


Luxury Vehicles—Future Differentiating Technologies Features, such as ride and handling and convenience features, are prioritized, followed by active safety,

peripheral integration, input HMI controls, and interior features and vehicle personalization key.

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Connected

Services Apps

Telematics

Services HMI

Remote

Convenience

Key

Features

• Dynamic

navigation/

Google Earth or

picture

navigation

• Live traffic

services

• Parking

reservation and

payment

• POI services,

Google search,

other real-time

services

• Eco-driving apps

• Social

networking apps

• Location-based

services—geo-

social networking,

food guides,

charging station

locators, etc.

• Entertainment

apps—Internet

radio, on-

demand radio,

news radio

• Mobility—car

rental

• Emergency or

breakdown

services

• Vehicle tracking

services

• Proactive

diagnostics

alerts

• Condition-

based service

scheduling

• Over-the-air

updates

• Concierge

services

• 8- to 17-inch displays Wide Video Graphics Array (WVGA)

• 800*480 to 1280*480 to 1280*600 pixels

• Dual-view displays

• 3-D graphics

• Haptic rotary controller

• Personal digital assistant

• Natural speech recognition

• Integrated Circuit (IC) display

• Remote vehicle

communication—

locking or

unlocking

• Status check and

battery range

• Activating or

planning charging

cycles

• Parked vehicle

location finder

• Diagnostics

information check

• Interior settings—

seat, lights

Key

Takeaway

Navigation is a

commodity—smart

parking-type

services are crucial

to integrate.

Balancing number

of apps with right

type of apps is

critical—BMW is

leader here.

Long-term customer

interaction is crucial

from after-sales

angle—BMW tele-

service.

12-inch-plus

screens are

becoming a norm

with Tesla, 2014 S

Class with high PPI.

It is crucial,

especially for

electric vehicles (EV)

or hybrid owners, to

ease range anxiety

factor.


Connected Car Feature Portfolio of Luxury OEMs Connected services, apps, and HMI innovations are the crucial areas where luxury OEMs are investing a lot of

time and effort.

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OEM

Automation

Level

Launch

Year First Models

Top-level Functions

Region of Introduction TJA1 APA2 AHD3

BMW Semi–

Highly

2014

2017

X5

5-/7-series Europe and North America

Mercedes-Benz Semi–

Highly

2014

2017

E-Class

S-Class Europe, North America, Australia

Audi Semi–

Highly 2016 A8 Europe and North America

Cadillac Semi–

Highly

2018

>2020

SRX,

ATS, XTS North America

Lexus Highly 2020 LS Japan, Europe, North America

Infiniti Highly 2020 Q50 Japan, Europe, North America

Volvo Semi 2015 XC90 Europe and North America

Automated Driving Market: OEM Comparative Analysis, Europe and North America, 2014–2020

1Traffic Jam Assist

2 Automated Park Assist

3 Automated Highway Driving

Source: MIRA Ltd; Frost & Sullivan

OEM Comparative Analysis—Automated Driving Rollout Strategy High-volume premium OEMs, typically thought leaders, are ahead of the curve in launching applications with

3-fold benefits to mitigate frustration and monotony in traffic jams, in parking lots, and on highways.

brand differentiation and competitive pressures to ...316...future of the global luxury vehicle...

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