BERLIN (Bloomberg) -- Germany's three biggest automakers are gearing up for Christmas with a range of luxury toys that target the next generation of drivers. The rivalry between BMW, Mercedes-Benz, and Volkswagen AG's Audi has expanded to include a holiday season battle for playground prestige with new push cars and snow sleds aimed at luring future drivers to the brands.
Audi set the standard for luxury kid toys with a limited-edition pedal-powered version of the Auto Union Type C, which it showed at the Nuremberg toy fair in February. The scale model of the 1930s racer, designed for kids up to 135 centimeters (4' 4") tall, has an aluminum frame, hydraulic brakes, seven-speed hub gear, leather-clad steering wheel and oak dashboard. The car retails for 9,700 euros ($13,300), making it Audi's most expensive kid toy; only 100 of the 500-unit run remain unsold.
BMW AG is firing back in time for Christmas with new BMW and Mini-branded sleds for 79 euros apiece. The Snow Racer sled has replaceable metal runners, a suspension-system in the red steering ski, and a horn to warn unwary pedestrians.
Not to be out done, Daimler AG's Mercedes is countering with a version of the gullwing SLS supercar for toddlers, due in April for 90 euros each. The foot-powered SLS Bobby-Benz, will share the shape of its headlights, grill, and rear end with Mercedes' $183,000 SLS sports car and features quiet-running tires, an Ackermann steering system with tight cornering for living-room maneuverability, and a steering wheel that absorbs impact to prevent injury in the event of a collision.
Ultimately, the world's top three premium car brands are chasing Aston Martin when it comes to exclusive kid toys. The British automaker sold mini motorized replicas of the V8 Vantage Volante and Virage in the late 1980s and early '90s to customers including Prince Charles.
The Aston Martin Volante Junior, which retailed for 15,000 pounds ($24,000) plus tax, had a gasoline engine, radio, and a top speed of more than 30 mph (about 50kph). The cars have resold for as much as 25,000 pounds, according to Roger Bennington, managing director of Stratton Motor, an Aston Martin dealer.
“A lot of people bought them as a collector's item when they had a new car built and would normally have the Junior built to the same specification,” said Bennington. “I don't actually think many kids got to use them as they were normally the prized possession of the Aston Martin owner.
They were also a little bit too fast for children.”
Teddy bears, geckos
The carmakers are quick to explain that there's more to gain by promoting kid-focused merchandise than simply making a few euros from hawking toy racers.
“Merchandising is not important because you can make huge money with it, but because it's another means of positioning your brand,” said Peter Schwarzenbauer, Audi's sales chief. In addition to toy cars, Audi has a line of teddy bears, including one decked out in a motor-racing suit for 47 euros, and a modern pedal-powered alternative to the exclusive Type C, which premiered as a prototype in 2006. The red plastic racer for 299 euros features an adjustable rollover bar, handbrake, over-sized tires with Audi-style rims, and padded seats. Then, there's Rob the gecko, a black, grey and gold cartoon lizard featured in plush toys and baby items. Rob was developed as a companion for kids on car trips and is “made of such soft plush that you can hug and stroke him for ages,” Audi said in a brochure for the line, which includes a cocoon blanket, neck support, and play steering wheel.
Driving mom's car
Toys are a particular attraction for car companies because they tighten relations with current customers and provide an opportunity to develop an affinity for the brand with future drivers such as Sonny Kim's kids. The 36-year-old graphic designer from Berlin spotted a pedal car, which sells for between 179 euros and 205 euros, at the Mercedes Center in the German capital while having winter tires put on her own Mercedes and thought it would make a great gift for her 2- and 4-year-old boys. “It would be nice for the kids to drive the same thing as Mom and Dad,” she said. “It would be a nice bond.”
The kid products “have to live up to Mercedes' standards for quality and safety, especially our toys, which are all-time favorites with the next generation of Mercedes-Benz customers,” said Christian Boucke, head of Mercedes-Benz Accessories. The 10-year-old unit offers 15,000 products including $24 silver Christmas ornaments, a $139 tote bag made from seat belts, and a retractable pet leash for $15.50. Merchandise has been a steadily growing part of Mercedes's business, with sales rising on average more than 10 percent annually over the past decade.
Mini rain boots
BMW began its lifestyle business 15 years ago. It now sells more than 2,000 products including 39-euro Mini rain boots and a 1,500-euro bike from BMW's M performance unit. The Munich-based company also introduced a kid edition of the M3 GT2 race car. The battery-powered version, which costs 349 euros, has forward and reverse gears, and a top speed of 2.5 mph.
“We are first and foremost a marketing initiative, and the main objectives are to broaden the brand's presence and strengthen loyalty,” said Thomas Goerdt, head of BMW's merchandising and lifestyle unit. “We are a marketing effort that makes money.”
BMW's merchandise sales this year have increased 20 percent and the unit holds its own with profit margins generated from selling real cars, he said. BMW is targeting a margin of more than 7 percent this year on its auto business. In China, which is now its third-largest market for car sales, BMW opened a store selling merchandise a year before it began assembling cars in the country. There are now 40 BMW stores in China, and BMW is considering expanding its retail presence to Korea, Russia and India, Goerdt said.
While luxury consumers want a wide range of products to communicate their association with the brand, “merchandising needs to be kept in check so that it doesn't overstretch the brand or interfere with the core business,” said Michel Gabriel, managing director for consultancy Interbrand in Zurich, who has previously advised Audi on branding.
“Sometimes you have to say no, even if a lot of money can be made from a product” like branded underwear, he says.