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Luxury carmakers battle to impress Russian buyers
August 28, 2008 / 1:19 PM / 9 years ago

Luxury carmakers battle to impress Russian buyers

MOSCOW (Reuters) - The Russian luxury car market may be one of the most coveted but companies like BMW, Daimler’s Mercedes-Benz or Audi have to fight hard to win over wealthy, young and fickle buyers.

<p>A Mercedes classic car drives past spectators during a car show in front of Moscow's State University building May 20, 2006. REUTERS/Alexander Natruskin</p>

The three German automakers dominate the global market for luxury cars, yet they are finding the strength of their brands is not enough to guarantee sales in Russia, where incomes are soaring.

“Russia is one of the hardest-fought luxury markets in the world,” Christian Kremer, president of BMW Group Russia, said on the sidelines of the Moscow International Auto Salon.

“Since customers are not so far along in their purchasing decision, you can change their opinion very quickly with the right marketing.”

Although volumes in the luxury segment are not high with the three major German luxury brands selling around 15,000 cars each last year, the market’s growth rate is soaring.

Mercedes customer deliveries in Russia rose 65 percent, BMW by 55 percent and Audi by 52 percent last year. The trio enjoy higher-margin sales thanks to the desire by many in Russia to display their wealth by driving the most expensive cars.

“There is another big difference about our customers -- they are considerably younger. Our average Mercedes buyer is between 35-37 years of age, in other words roughly 15 years younger than elsewhere,” said Juergen Sauer, president and CEO of Mercedes-Benz Russia SAO.

Mercedes has adapted its western Europe marketing campaigns for Russia to focus on younger buyers, he said.

“It would be fatal not to be present at this show. The effect you can generate in Russia during such a trade fair is much higher than in an established market,” said Sauer, pointing to the success that Infiniti enjoyed here two years ago.

In order to generate as much media splash in the country as possible, BMW’s next-generation 7 Series luxury saloon made its world debut on Red Square in early July. The car is its largest and most expensive model below the Rolls-Royce Phantom.


Rivals at Mercedes-Benz say the competition with other premium brands like Lexus, Infiniti, Cadillac, Jaguar and Land Rover is far more intense in Russia than in its home market of western Europe.

In a departure from its strategy in western Europe, Mercedes product managers in Russia have introduced the Osobaja Serija, or “Special Series”, that offer predesigned options packages at discounts of up to 7,000 euros in order to lure customers that might otherwise not be able to afford a Mercedes.

On local production, however, the two leading premium brands diverge.

BMW has assembled 3 Series and larger 5 Series models in Kaliningrad from knocked-down kits since 1999, but Mercedes has no plans yet to open a CKD line or production plant in order to avoid 25 percent import tariffs.

“A manufacturing site only makes sense for more than 100,000 vehicles, and we are far away from those kinds of volumes. CKD is another question but we examined this option and decided against it for now,” said Joachim Schmidt, president and CEO of Daimler Central/Eastern Europe, Africa and Asia.

In Moscow, Mercedes is showcasing its high-performance ML 63 AMG offroader with a 6.3 liter V8 capable of generating up to 510 horsepower that sells in Russia for 125,000 euros -- about twice as much as what customers pay for a basic M-Class.

“Four percent of all our sales are AMG models, a proportion much higher than in other markets,” Sauer said.

In Moscow, BMW’s X5 Security sport utility vehicle made its debut. The car is equipped with safety glass, heavy-duty material and ballistics-resistant steel that can withstand the firepower of a .44 Magnum.

While Land Rover was displaying its LRX cross coupe concept at the show, Infiniti showed off its FX crossover. Lexus had the world premiere of its all-wheel drive LS 460 flagship while Audi tempted buyers with the RS6, the most powerful version of its full-size sedan.

Editing by Sue Thomas

Our Standards:The Thomson Reuters Trust Principles.
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