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| Re: What would be the best car for your grandpa?
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BMW, Audi Lure Aging Buyers With Infrared Beams, Radio Signals
Feb. 27 (Bloomberg) -- Bayerische Motoren Werke AG is betting on infrared beams that help drivers see better at night. Volkswagen AG's Audi luxury car brand is using radio transmitters to warn oncoming cars of traffic hazards.
European carmakers are rolling out space-age gadgets and luxury options to lure older customers as a regionwide baby bust begins to shrink the pool of drivers in the home market of DaimlerChrysler AG, PSA Peugeot Citroen and Renault SA.
``The value of the final few years of life to an 80-year-old means he'll spend whatever it costs for a very safe and comfortable car,'' says Ferdinand Dudenhoeffer, who heads the Center for Automotive Research at the University of Gelsenkirchen in Germany. ``That older buyer wants the best and latest technology, even if he doesn't understand it.''
Audi will show off its Roadjet concept car, equipped with the ``telematic'' radio-based warning system, Feb. 28-March 12 at the Geneva International Motor Show. Such options are more profitable than standard features, helping manufacturers counter slowing demand. New car sales in Europe are expected to stagnate at about 14.2 million in coming years, after growing 0.5 percent annually for the past 14 years, says Dudenhoeffer, 54.
Western Europe's population began shrinking in 2000 and may decline 0.2 percent a year by 2020, according to the United Nations Human Settlements Program in Nairobi, Kenya. The population will age during the same period, with the proportion of people over 65 rising to 20 percent from 11.9 percent in 1985.
``Car manufacturers are looking 20 years down the road when their customers are going to be older on average,'' says Stefan Bauknecht, who manages 1.2 billion euros ($1.4 billion), including shares of DaimlerChrysler and Volkswagen, at Frankfurt-based DWS Investment. ``Innovation is the most important aspect for carmakers, and they are investing a lot of money in this.''
Luxury Advantage
Luxury carmakers such as DaimlerChrysler's Mercedes Division, BMW and Audi stand to benefit the most from an aging population, says Thomas Weber, the Daimler management board member in charge of research and development.
``Premium manufacturers will have an advantage in these conditions because these features are expensive and it's easier to put them into a premium car,'' says Weber, 54. ``With older customers there is the need for safety, but also the excitement of driving.''
Shares of Wolfsburg, Germany-based Volkswagen have gained 59 percent to 59 euros in the past 12 months on rising sales of Audi luxury cars and a cost-cutting program initiated by new CEO Bernd Pischetsrieder. Stuttgart-based DaimlerChrysler's stock has gained 34 percent to 47.17 euros, and Munich-based BMW is up 23 percent to 39.76 euros. The eight-member Bloomberg Europe Autos Index advanced 27 percent in the same period.
Overseas Expansion
Courting older drivers is only part of European carmakers' strategy for countering the shrinking market. They are also cutting costs at home, and expanding into markets such as China and the U.S.
China's car market grew more than 20 percent last year, making it the world's third-largest after the U.S. and Japan. Demand in India is also expected to accelerate, BMW Chief Executive Officer Helmut Panke, 59, said at the North American International Auto Show last month in Detroit.
``If Western Europe were the only market for these carmakers, it would be a headwind, definitely,'' says Adam Jonas, an analyst at Morgan Stanley in London. ``Companies will have to take an offensive and defensive approach -- coming up with new models and attracting more up-market customers.''
Continental AG, which supplies parts to every major carmaker, is developing a radio-based warning system similar to Audi's that may help carmakers do just that.
Arthritis
``The next big thing in the industry is more sophisticated communications between vehicles,'' says CEO Manfred Wennemer, 58.
The company's 2005 net income rose 30 percent to 930 million euros, partly on demand for its Electronic Stability Program. The device minimizes collision and rollover risk by controlling over- steering. Hannover, Germany-based Continental last week forecast record operating profit as sales of ESP doubled to 3 million units on orders from U.S. carmakers such as Ford Motor Co. and General Motors Corp.
BMW has already eliminated the need to push buttons and switches on the dashboard, an anathema to older motorists, with the i-drive system that controls more than 700 functions, including steering responsiveness, with a knob and display screen. The feature has been available on the 7-Series luxury sedan since 2001.
``As people reach their 50s, we start to see the onset of arthritis,'' says David Foot, a professor of economics at the University of Toronto and author of the book ``Boom, Bust and Echo: How to Profit From the Coming Demographic Shift'' (St. Anthony Messenger Press, 1996). ``This makes it harder to use small buttons on dashboards.''
Technology Gap
Putting technology in a car is a balancing act between ease of use and including so many functions that it frustrates drivers who aren't adept with computers, says Brian Moody, who is in charge of road tests for Santa Monica-California-based Edmunds.com, an automotive and car-buying Web site.
BMW and Mercedes have been the most aggressive in introducing new technology. This has led to a decline in quality rankings as the number of micro-computers and motors increased to operate seat heaters, rain sensors and navigation systems.
Mercedes's quality ranking fell to 29th out of 37 brands in 2004, according to a study by Westlake Village, California-based J.D. Power & Associates. Mercedes' improved last year after it spent an unspecified amount to fix the defects.
``Some older customers, younger ones too, simply won't adjust to new technology,'' Moody says. ``This means carmakers are going to have to make a lot of technology invisible.''
`Heads-Up Display'
BMW offers options such as an infra-red night vision system for 1,950 euros, and a fighter-plane style ``heads-up display,'' which projects readings such as speed and fuel level on the inside of the windshield, for 1,300 euros. In-seat massagers and software to control lane position are on the way.
``From a manufacturer's point of view, there are a lot of opportunities as far as vehicle sales are concerned,'' says Bernhard Mattes, who heads Ford's German division. ``As populations age, there is an undiminished need for mobility.''
The emphasis older drivers place on safety, brand image and quality may help luxury carmakers win buyers such as Dieter Schwarz, a retired engineer who lives near Cologne, Germany.
``I've got grandchildren to carry around, and I want a car that is uncompromising in terms of quality and safety,'' says Schwarz, 70, who plans to replace his 15-year-old Audi 80 with a new Audi A4, with a suggested retail price starting at 23,114 euros. Audi stands for excellence, including thicker steel and trouble-free driving, he says.
Comfort and Safety
``Europe in 10 to 15 years will have a relatively wealthy population, many of whom won't be working, and they will want premium vehicles that are comfortable and safe to drive,'' says Marc-Rene Tonn, an analyst at M.M. Warburg in Hamburg. ``They won't want the car purely for its functional purpose.''
That may spell trouble for carmakers such as General Motors, which is fighting for the middle of the market with vehicles like the Opel Vectra sedan and Zafira minivan.
Medium-priced vehicles are being squeezed out of the market, which is increasingly dominated by luxury models and cheaper, entry-level cars such as Renault's Dacia Logan, which starts at less than 8,000 euros, says Michael Raab, an analyst at Sal Oppenheim in Frankfurt.
Europe already has fewer cars than North America. The continent has about 504 cars per 1,000 inhabitants, a figure that probably won't rise, Tonn says. That compares with 725 cars per 1,000 people in the U.S., according to U.S. Department of Transportation figures.
``The real challenge for carmakers will be the decline in the number of vehicles sold,'' says Foot of the University of Toronto. ``In the retirement years, people begin to cut back on consumption and go from two cars to one car. In Europe, this is going to be a problem sooner than in North America because people retire there earlier.''
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