BIRMINGHAM, Mich General Motors Co (GM.N) is counting on the new Encore small crossover vehicle to bring more new customers to its premium Buick brand.
The Encore, which went on sale in U.S. show-rooms last week after launching last fall in China, is the fifth vehicle in the Buick brand, joining the larger Enclave crossover and the LaCrosse, Regal and Verano sedans.
Buick's U.S. sales rose 1.6 percent last year to 180,408 vehicles, a six-year high for the brand. But LMC Automotive senior analyst Joe Langley says it has a tough road ahead.
"Buick still remains a small player in the market and faces many challenges," he said. "While a good strategy to try and have Buick serve the entry luxury market, it will come under pressure as well-established brands with far greater prestige enter the space over the next several years, such as BMW (BMWG.DE), Mercedes-Benz (DAIGn.DE) and Audi(VOWG_p.DE).
"Buick is already having a difficult time carving out a place in the market and the down-market push by the German luxury brands will make that mission that much more difficult," Langley added.
LMC expects GM to add another small crossover and a compact hatchback within a few years, with the Encore's annual sales hitting about 30,000 vehicles. The brand's overall U.S. sales are expected to top 280,000 vehicles in 2017, according to LMC.
Buick executives did not reveal what sales volume they expect the Encore to generate, but they anticipate it will help further boost demand at Buick.
"There's a lot of momentum in this brand," Tony DiSalle, Buick marketing vice president, said at an event outside of Detroit.
DiSalle told reporters he expects the Encore's conquest rate, or the percentage of buyers new to the brand, to match that of the Verano, which is above 50 percent. The brand's overall conquest rate has risen to just over 43 percent last year from 28 percent in 2007.
Buick officials see the Encore's primary rival as the Volkswagen Tiguan, but they also mentioned the BMW X1 and Nissan's (7201.T) Juke.
Over the last five years, the average age of Buick buyers has dropped seven years to 57, Buick officials said. The Encore is targeted at young professionals and empty nesters, marketing officials say.
DiSalle said GM expects the segment in which Encore competes, small and mid-sized crossovers, to add more than 350,000 sales in the United States over next three years.
Marketing for the Encore, which will start in earnest in March with a campaign during the NCAA March Madness college basketball tournament, will emphasize Encore's maneuverability, flexibility to accommodate people and their cargo and technology, said Lloyd Biermann, marketing manager for Buick crossovers. The company expects 60 percent of the vehicle's buyers to be women, he said.
The Encore, which is built in South Korea on the same vehicle platform as the Opel Mokka available in Europe, has a starting price of almost $25,000.
(Reporting by Ben Klayman; Editing by Dan Grebler)