LANHAM, Md. - Virtually since its re-introduction in this country in 1987, Land Rover has had the high end of the sport-utility segment to itself with its Range Rover model.
That carriage-trade image has served it well. Before this year, the only time Land Rover sales had declined in this country was in the 1990-91 recession, when all European luxury marques tanked.
Indeed, the company's U.S. sales quadrupled from 1993 to 1995, reflecting the introduction of the Defender 90 and 110 and the Discovery.
But that momentum has stalled.
Land Rover is under attack from upscale vehicles like the Lexus LX 450, Infiniti QX4 and high-trim Jeep Grand Cherokees and Ford Explorer Eddie Bauers. The LX 450, in fact, has consistently outsold the Range Rover (Land Rover's top series) since it was introduced in January 1996.
The recently introduced Mercury Mountaineer and the soon-to-come Lincoln Navigator offer additional threats.
And in the wings is perhaps the biggest threat of all: Mercedes-Benz of North America's U.S.-built, M-class sport-utility.
That formidable competitor will come to the market with a price in the mid-$30,000 range, with at least as much prestige as Land Rover and with a better reputation for quality. Mercedes expects to sell about 30,000 to 35,000 M-class vehicles in its first year, which would mean outselling Land Rover.
In that hostile new environment, an 18.5 percent drop in Land Rover sales from December 1996 through March would seem to be grounds for nervousness among company executives. In April, Land Rover sales bounced back to a monthly record with help from an incentive program on the Discovery, but they were still off 10 percent for the year to date.
However, concern was in short supply at opening ceremonies here April 30 for Land Rover's new U.S. headquarters complex.
'We like to believe we have done our homework, within BMW, within the Rover Group and within Land Rover,' Walter Hasselkus, the BMW AG executive who is Rover Group's CEO, said in an interview.
'We never underestimate Mercedes, but when it comes to 4x4s of the character of Land Rover, that is 'Land Rover Country,' so to speak. We are not frightened stiff because Mercedes is entering this segment of the business.'
Tom Purves, Rover Group sales and marketing director, said he appreciates that Mercedes will build a 'fine' vehicle.
'But I don't see where we should be any more concerned about the M class than we were about the (M class predecessor) Gelaendewagen, which is a great vehicle technically. But it has been a failure because it failed to capture people's imagination,' Purves said in an interview.
SLOW GROWTH CHARTED
BMW has told dealers it plans slow growth in Land Rover volume through 2001-02. According to plan, U.S. sales should grow from 23,182 last year to about 30,000 by then; worldwide, from about 125,000 last year to about 230,000.
Faster growth is expected later, with the appearance of a new batch of products developed since BMW took over Rover in 1994.
So what has happened to Land Rover sales this year?
Through November 1996, U.S. sales were up 21 percent year to date. Then some short-term factors led to a downturn, said Bill Baker, the longtime spokesman for the U.S. subsidiary.
For instance: year-ago numbers were record highs, in part because of a severe winter. Land Rover got 750 rental units back in December 1996 through February 1997, which probably cut new-vehicle sales; and the Defender 90 and the Range Rover 4.6 HSE were in short supply.
'We don't think there was any cataclysmic abandonment of the brand,' said Baker, who was recently promoted to head Land Rover public relations worldwide.
However, the company acknowledges that the Discovery model, its best seller, was in adequate supply, yet sales went down 24.9 percent in the first quarter. Land Rover responded April 18 with a discount program on the Discovery called 'Buy the Numbers,' with a monthly lease payment of $395 or loans at 5.9 percent.
That helped bring about the record April sales total of 1,913 for Land Rover, up 27 percent from the year-ago month. After four months, Land Rover sales were off 10 percent year to date.
Senior officials acknowledge, though, that some longer-term factors may pose a threat to Land Rover.
'We're getting into the mature phase of this market,' said Charlie Hughes, Land Rover North America president and CEO.
'We're in a revised ball game,' because of the host of new models at both the high and the low end of the sport-utility market, he said.
Quality, too. With the entry of Mercedes and with the Japanese already established as the standard bearers in the segment, sport-utility buyers may be less forgiving of Land Rover's defects than they have been.
In the 1997 J.D. Power and Associates Initial Quality Study released April 30, Land Rover came in next to last overall. But that was an improvement - it was dead last the year before.
The Lexus LX 450 was the highest ranked on Power's list of full-sized sport-utilities; the Range Rover was last. In the compact segment, the Discovery was near the bottom.
But that should start to change, especially since BMW views the M-class threat as part of the traditional BMW-Mercedes rivalry.
'BMW and Mercedes have been very intense competitors for many decades,' Hasselkus said. 'At the end of the day, it has worked for both of us. We have put each other on our toes.'