What Do the Americans Want Next?

Across the world, automakers pay close to attention to the American consumer, striving to get it right in offering them the vehicles they want.  The knee jerk reaction to our steeply rising gas costs might be to accelerate electric vehicle (EV) roll-outs.  While we are seeing EVs across all vehicle categories from both domestic and foreign producers, the EV evolution remains challenged for all on a number of fronts.

So, will our love for large vehicles change with rising gas prices?  Not likely, say the analysts.  Technology has enabled the fuel economy of vehicles to improve enough over the past decade that consumers are no longer forced from SUVs to passenger cars because of high fuel prices, like they were in 2008, or even 2012.  Compare gas costs to the higher upfront costs for EVs and other uncertainties such as lack of charging infrastructure, a poorly developed second-hand market for electric vehicles, confusion over subscriptions for charging services, and concerns over the degradation of batteries.  All this suggests that surging gas prices will neither shift the focus away from light trucks (pickups, SUVs and CUVs), nor will expensive gas alone be enough to see EV sales come close to overtaking internal combustion engine (ICE) vehicle sales for some time.

In general, EVs represent a high-cost and low-margin proposition compared to the most profitable ICE vehicles, say the insiders. As the chip supply shortage continues, the priority for chips will go first to the best-sellers.  All modern vehicles rely on computer chips to operate radio touchscreen infotainment systems, air conditioning systems, and safety features, but none so much as electric vehicles. Advancements in semiconductor chemistry are responsible for electric vehicle batteries allowing electric cars to drive further distances before needing a charge, which helps drive the demand for more EVs.  But at the same time, this exacerbates the chip supply shortage because electric vehicles require so many semiconductors in each vehicle.

European automakers experience the same challenges with EVs, but have finally come to the table, though very cautiously.  The 2022 Mercedes-Benz EQS was the first model from the all-electric Mercedes-EQ sub-brand, and the electric equivalent to the gas-powered top tier S-Class sedan.  Audi has successfully launched the e-tron, but the mainstay of its current lineup still includes a host of gas-powered sedans, SUVs and sports cars, so it will have a lot of work to do to achieve its ambitious all-electric plan by 2026.  BMW’s “dual development” strategy of introducing EVs alongside internal combustion engine (ICE) vehicles is illustrated by its 4 Series.  An ICE-powered coupe, convertible and four-door (Gran Coupe) along with the all-electric i4 four-door sports coupe were all included in the second 4 Series generation.  But it remains to be seen how long this type of strategy by BMW and others can be profitable.

The German automakers do, however, see another avenue that’s a little less travelled in America.  The popularity of the light truck category has led some U.S. automakers and others to abandon passenger car making altogether.  With a few exceptions, the sedans and coupes that remain are “safe” designs, resulting in many look-alikes.  All this antes up the pot for European automakers.  Light trucks have gained in popularity in Europe, too, but cars are still the focus, mainly attributable to narrower roads and limited space to park in Europe.  Manufacturing is a respected field in Germany, where cars are built by highly professional engineers that choose a vocational track before they even complete their equivalent of high school. The people take pride in the craftsmanship their car brands have built a reputation for, and they need Americans to share their belief in vehicle design and engineering superiority.

Euro automakers have also noted that growth in the luxury-car segment is three times faster than that for normal vehicles.  Mercedes, Audi and BMW long held the title for sexy, prestigious vehicles with superior performance and unmatched luxury that people were willing to pay more for.  When the German giants shifted their focus toward lower entry point vehicles, the goal was to entice newcomers to their brands.  But the primary result was increased competition from newcomers who crept into the luxury car segment over the past couple of decades.  In a return to their roots, the German automakers’ newest marketing messages are all about their top shelf vehicles.

Mercedes’ EQS is both top-line luxury and all-electric, meant to give chief rival Tesla a run for the money.  We tested the 450+ model, which has a single electric motor and rear-wheel drive, with a 350-mile range.   Producing 329 horsepower and 419 lb-ft of torque, its acceleration was comparable to that of a conventional gas-powered six-cylinder. (True performance-seekers also have the choice of the EQS 580 4Matic or AMG EQS.)  The ride was quiet and comfortable as one would expect from the brand, with plenty of included creature comforts and a panoramic glass roof.  The regenerative braking takes some getting used to, but not more than on any other EV.

EQS is tech-savvy before adding any options, with eight USB ports, wireless CarPlay and an impressive list of included advanced driving aids.  The impressive Hyperscreen option added $7,200 to the vehicle’s suggested retail price just topping $102K. But the sleek, glass dashboard panel dash was a true stunner, running from door to door, housing the instrument panel, central MBUX infotainment touchscreen and an optional third touchscreen for the front passenger.  With destination and a few other mostly comfort and appearance options, the total sticker was just over $115K.

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Audi has collaborated with Bentley and Lamborghini to prepare itself to take on competition from all sides in the premium and luxury segments.  While we await to see if the stylish S5 will become another e-tron variant, we enjoyed our tester powered by a 349-hp turbo V-6 which sported 349 hp and 369 lb-ft of torque paired to an eight-speed automatic and all-wheel drive. Like the BMW 4 Series, S5 is offered as a coupe, a four-door hatchback (Sportback) or convertible (Cabriolet).

Standard features on our S5 Cabriolet tester included massaging front seats, heated rear seats, diamond-stitched upholstery and carbon-fiber-look interior accents within its MSRP of $63K.  The Prestige package added made up the bulk of the option costs to include upgraded headlights, a nav system, a 19-speaker Bang & Olufsen premium audio system, heated rear seats, head-up display, automated parking system and traffic sign recognition. Add premium paint, 20-inch V-spoke-star design wheels and destination charges, and its final price was $73,540.

Among the BMW 4 Series offerings, we got the new rear-wheel-drive M440i coupe packing the turbocharged 3.0-liter six-cylinder (382 hp, 369 lb-ft) with eight-speed automatic transmission.  Tuned to deliver athleticism and power, it remarkably gets 29 MPG combined.  An M Performance package and Dynamic Handling package were included in the M440i’s $56,700 MSRP, while the M Carbon Exterior package was a $2,900 option. Another $2,400 was required to upgrade the Cooling and High Performance Tire package. Advanced safety features required a Drivers Assist Pro package add-on.  A Premium package added a head-up display, heated front seats and steering wheel and gesture control to operate infotainment functions.  All in, the final price was $67,320.

The bottom line:  German automakers are going after American luxury car sales in a big way.

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