Despite competitors from Asia and the US, Western Europe is still the home of the luxury car, particularly in Germany, where it is perceived that some of the most superior and desirable top-end cars in the world are built. But now Nissan, not a brand at the top of most car buyers' wish list, has made the questionable decision to launch its luxury brand Infiniti into Western Europe, attracting a fair bit of attention, as new marques are not born very often.
There are several reasons for launching a luxury brand, including individuals' egos and margins, which mean no car firm feels complete without its own luxury marque. But in the case of Nissan and its parent company Renault, the reasons for this launch really are questionable.
The firm, which is only recently out of the woods financially, will have to invest millions in building and operating showrooms for Infiniti at a time when the car market is facing some tough challenges. Car launches take many years to plan, so Nissan may not have been able to predict obstacles, particularly the carbon emissions issue, facing the motor industry.
However, its decisions to launch in such a tough climate and make its first launch an SUV are the most debatable. There is a conscious movement, especially in cities, to dissuade consumers from buying big cars, and the government has made no secret of its desire to see fewer of them on our roads. It has already hit owners in the pocket, and, combined with rising petrol prices, the cost of running an SUV is spiralling.
The European Infiniti launch may not be a disaster. In the US, it sells 130,000-140,000 cars a year and its global sales grew 12% last year, so it has an audience, but Nissan has its work cut out. The timing of its launch is far from perfect; the UK car industry is stagnant, with one analyst predicting that the luxury market will decline by as much as 6% in 2008.
Infinti's launch in Western Europe comes two years after it launched in Russia and two decades since it went on sale in the US. Nissan says it is basing its launch on the example set by Apple, which grew its customer base modestly in its early years. Infiniti's humble sales target of 25,000 in Europe within five years may seem low compared with BMW, which sells more than 120,000 cars in the UK alone, but Nissan is still being exceedingly optimistic. Toyota's luxury car brand Lexus barely sells double that across the continent, and it has been available in Europe for 17 years. Lexus has grown its sales in the past few years, but Toyota has had to invest millions in advertising, and build a standalone network of showrooms for the marque over the past decade in order to achieve the growth.
The cost of making consumers appreciate the values of the Infiniti brand will run into millions, and I am not sure the margin for Nissan is there. There is nothing wrong with the reliability and quality of its cars, but I am not convinced that consumers really care either way about it.
It is rather interesting trying to imagine who Nissan has envisaged as the 'Infiniti man'. I must admit I am struggling.
- Nissan eyes luxury leap, page 19.