No Niche Left Untouched: Are High-Performance SUVs Brand Killers?

By Chris Haak

04.07.2009

P90045839This week, BMW is displaying its X5 M and X6 M hot-rod sport-utility vehicles at the 2009 New York International Auto Show; while this is the first time that M-spec SUVs have come from BMW’s M division’s hallowed halls, the pair are certainly not the first high-performance SUVs on the market.  The M duo – with their 4.4 liter twin-turbocharged V8s that produce a healthy 555 horsepower and 501 lb-ft of torque (and a torque peak that occurrs between 1,500 and 5,650 RPMs) – will surely be excellent performers in a straight line, and quite possibly in the curves as well, with huge brakes, upgraded suspension, and meaty tires.  But really, what’s the point of these things?

BMW’s M(otorsports) division isn’t known for fuel-thirsty all-wheel-drive, wagon-shaped, 2 1/2 ton SUVs.  At least it hadn’t been until this week.  I’ve never owned an M, much less a BMW, but I’ve always admired M from a distance as a team of dedicated performance enthusiasts that (to borrow from Spinal Tap) turn the performance dial to 11 through revised suspension, increased power, decreased weight, better brakes, and styling enhancements that announce to the world that you have the ultimate performance version of the Ultimate Driving Machine.  Prior to these two recent additions to the family, there were three other current M models:  the M3, M5, and M6.  All three are rear wheel drive cars that are at home on a track, on a winding road, or taking clients to dinner.  Frankly, it’s hard to imagine an X5 or X6, in spite of the upgraded hardware, impressing many people on a track or winding road without the added qualifier of, “for a 2 1/2 ton truck.”  (You know, as in, “it handles really well for a 2 1/2 ton truck,” or “Zero to sixty in 4.5 seconds is really impressive for a 2 1/2 ton truck.“)

One part of me thinks it’s pretty cool to have an SUV that can blow the doors off of some legendary sports cars; I’ve always had a soft spot in my heart for the GMC Typhoon.  And BMW isn’t really blazing new trails in applying the M treatment to the X5 and X6; German competitors Porsche and Mercedes-Benz have already jumped headfirst into the performance SUV niche with the Cayenne Turbo S (550 horsepower turbocharged 4.8 liter V8, 0 to 60 in 4.7 seconds, $125,000), the ML63 AMG (503 horsepower 6.2 liter V8, 0 to 60 in 4.8 seconds, $90,000), and the completely ludicrous G55 AMG (500 horsepower supercharged 5.5 liter V8, 0 to 60 in 5.4 seconds, $119,000).  But Porsche has been lambasted for years by critics for deviating from its sports-car-only raison d’être and trotting out an SUV in the name of profits but at the price of its brand, and Mercedes’ AMG performance arm has, until recently, been mostly about going fast in a straight line.  And AMG has already jumped the shark from performance cars into performance everythings, with no less than 13 current models featuring an AMG-massaged V8 shoehorned under the hood.  Thankfully, the R63 AMG minivan/Chrysler Pacifica tribute has been terminated.

e28_m5_early_exteriorAnd now BMW has done it too.  In spite of BMW mentioning the original 1985 M5 in its X5 M/X6 M press release (there’s an excellent summary of the original E28 M5 here, by the way), BMW has been in the “no niche too small” business for the past several years, with two similar SUVs (the X3 and X5), the controversially-styled, yet impractical X6.  Until now, they had managed to keep their M lineup more pure by sticking to cars that can actually acquit themselves on a racetrack and perform well because of what they are, not in spite of what they are.  So why the heck would BMW join this party?  One word:  profit.

While I don’t pretend to have access to BMW’s cost accounting analysis, the publicly-available pricing between the 335i and M3, and the 550i and M5 show just what a pricing premium the M badge adds to the vehicles.  In the case of the 3-series, the M3 adds about $15,000 to the price of the 335i, which is a 36.2% premium.  In the case of the 5-series, the M5 adds about $25,000 to the price of the 550i, which is a 41.6% premium.  Now, a hand-built V8 or V10 is not without its cost to BMW, but remember that BMW also does not have to pay for a “regular” engine, which itself costs a decent amount of money.  The brake, suspension, styling, and interior upgrades also don’t come for free, but the bottom line is that BMW is absolutely making considerably more money on each M model than they are on the equivalent non-M model.  So if the company can pull in another $10,000-plus in profit from each X6 M, is it worth it in the long run?

As a short-term survival strategy – almost definitely.  With the credit crisis and faltering world economy, BMW is in a difficult position, with car leasing – the primary way that BMW drove its sales in the US for the past decade or more – on the wane and potential buyers who had well-performing portfolios and a little extra money for a BMW instead of a Honda in the past heading over to the Honda store again to look for something more “practical.”

As a long-term strategy, however, I continue to question the wisdom of building niche vehicle after niche vehicle, even to the point of inventing niches like “crossover coupes” (the X6).  I’d also question the long-term wisdom of creating an M version of every car in the lineup; although Mercedes has an AMG version of nearly every vehicle, AMG just doesn’t carry the same kind of clout that M does, at least to me.  I drove an X6 xDrive50i around a racetrack for two laps last fall, and while it made some great sounds, and was adequately powerful, it didn’t set my heart on fire.  While more horsepower would always be welcome in nearly any vehicle, I can’t imagine that it’s nearly half as fun to drive as an M3.  I can definitely attest that the X6 xDrive50i wasn’t half as fun to drive as a 135i coupe with a six-speed manual.

The good news is that these new M models will help BMW survive this economic downturn and continue to provide excellent, engaging vehicles to automobile enthusiasts.  The even better news is that the new turbocharged 550-horsepower V8 found in the X5 M and X6 M will make its way into the next-generation M5 in the next couple of years.  I’m dying to see how the next M5 compares to a CTS-V; in the meantime, I’m happy to say that we won’t be able to see how the X5 M compares to the Cadillac SRX-V, since Cadillac has not bothered to make one.  Maybe GM does know a tiny thing or two about branding, but maybe the lack of an SRX-V is just because of the lack of resources to create one.

COPYRIGHT Autosavant – All Rights Reserved

Author: Chris Haak

Chris is Autosavant's Managing Editor. He has a lifelong love of everything automotive, having grown up as the son of a car dealer. A married father of two sons, Chris is also in the process of indoctrinating them into the world of cars and trucks.

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3 Comments

  1. Three things that I should mention I think (long winded wall of text):

    High-performance SUVs certainly are profitable as you mention. SUVs in particular are profitable. The biggest success story of this is with Porsche, who essentially have a rebodied VW and turned it into a cash cow. It was such a runaway success that it even allowed Porsche to obtain a majority share in VW. Brand dilution be damned as despite Porsche purists crying foul, that they should focus on the venerable 911 instead. Porsche retorted by saying that without the Cayenne, there would be NO money to invest in the 911. Hell Porsche is pushing its luck again with the Panamera, a four door coupe. Lightning striking twice? We’ll see.

    I don’t know about you but being able to post the highest record profits for an insurmountable period of time during the Cayenne craze seems to have paid off handsomely for Porsche’s gamble. Does it destroy it’s brand cachet? Doesn’t seem like it as they seem to be pretty well off financially. Do people think any less of Porsche? Buyers are speaking with their money so it doesn’t seem to be the case. Maybe further along down the line we might be able to see the gains/damages the Cayenne has caused and be able to look at it from that perspective but now, it’s far too soon.

    Another thing I think I should mention is the loss in direction for the M division of BMW. The M3, M5, and M6 are all shameful examples of their predecessors and cater to the poseurs in today’s society. What happened to catering to the performance enthusiast? With each passing generation’s unveiling from the original M3 onward, I shudder. A screaming inline 4 on a finely tuned lightweight chassis embodies the epitome of what it was to be the Ultimate Driving Machine. No electronic wizardry here folks, just straight up driving. We all know of people harping on the godliness that is the E30 M3 but really, how could something that borders on driving perfection evolve into the mess that is the behemoth known as the E92? Same thing goes for the AMG division with its inception of the 190E and all it’s derivatives. Money talks and if it means selling your soul, well, we know the answer to that one.

    The last point I’ll raise is that the upscale German firms (especially BMW and Mercedes) have been aiming for filling any and all niche’s in the market to further stave off the invasion of the Japanese onslaught. Notice how, at least here in America, the trend setters in most areas of design have been set by the Germans, give or take an odd xb here and there. But design, driving prowess, and brand cachet aren’t nearly enough to counter the cheaper, more reliable, and “just as good” Japanese brands. With each passing year the Japanese nip closer and closer towards their German rivals, hence, I believe the push in the niche direction with the Germans. They’ve already exhausted the technological push and it seems that they’ve run into a wall. The next thing then? Niche vehicles!

  2. Anonymous – first of all, thanks for the thoughtful comments. I would have been happy to publish your comments as their own editorial.

    Excellent point about how we still don’t know what the Cayenne did to/for Porsche long-term. I too believe that it’s a short-term fix to a long-term issue, similar to the way GM’s decision to skimp on quality in the 70s and 80s may have saved them money in the short term (and its decision to focus on trucks and SUVs in the 90s may ahve brought them huge revenues in the short term) and now both choices are literally killing the company decades later.

    I think we see things in much the same way – what had been nearly-pure performance cars are now cars with great performance, but huge weight and huge price tags to go along with race car-like engine outputs.

    Thanks again for the comment. Please come back again!

  3. If I were asked what a ///M BMW is, I would say, a stealthy-looking high-revving, naturally aspirated, manual gearbox RWD sports version of a coupe, sedan or wagon.

    These AWD slushbox turbo torque monsters are not ///M cars. They should have called them something else.

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