New manufacturers are gearing up to begin selling cars in the US, Europe and around the world.  What would it take to get you to buy one?  A revolutionary new type of vehicle from a relatively unknown manufacturer like Aptera, Smart, Tesla or Milner Motors?  An relatively inexpensive new vehicle made in China by Brilliance, SAIC or Chery, or made in India by Mahindra or Tata Motors?

Consumers report that brand reputation is one of the most important considerations when purchasing a car.  Recognition of a brand can be established to some extent by pouring millions into marketing and PR.  But reputation takes years of customer experience with the vehicles, dealers, reliability, service and communications to establish.  So what are the avenues which a manufacturer can take?

Adaptation of a well-known Car Brand to extend to new products:  SAIC could use the MG name and Tata Motors could use the Land Rover and Jaguar names to immediately borrow from those established reputations.  But each established marque carries a reputation, good and bad, which can be difficult to apply to new products.  For instance MG left the world market as a volume brand in the 1980´s, and would effectively be a “new” brand for customers under 40 years of age - an important target market for new brands.  Land Rover and Jaguar are premium brands known for luxury, driving characteristics and styling, but these brands may not fit so well for smaller vehicles which need to be marketed as fuel economical and environmentally responsible.  In fact, large corporations such as Mercedes, BMW and Toyota have chosen to market such vehicles under sub-brands, respectively Smart, MINI and Scion.

Creation of a New Brand: For manufacturers like Aptera, Tesla and Milner, Mahindra or Chery, successfully building a new brand requires substantial investment and very clever communications.  New brands with fuel-saving, hybrid or electric vehicles have the advantage of high public interest in fuel economy and the environment worldwide.  However, consumers are generally skeptical of new brands, especially in the automotive sector, with cars being the single most expensive consumer product.  Any mishap with quality, service or safety can easily become a substantial long-term sales barrier –it took Audi fifteen year sales for sales to rebound after the “unintended acceleration” discussion in the late 80’s.

Adaptation of a Non-Car Brand to extend to new products:   A decade ago, no one associated Sony with laptops.  Apple had nothing to do with the music or cell-phone business.    When extending a well-established consumer brand to a new field, the brand reputation comes with it.  One would expect a Sony car to be compact and well-made, an Apple car to be innovative and easy to drive, a Nike car to be sporty, or a Gucci car to be luxurious and stylish.  Consumers would expect such cars to be different than ordinary cars.  Without such brand association, consumers measure new entrants against the traditional category best, i.e. a Brilliance BS6 is up against a Toyota Camry.

Prerequisites to brand reputation:  Besides a clever marketing campaign, customers want to know:

1. •who will service their cars
   

2. •whether they will be reliable
   

3. •whether they will retain resale value
   

4. •whether they are safe
   

BMW successfully leveraged its established sales, service, parts and dealer network to launch the MINI, requiring separate franchise agreements and separate sales facilities. Mercedes parent company Daimler has chosen instead to team up with the very US-savvy Penske organization to market its Smart car line in the US.  Both car BMW and Mercedes placed a very high priority (and huge resources) on safety engineering and high safety ratings for their “offspring” – knowing that any new brand, and small cars in particular, must overcome consumer skepticism.

Other considerations in establishing a brand in the US are the sales channel (i.e. mega-dealers, individual franchises or even on-line, agents or chain stores) and the ownership concept (sales, finance, lease or even rental or time-share).  But those are subjects for future blogs.

The challenge for these new entrants is to create a successful brand launch which stimulates demand, and then to make sure that this demand is met with the matching product characteristics and customer experience.  Now lets see how this unfolds . . . . .

-Bert Holland