Revving up
June 25, 2011
Mercedes inaugurated its new five-story branch near the Hudson River in midtown Manhattan on Tuesday. Just three weeks before that, Volkswagen ceremoniously opened its first American production site for 23 years.
New York City Council Speaker Christine Quinn gave a warm and enthusiastic address at the opening ceremony: "Mayor Bloomberg has declared today 'Mercedes-Benz Day' for all five districts. We feel honored to welcome Mercedes to the 11th Avenue!"
The flagship store is a glass building spread over some 30,000 cubic meters. It's the boast of the Stuttgart-based firm, and a model for all American car showrooms, which the company refers to by their German name Autohaus.
The store is designed to encapsulate everything Mercedes stands for - and that's why the company dug deep: "We have invested $1.4 billion to deliver the dream, which everyone earns, who buys a Mercedes," stressed Ernst Lieb, president and CEO of Mercedes-Benz USA at his opening speech.
The efforts of Mercedes aren't coming from nowhere. Demand for cars in the United States has been growing since 1960. With 254 million registered vehicles, there are currently more cars in the country than people with licenses to drive them.
German cars are too expensive
But German manufacturers find it hard to get a hold on the market. Mercedes and BMW have only managed to grab a small slice of the US market, with 1.9 percent each of the market share.
The so-called "Big Three" US car makers (General Motors, Ford and Chrysler) make up half of all cars sold in the country. Market leader General Motors has around 21 percent alone. Meanwhile, Japanese manufacturers Toyota, Honda and Nissan all punch well above the German competition.
One hurdle could be that Americans regard German cars as luxury vehicles. For most Americans the "pain threshold" - how much money people are willing to pay for quality - is much lower than in Europe. That's why Volkswagen is now producing the "America-Passat" in the United States, and is marketing it for around $10,000 less than the German equivalent.
According to Rebecca Lindland, market analyst at IHS Automotive, the Germans have to expand the range of models on offer. Above all crossovers - such as a cross between a sport utility vehicle (SUV) and a sedan - like the Mercedes ML.
Han Tjan, the New York spokesman for Daimler, agreed. He said the company is also building up its range, and he's confident that there "a lot of fantastic products in the pipeline."
Volkswagen takes another stab
Mercedes isn't the only German carmaker that wants to make more of an impact. The headquarters of Volkswagen, Germany's biggest car manufacturers, is only a block away from the glitzy Mercedes showroom.
VW has an ambitious goal: the company wants to become the biggest carmaker in the world by 2018. But to do that it needs the American market. Volkswagen currently sits in ninth place with a market share of 2.8 percent. In order to increase US distribution, the new VW-plant was opened a few weeks ago in the state of Tennessee.
The difficulty of conquering the American market was proven by the company 23 years ago: Volkswagen was forced to close its first American plant in Pennsylvania - it was, coincidentally, also the first foreign car production site on US soil.
Author: Simon Berg / jli
Editor: Sean Sinico