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Europe’s Premium Flagships Return To Health


New Audi A8 Has New Technology To Boost Safety, Economy
S-class, 7-series, XJ, LS Set To Survive, Thrive

CO2 Rules, Fashion Will Get Them In The End 

Europe’s premium top-of-the-range car manufacturers are defying logic as they pick themselves up and dust themselves down after the great slump of 2009.

You would think that the days of these massive, gas guzzling, hugely expensive behemoths – like the Mercedes S class, BMW 7 Series, Audi A8 and Jaguar XJ – would be numbered. After all, the days of conspicuous consumption are surely over for a while at least. And new regulations in the European Union and United States will soon start forcing car manufacturers to drastically cut fuel consumption.

When these carbon dioxide (CO2) emission rules were being discussed in Brussels and Washington it appeared that there was no way luxury cars would be able to meet them. But the car manufacturers used their lobbying power to some effect, and a new regime emerged which will allow these massive motors to thrive for a while yet.

Analysts even expect the sector to start growing again.

IHS Global Insight analyst Colin Couchman said the top end of the global luxury executive sedan market, which also includes the Lexus LS as well as the Jaguar, Mercedes, BMW and Audi, did well from the mid-1990s, growing from around 225,000 a year up to the crash of 2009, peaking at around 255,000. Last year sales dived to around 175,000, and would have been much worse without emerging markets in China and Russia taking up the slack.

The three Germans and Jaguar have all recently replaced these top of the line models. Cynics might say the manufacturers were anxious to renew their top-end candidates as quickly as possible, before fashion and politics consigned them to history.

“They might look like dinosaurs to some but there should be some growth in 2010 – we reckon about 220,000 (sales) this year. There should be some growth because we now include the Porsche Panamera and now we have about 300,000 annual sales by 2015, although most growth will be outside the U.S. and Europe,” Couchman said.

The recently launched Panamera took Porsche into the four-seat sedan market for the first time.

Euro’s slump will help
Sales in the U.S. market, which is looking much healthier than Europe, will be helped by the slump of the euro against the dollar. In 2008 the euro peaked at over $1.60. Now the rate is plunging back down and threatening $1.20, all the while making German and British luxury cars more profitable for the manufacturers and more affordable for U.S. buyers.

These cars might represent the worst excesses of consumerism to some, but they do perform a vital task for the manufacturers. They demonstrate the high technology prowess of the manufacturers, and provide test-beds for new technology.

“In many ways these cars are the technology pioneers. Look at the Mercedes S class, where you first saw seat belts, disc brakes, air bags, headup displays, computerised braking. All these developments were pioneered in this class and then rolled out down the range. Also, important techniques like aluminum weight saving technology used by Audi and Jaguar which save masses of weight meaning that smaller engines are required to move the metal. That saves CO2 as well,” said Couchman.

Audi’s new A8 flagship, being launched in Europe now and appearing in the U.S. in November, has all manner of cutting edge stuff to enhance safety, driving performance and economy.

The A8’s satellite navigation system talks to the engine management computer so that if you accelerate towards a corner, the computer won’t allow a higher gear on the eight-speed automatic to be engaged as it senses the need to slowdown imminently. Approaching a junction at night, the lights will automatically spread to illuminate a broader area to identify traffic which might appear from both sides of a cross roads. As you accelerate to cruising speed on a highway, the lights will focus much further ahead.

Adaptive cruise control
Driving in town after dark, an infrared, thermal imaging camera will identify people up to 400 yards ahead. People and animals are highlighted as yellow if they stick to the sidewalk, but become red and trigger a buzzer if they step out into the road. The A8’s adaptive radar cruise control slows the car when it sees slower moving traffic ahead, then accelerates again when the coast is clear. If you select sports mode for the transmission, the seat belts will tighten a little. The sunroof incorporates solar panels which augment the batteries. Stop-start cuts the engine when the car halts in traffic and restarts when required. Regenerative braking reclaims power when the car is freewheeling down a gradient, and transfers it to the battery.

All A8s have four-wheel drive as standard, which gives it a unique selling point compared with the competition.

When sales start in the U.S. only one engine will be available – a 4.2 litre V8 gasoline motor which produces 367 hp, propelling this huge beast from rest to 60 mph in about 5-1/2 seconds. In Europe, there’s a bigger choice of engines, including a supercharged V6 3.0 litre gasoline motor which produces 286 hp. This is the shape of things to come. Expect a hybrid next year and a 12-cylinder model too.

Al Bedwell, powertrain analyst with J.D.Power, said V6 engines will gradually take over from V8s across the sector, while hybrids will become a necessity for selling in the U.S. He also expects relative health in the sector thanks to China and other emerging markets, although Europe will be stagnant.

Lure of technology
“Hybrids are not really more frugal (than European diesels) but it’s the lure of the technology which people quite like,” Bedwell said.

Bedwell expects a new diesel hybrid, which appears in a Mercedes E class next year, to find its way into the S class before too long.

“That will give you an S class with 50 miles per gallon (that’s 60 mils per U.S. gallon). Pretty impressive. In terms of gas engines, the V8s are being replaced by V6s, usually turbo-charged or supercharged; that means you get V8 performance out of a V6,” he said.

But despite the new, tough CO2 rules, power plants will remain pretty conventional for some time yet. The long promised but elusive fuel cell still remains more of a dream.

“Our forecasts don’t go out more than about seven years and by then conventional engines are still in the majority; by then it could be 30 or 40 per cent hybrid. There will be electric vehicles, and a move towards smaller cars. We will see fuel cells in tiny numbers. Mercedes seems to be taking a bit of a lead there with a vehicle which uses a battery, but has its range extended by a fuel cell engine (like the Chevrolet Volt, although its range is extended by a gasoline engine). But mass commercialisation of the fuel cell is probably still 20 years away,” Bedwell said.

Survive and thrive
Jonathon Poskitt, another J.D.Power analyst, agrees with Global Insight’s Couchman that the sector will not only survive but thrive, despite their tiny overall market share being squeezed a bit.

“These models act as flagships, benefitting the brands more than just through the immediate sales revenue they generate and provide a platform to show off the latest technology. The key is that manufacturers continue to improve the emissions of these models, helped by recent/forthcoming hybrid introductions, as well as smaller engines,” Poskitt said.

John Wormald, analyst with automotive consultancy Autopolis, said he expects this sector to continue to exist because there will probably be buyers with sufficient money and enthusiasm.

“It is hard to know if one day it will be seen as deeply anti-social to drive around in cars like this and it goes out of fashion. I don’t think so because many sales take place where they are unlikely to care too much. There is more likely to be a problem for more modest luxury cars like the BMW 3 series and Mercedes C class, where people might not want to pay the premium price when cheaper alternatives are just as good,” Wormald said.

“One thing’s for sure. Things aren’t going to be easy in Europe for the next few years. I don’t think people have realised the scale of the financial mess we’re in. For the sake of sales, it’s a good job Russian and China are on board,” Wormald said.

Neil Winton – May 31, 2010 

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