Mini: Retro brand battles fresh sales slump

Mini was once the business model for pricey small cars, creating its own niche in the U.S. But this year, Mini has skidded off the sales charts.

After a flat 2013, Mini's U.S. sales are down 20 percent through October. The slump has left some pundits wondering whether Mini could suffer the problems of other once-trendy retro nameplates.

Mini management says sales are down mainly because of the model changeover for its core vehicle, the two-door Cooper hardtop. The redesigned hardtop, which is larger and shed some of its quirky features, arrived on dealership lots in April. Then dealers suffered a six-week delay of the 2015 Cooper, which arrived in mid-September.

"We knew going into the year that we would be down at least through this point in the year," said David Duncan, who became vice president of Mini of the Americas in January.

"We are starting to claw back our way a little bit. It will be an uphill battle," Duncan said. "We will not get back to where we would be even year over year. It should be a lower decrease than it is so far."

But dealers and analysts say the cold stretch should be a wake-up call. They say Mini needs to bring its marketing and its vehicles closer to the mainstream if it wants to continue to grow toward annual U.S. sales of 100,000 vehicles by 2020, which executives once forecast.

Mini has led a seemingly charmed life since it was relaunched in the United States in 2002 by parent company BMW AG. Sales peaked at 66,502 vehicles last year, and the number of dealers grew to 121, up from the 70 who originally sold the brand.

Mini has grown with zany event marketing and offbeat campaigns, rather than costly TV commercials. It kept adding variants, too. The range grew to seven models.

Now, with a new generation of models in the pipeline, Mini wants to focus on volume products. At this year's Geneva auto show, Oliver Friedmann, the brand's head of product management, said that models such as the Roadster, Paceman and Coupe are not future priorities.

A key nameplate will be the new four-door hatchback hardtop that goes on sale in December. That will be followed by a larger, redesigned Countryman next year. Ed Kim, vice president, industry analysis, for AutoPacific, says getting away from very limited niches may help. 

"Because these upcoming new Mini models are not typecast into niche roles, I think they can play a big role in revitalizing the Mini brand, helping it to avoid the PT Cruiser/New Beetle curse," Kim said. 

Mini is sometimes compared to the Chrysler PT Cruiser and Volkswagen New Beetle because both vehicles' parent companies found it hard to sustain those models' initial buzz. Tim Fleming, an analyst with Kelley Blue Book, says that is a hazard with retro appeal. 

"As with other niche vehicles, consumers can lose interest and move on to the next trendy models," said Fleming. "Mainstream, practical and sometimes boring vehicles tend to be the ones that stick around and sell in the highest volumes."

Mini seems to be edging toward the mainstream. The new-generation Cooper hardtop has shed some idiosyncrasies and has gotten bigger. Likewise, the next-generation Clubman wagon will be less quirky -- for instance, it will have four conventional doors, rather than the current version's asymmetric three doors -- including a suicide door on the rear passenger side, dealers said.

The petite Cooper hardtop -- a two-door hatch -- maintains its bulldog snout and stance, but it grew 4.5 inches in length and 1.7 inches in width.

The dash-mounted round speedometer is gone, and window controls have shifted from between the seats to the door. The interior was improved, and new optional features include driver head-up display and camera-guided cruise control. It uses BMW engines and rides on a new BMW platform that also will be used for the BMW 1-series replacement in 2017.

Owner reaction has been mixed. "Not a fan of the new Mini design. It's starting to look like the first wave of Scion," one owner wrote on Mini USA's Facebook page after the redesigned hardtop debuted last year at the Los Angeles Auto Show. "You've lost the traditional design."

Another owner said: "The new Mini is awful! The interior stinks of BMW design. It looks like crap. Everybody loved the center speedo, why remove that?"

But Edmunds.com praised the "larger and more sensibly designed interior" and increased cargo space. Edmunds added that "the essential elements that gave the Mini its mojo from the get-go are still present and well accounted for."

Dealers don't complain about the new hardtop. But they say Mini is not doing enough national marketing and that the old kooky stuff isn't working anymore. The brand simply doesn't end up on enough buyer lists, dealers say.

Duncan responds that "we agree 100 percent."

"We are working on that," he said. "Part of the plan is to get the message out better and to get more efficient."

TV will be a "major portion" of Mini's marketing in 2015, Duncan said.

The main reason for this year's sales drop is the model changeover, he adds, noting that the old model went out of production in October 2013, and the U.S. didn't get the successor until April.

Also, the 2015 hardtop was delayed six weeks because of problems with its EPA fuel economy certification, Duncan said. It went on sale in mid-September.

Duncan is not only revamping Mini marketing. He has changed the customer service program and is working on changes to the dealer margin. The goal is to make Mini more of a premium brand as it rolls out its refreshed lineup in the coming three years.

Mini's dramatic drop in sales suggests there is a "distinct possibility" the brand could become the next PT Cruiser or Beetle, said Dennis Bulgarelli, director of the automotive unit for the marketing firm Millward Brown Digital in Boston. "They may attract that initial sale from a prospect, but when it's time to move on, that person likely looks beyond Mini for their next vehicle."

But Ian Fletcher, principal analyst at the forecasting firm IHS in London, doesn't think Mini will die out because it is a premium lifestyle brand with sporty handling that has "a strong following."

But, he adds, to grow further in the United States, Mini may go beyond its Euro-sized cars to "create a range that is more focused on the U.S. market."

"The subcompact market in the U.S. is extremely small," Fletcher said. "It will have a point where it has reached a critical mass."

Duncan says Mini expects the new four-door hatch to draw a new segment of buyers who want more interior space and four full back seats. The new model is 6.3 inches longer than the two-door hardtop with a length of 157.4 inches and a 101.1-inch wheelbase that is 2.9 inches longer. The width is the same as the two-door hatchback.

Ian Robertson, BMW board member for sales and marketing, said he is confident the four-door hatch will "break the paradigms" in the same way the Countryman compact crossover did. Mini sold nearly 100,000 Countrymans worldwide last year.

But Robertson notes that the Countryman "is just too big" for some Mini lovers. That is why it is difficult to predict sales of the four-door, he said. "Mini is a very emotional brand."

Until now, Mini has won U.S. buyers to its self-created niche with its petite size, unique shape and fun-to-drive philosophy, analysts say. But the four-door hatch opens Mini to comparison shopping with cheaper vehicles, says Tom Libby, an industry analyst with IHS Automotive in suburban Detroit.

As it drifts further upward in size, Mini will compete with volume subcompact cars such as the Nissan Versa, Chevrolet Sonic, Ford Fiesta and Hyundai Accent. That's where price could be an issue. For instance, the Mini Cooper hardtop has a base price of $21,550, including shipping, while the segment-leading Versa has a base price of $12,800, including shipping.

In the next few years, Mini will switch most of its current models to the new BMW front-wheel-drive platform. Executives say they haven't decided how many models the brand will have.

"The decision is still ongoing," said Duncan. "The concept is having superhero cars and focus on the cars that will produce the volume."

This doesn't rule out having some halo models, he said.

Michael Vadasz, general manager of Otto's Mini in Exton, Pa., and chairman of Mini's dealer council, said replacing models with bigger ones carries risk: "We are called Mini, and when the car gets bigger we get a little flak."

Duncan is coy on the issue of size, saying that as Mini looks for opportunities, "I do not think we can really define the limit of how big a Mini can get. ... We cannot make huge cars, but there is space for us to move above where we are today."

Vadasz says that "each Mini will still be the smallest car in its segment."

In some cases, that might be a mixed blessing.

The replacement Countryman crossover, the only Mini offered with all-wheel drive, will be bigger. But it will be nowhere near the size of conventional crossovers such as the new Mercedes-Benz GLA, dealers said.

Missing growth segments will make it difficult for Mini to use the Countryman to capitalize on the two growing segments in the United States -- SUVs and pickups, said Karl Brauer, senior analyst at Kelley Blue Book.

"The closest they've got is the Countryman, but it's an old player in the small SUV category, which has seen a lot of new and compelling entries arrive over the past two years," he said. "Plus, the Countryman doesn't really look like an SUV, so it's missing out on much of that buyer group's consideration."

Brauer compares Mini to Volkswagen as "another automaker without a compelling SUV strategy."

"Both brands were doing well a few years ago, and both have been mired in a sales slump recently," he said.

Mini and BMW executives speak confidently about continued growth in the United States. But they no longer predict when Mini's U.S. vehicle sales will reach 100,000. Just two years ago, they predicted the brand "would easily" hit 100,000 by 2020.

Now, Duncan said, he hopes to slow this year's sales decrease and perhaps return to positive sales in 2015.

Not all the pundits are negative.

"Our forecast has Mini's volume growing into the low- to mid-70K annual volume range from next year through the remainder of the decade, which does represent Mini's highest volumes yet," said Kim. "The addition of two practical four-door body styles casts a wider net, so the brand should have room to grow further."

Dealer council head Vadasz said he has "hopes that Mini hasn't hit its peak."

With executive changes in the United States and Europe and the new strategies being worked out by Duncan and his team, "we are on a rebound," Vadasz said.

IHS forecasts Mini U.S. sales of 56,775 vehicles this year and 66,223 in 2015. By 2020, Mini U.S. sales will increase to 81,509, according to IHS.

Duncan also says Mini's marketing budget will increase. According to Kantar Media, Mini spent $18 million on advertising in the first six months of 2014 and $25 million for all of last year.

Spending will increase next year to push the new models, said Duncan, but he wouldn't give details. Mini also plans to beef up Tier 2 co-op local and regional advertising, with details being worked out for a January launch. Mini dealers spent $5.4 million through June and $6.6 million for the all of last year, according to Kantar.

The new-generation Cooper hardtop was launched with a TV commercial featuring a bulldog inspecting the new model and sniffing the tailpipe. The bulldog is Mini's icon because the car has a low stance like the breed. Insiders got it, but that's it.

Meanwhile, Fiat launched the 500L with celebrities including Sean "Diddy" Combs and featured Godzilla, who nearly choked swallowing the not-so-little car.

"We had hoped the launch would have gone better. We just don't have the budget that other carmakers have," Vadasz said. "The media launch was strong for the first month and a half, and then it petered out and lost steam."

Analysts said Mini marketing should bolster its premium image by trumpeting that it is owned by BMW and uses BMW components.

Says Kim: "It's not a luxury brand, but its close association with BMW and its premium pricing for what these vehicles are -- small, B-segment cars -- they are definitely perceived as more premium than most mainstream brands."

Duncan said whether to promote the link with BMW is often discussed internally, but Mini wants to "be an independent brand and not feel like we want to live off the big brother."

The advantage of BMW ownership and engineering may be touted on the dealership floor with a customer, Duncan said. Other than that, "I don't really see an advantage."

Duncan doesn't offer a peek at new marketing or Mini's product plans.

But he says: "I know what is coming over the next handful of years. I would not say we have peaked. We have some great things coming."