BMW, Mercedes and Volkswagen Must Avoid Repeating Their China Mistake in the US - Startups and venture capital

Germany’s struggling carmakers are looking to the United States to recover lost profits, but larger SUVs alone will not guarantee success as new competitors continue to raise the bar.

Germany’s troubled automotive industry is looking to the United States for a way to recover margins lost in China. The US is the world’s second-largest car market, and BMW, Mercedes-Benz and Volkswagen hope it can provide relief after a difficult period in their most important former growth market.

For years, engineers in Munich, Stuttgart and Wolfsburg developed vehicles with modest adaptations, such as longer wheelbases, and sold them in China. That strategy generated billions until Chinese manufacturers began offering local customers high-tech electric vehicles at more competitive prices. Since then, German carmakers have faced repeated profit warnings and restructuring programs.

To succeed in the US, the companies will need to respond more closely to local customer preferences. A large SUV, such as the model reportedly planned by BMW and also being considered by Mercedes, would be a logical starting point. However, the article argues that simply enlarging vehicles will not be enough to overcome the broader crisis.

Large combustion-engine SUVs currently offer manufacturers considerably higher margins than the smaller electric vehicles that are particularly popular in Europe. That commercial advantage may make them attractive as the German brands seek to rebuild profitability in the US, but the companies will still need to avoid repeating the market misjudgment that weakened their position in China.

Sources: Handelsblatt.