Jaguar Armed With SUV Leads Growth in Stalling U.S. Auto Market

(Bloomberg) -- As auto-sales growth has slowed this year in the U.S., the biggest gainers have been smaller luxury brands with new SUV offerings. Exhibit A: Jaguar, the elegant British line known traditionally for its sports cars and sedans.

With the timely addition of its F-Pace sport utility vehicle as well as its XE compact luxury sedan and clever marketing initiatives, Jaguar has drawn in more, new and younger customers. Sales in October more than tripled, and for the year, they've reached 23,568, up 93 percent, the most among brands tracked by Autodata Corp.

Jaguar is hardly alone in cashing in on the SUV craze. Sister brand Land Rover, which specializes in body-on-frame luxury utilities, is up 7.8 percent. Volvo, best known for its XC90 crossover, has increased sales 20 percent, according to Wards. And Tesla Motors Inc., which added the Model X electric SUV to its lineup this year, grew about 78 percent through September, according to Autodata's estimate. Tesla doesn't release monthly results.

“The winners you called out, they all have a truck component to their business,” Mike Jackson, chief executive officer of dealership owner AutoNation Inc., said last week in an interview.

Those smaller brands with new SUV models are narrowing the sales gap -- at least a little bit -- with the top three brands, Mercedes-Benz, BMW and Toyota Motor Corp.'s Lexus, which have all contracted this year.

“If you take the Germans, at the end of the day they were car companies,” said Jackson, a former sales executive with Mercedes-Benz USA. They've reacted as best they can to give consumers the SUVs that they want, but they also “need to reduce car production -- and that's tough.”

Sales of Daimler AG's Mercedes luxury vehicles -- excluding work trucks and Smart cars -- slipped 0.4 percent through October to 277,863 -- expanding its lead over Lexus, which slid 4.7 percent to 260,996. BMW AG's namesake brand declined 9 percent to 254,150.

Last month, with two fewer selling days than October 2015, BMW sales dropped 18 percent, Lexus slid 6.2 percent and Mercedes declined just 1 percent. BMW's results exclude the company's Mini line.

Despite the setbacks, those brands remain far bigger than Jaguar and Land Rover, which together may top 100,000 U.S. sales this year for the first time since 2002.

Concerns that demand in the U.S. has peaked have been weighing on auto stocks around the world. But Tata Motors Ltd., which bought Jaguar and Land Rover from Ford Motor Co. in 2008, is tearing it up. Even with turbulence at the parent Tata Group, the automaker's shares are up 36 percent this year through Tuesday. Most global automaker stocks are down, except for SAIC, the Chinese partner of companies such as GM and Volkswagen.

Hands-Off Approach

Jaguar Land Rover is the heart of Mumbai-based Tata Motors, providing 82 percent of its sales and 86 percent of operating income. Tata, famous for its super-cheap Nano car, has mostly left the luxury-vehicle business in the hands of industry veterans and given them tremendous support, said Joe Eberhardt, head of Jaguar Land Rover's North American operations.

“They've been great stewards of the company of the brands,” he said. “They understand the importance of brands, and they have let the management of Jaguar Land Rover do what's needed to compete in the market.”

In addition to expanding the product line -- more announcements are coming, Eberhardt said -- Jaguar has gone after new customers with creative marketing. Its villain-themed Good to Be Bad ads have evolved into a British Intelligence motif with the latest offering, which features physicist Stephen Hawking.

The brand has also won over younger customers through its Art of Performance campaign, Eberhardt said, which puts potential customers into 2-minute action-film videos they can share online. Ninety percent of XE and F-Pace buyers are new to the brand, which now has 12 percent of customers under 35.

“They don't want to be talked to or communicated to,” he said. “They want to be a part of the experience.”

To contact the reporter on this story: Jamie Butters in Southfield, Michigan, at jbutters@bloomberg.net.

To contact the editors responsible for this story: Kevin Miller at kmiller@bloomberg.net, John Lear