“The old certainties that existed before the Covid pandemic are over and brands such as BMW, Mercedes, Audi and Land Rover need to widen their vision. Their competition is now everybody.”
Nothard conceded, however, that the most expensive premium models are safe, at least for now. He said: “It will take a generational shift for premium Chinese brands to unseat the likes of Mercedes’ and BMW’s most expensive models. However, among tomorrow’s buyers with less attachment to these and other brands, it will happen.
“To protect themselves, brands may decide they no longer need market share and will instead focus on being more aspirational and expensive, as Jaguar is planning to be.”
Tony Whitehorn, a former CEO of Hyundai UK with experience of launching its premium brand Genesis in the UK, said that taking on existing premium brands will be a huge challenge for the new Chinese entrants.
“It’s extremely difficult to crack Mercedes and Land Rover,” he said. “The high levels of quality and features that the Chinese promise aren’t a priority for customers at the upper-premium level; they’re a given. What people want is prestige and the Chinese brands are unlikely to have that for a very long time.”
Whitehorn also questioned the ability of Chinese brands, currently serving the lower and middle model sectors, to persuade customers to buy their more expensive models at much higher price points.
“BMW, Mercedes and Audi have demonstrated that premium brands can extend their reach downwards but, in my experience, to grow your brand in the opposite direction is very difficult,” said Whitehorn.
He said establishing separate franchises and showrooms would be crucial to the success of the new Chinese premium brands, something a BYD spokesperson told Autocar it plans to do with Denza.
“When we launched the LS 400 [when I worked for Toyota], initially it was being sold from Toyota showrooms,” said Whitehorn, “It didn’t work. You need the right sales and customer relationship environment, which has to be clearly separate from the sister brand. Once we did that, Lexus was transformed.”