Luxury SUV Rolls-Royce Goes Off Road

Rolls-Royce, the 111-year-old British car brand owned by BMW, said Wednesday it would build its own sports utility vehicle in a risky move to capture the wealthiest drivers in their four-by-four routines.
With its own SUV, Rolls-Royce has advanced the evolution of the luxury motorist.

 

Think British aristocrats drinking tea while racing the Paris-Dakar rally – without spilling a drop.

Rolls-Royce Motor Cars, the maker of limousines favored by British royalty, Arabic sheikhs and Chinese and Silicon Valley billionaires, will develop “a vehicle that can cross any terrain” and reflects the “promise of effortless luxury,” according to the announcement Wednesday by the automaker, a unit of Germany's BMW.

The British brand, whose famous limousines include the "Phantom" and "Wraith," has traditionally chauffeured heads of state and kings and queens.

Sport utility vehicles, known for elevated suspension that can drive through rivers and over some rough terrain, have caught on with consumers who love the sense of security in a large car.

The cars are a big part of the U.S. auto market and are increasingly popular in China, where the rising wealth of the population is making them affordable.

Hans-Gerhard Seeba, the former head of sales strategy at Volkswagen, Europe’s largest automaker, said BMW’s decision to produce a Rolls-Royce SUV was a shrewd move.

The decision by Munich-based BMW to make a Rolls-Royce SUV is part of a growing trend toward multi-brand cross-marketing by the world’s largest automakers.

“I think this is not only a smart decision, but it will probably be a very profitable one,’’ said Mr. Seeba, a professor of business who specializes in the auto industry at Ostfalia Institute for Applied Sciences in Wolfsburg, the headquarters of Volkswagen.

Rolls-Royce and Bentley are often driven in Arabic countries, Russia and China. People there are no longer comfortable with the look of a classic limousine car. Ferdinand Dudenhöffer, Business professor, University of Duisburg-Essen

German luxury car maker BMW, which bought Rolls Royce at the end of the 1990s, started selling its own SUV, the X5, in 1999, and has since expanded to other models.

Audi, owned by Volkswagen, sells several SUVs, and Porsche, another VW unit, offers the Cayenne. Mercedes-Benz maker Daimler has the G-Wagon SUV and Land Rover, which is owned by Tata Motors, sells several Range Rover SUV models. Bentley, another VW unit, plans to soon start selling the Bentayga, its first SUV.

“Rolls-Royce and Bentley are often driven in Arab countries, Russia and China. People there are no longer comfortable with the look of a classic limousine car,” Ferdinand Dudenhöffer, a business professor at the Center of Automotive Research of the University of Duisburg-Essen, told Handelsblatt Global Edition.

“It is the right move but one would have wished they’d done it already last year or earlier. Bentley is already in an advanced stage,” Mr. Dudenhöffer said.

Rolls-Royce chairman and chief executive, Peter Schwarzenbauer and Torsten Müller-Ötvös, said in the statement. "Many discerning customers have urged us to develop this new car – and we have listened."

The decision to market a Rolls SUV is another sign of a broader trend toward multi-brand cross-marketing by the world’s biggest automakers, which are gradually shedding a conservatism that argued against “diluting'' the value of a core brand, Mr. Seeba said.

In the early 1990s, Porsche was financially struggling after a series of abortive launches. Executives led by chief executive Wendelin Wiedeking decided to make a Porsche SUV, the Cayenne, which now sells for €66,000 to €130,000, or $75,240 to $148,200. But the German automaker had to fight internal resistance to do so.

 

Video: one of Rolls-Royce's current limousines.

 

“Back then, everyone in the industry was saying: ‘Porsche was crazy to take such a step,’’’ Mr. Seeba said. “But it not only made sense, it ended up making a lot of money for Porsche. The auto industry purists cared about image dilution, but the customers couldn’t care less.’’

BMW Group, which delivered almost 2 million cars to customers in 2013 of which 3,630 Rolls Royces, has steadily expanded its range of models in the last two decades, from the 1994 purchase of the British compact car brand Mini to the launch of its electric car BMW i3 last year.

Mr. Seeba said Porsche’s decision to take a risk on an SUV helped resuscitate the brand, which is now a profitable unit of VW. That same thinking is motivating BMW to enter the SUV market with a vehicle that, Mr. Seeba said, will likely be priced at slightly less than the company’s trademark luxury sedan, the Phantom, which retails for more than €300,000 on the Continent.

Mr. Dudenhöffer estimated the new Rolls-Royce SUV could start selling from €200,000 to €250,000 and increase sales numbers at the British car maker to 7,000 or 8,000, perhaps 10,000 annually.

“From an economic perspective it is not very important. But because BMW is already in the top premium car segment it makes sense to further develop the luxury segment with the Rolls-Royce offering,” Mr. Dudenhöffer said.

The new Rolls-Royce SUV, for which no launch date nor a name has been given by the company, will keep all the limousine’s hallmarks, the professor said.

“It will be fully equipped for cross-country driving but built with noble design. Wood and leather are an absolute must,” Mr. Dudenhöffer said.

In future, Mercedes maker Daimler might also launch an SUV model under its luxury brands Maybach or AMG, he said.

The recent drop of oil and gasoline prices were no cause for Rolls-Royce to launch its SUV initiative now, Mr. Dudenhöffer said. “SUVs have been around for a long time, and the market keeps expanding. The oil price is not related to Rolls-Royce’s decision.”

 

Kevin O'Brien is a former Bloomberg Frankfurt and Vienna bureau chief and covered technology for The International Herald Tribune and New York Times for a decade. He is editor in chief of Handelsblatt Global Edition. Gilbert Kreijger is an editor with Handelsblatt Global Edition in Berlin, covering companies and markets. To contact the authors: [email protected] and [email protected]