How do you know that the global luxury-car market is booming?
Here’s one way: When BMW (NASDAQOTH: BAMXF ) doesn’t think its big and opulent 7 Series sedans are big and opulent enough to serve as the top of its luxury-car lineup anymore.
BMW took the wraps off of the car you see above in Beijing on Sunday. Officially, it’s just a concept, but it’s widely believed to be a preview of an upcoming super-BMW sedan called the 9 Series.
It’s new territory for the German luxury-car maker. BMW owns the Rolls-Royce brand, but it has never tried to move into this level of the market — a step up from its already-expensive 7 Series — with a BMW-brand sedan.
Why would it be planning to do so now?
Why does BMW want a 9 Series?
Because it could make a lot of money.
Luxury vehicles of all kinds have seen big sales growth since the recession, outpacing mainstream vehicle sales growth in many parts of the world — including Europe, the U.S., and China. And the outlook continues to be bright.
A lot of that growth has happened at the lower end of the market. But there has also been growth at the high end, as newly wealthy people in places like China look for increasingly different, increasingly exclusive offerings. In recent years, Rolls-Royce and Bentley have rolled out lower-end (for them) models, trying to reach customers for whom a BMW 7 Series or a Mercedes-Benz S Class might not be… enough.
Naturally, BMW and Mercedes would like to hold on to those customers — or at least, to create their own extra-premium models to try to bridge the gap (and collect the extra-premium profits).
BMW surely has data suggesting that there’s a good-sized market in that lofty neighborhood. And it knows full well that a model at that price tier could be a very profitable offering, at least on a per-sale basis.
How profitable? It’s hard to say. Profit margins on specific vehicle models are closely guarded secrets, at BMW or at any other automaker. But it’s well known that profit margins on luxury vehicles are higher than those on mass-market cars — and as you move further upmarket, those profits can get very big.
Consider this example from one of BMW’s key rivals. Volkswagen Group (NASDAQOTH: VLKAY ) builds and sells vehicles under a bunch of different brands, but in terms of profits, its big three brands are VW, Audi, and Porsche.
Last year, the VW brand sold 5,932,300 vehicles all around the world, and made about 2.9 billion euros in profits, or about 488 euros ($675) per vehicle sold. But Audi, which competes directly in BMW’s league, made just over 3,400 euros (just over $4,700) per vehicle sold — and Porsche, which is positioned further up-market, made almost 16,000 euros ($22,150) for every vehicle it sold.
So it’s reasonable to think that BMW could price a 9 Series in a way that would deliver it substantial profits on each sale.
So what is this thing?
For now it’s just a concept, and it has a concept-car name: “BMW Future Vision Luxury”. BMW’s press release says that the Future Vision Luxury “furnishes a long-term outlook on the perception of modern luxury for the BMW brand.”
That is to say, one stage beyond the 7 Series. The Future Vision Luxury concept is 280 millimeters (about 11 inches) longer than the longest version of the 7 Series, and even more opulent inside.
It looks like a very big, very well-appointed, very expensive BMW sedan.The interior features lots of wood and leather, but in light tones and relatively delicate arrangements, giving a feeling of spaciousness.
And it incorporates a lot of high technology. The seat frames and interior panels are made of carbon fiber, BMW says — an exceptionally light and strong (and expensive) material.
It’s so strong that BMW was able to incorporate the car’s roof pillars into the front seat backs. That allowed BMW to make an extra-wide opening for the rear door, for easier access to the lavish back-seat area — which includes its own touchscreen system.
A very plush back seat, for a very important market
Why so much emphasis on back-seat appointments? It’s not because the 9 Series is designed for limo-service duty, it’s because of the way cars like these are used in the Chinese market.
In China, luxury-car buyers (and sometimes, mainstream-car buyers) often hire drivers and ride in back. Automakers doing business in China have been putting increasing emphasis on rear-seat legroom and comfort. Those needs become even more important in high-end cars like this one.
But as I said, this isn’t limited to the vehicles we think of as luxury cars. Ford (NYSE: F ) didn’t need to change much when it turned the American-market Escape SUV into the Chinese-market Kuga SUV, but one key change it did make was to alter the seat structures to give back-seat passengers more legroom. (They got nicer leather, too.)
Rear-seat comfort and amenities will be especially important with a car like the upcoming BMW 9 Series, at least in China — and customers in Europe and the U.S. are unlikely to object.
The 9 Series is coming — and it will have competition
Several years ago, Daimler (NASDAQOTH: DDAIF ) tried to enter this market with a brand called Maybach that was slotted above its vaunted Mercedes-Benz brand.
The Maybachs were gorgeous, huge, and extremely expensive sedans — but the name didn’t resonate with buyers, and Daimler shut it down after a few years. But it’s coming back, this time as a super version of Mercedes’ top-of-the-line S-Class sedans.
Daimler is widely expected to show the Mercedes-Benz S600 Maybach this fall, at the Guangzhou and Los Angeles shows. Analysts think that a production version of BMW’s 9 Series is likely to follow, sometime next year.
What do you think? Can the world’s luxury market support a new class of BMWs and Mercedes that could cost well over $200,000? Or is this a step too far? Scroll down to leave a comment with your thoughts.